Volatility in the Middle East and the prolonged closure of the Strait of Hormuz have focused public attention on oil prices, petrochemicals and — relatedly — the vulnerability of generic drug supplies.

That concern is real, as generics account for 90% of U.S. prescriptions, but it misses additional, less obvious risks. Branded pharmaceutical companies, often assumed to be more insulated, are also exposed.

Pharma’s dependence on petrochemicals

The reason is simple: Nearly all medicines depend on petroleum in some form. Petroleum is the foundation for building blocks used across drug manufacturing. Common pharmaceutical inputs, from solvents and reagents to inactive ingredients like glycerin and phenol derivatives, originate from petrochemical processes.

Moreover, pharmaceutical supply chains rely not only on key starting materials and active pharmaceutical ingredients (APIs) but also on petrochemical inputs, petroleum-based packaging materials and logistics systems, all of which are tied, directly or indirectly, to the free flow of energy and goods through the Middle East.

The choke point problem: small inputs, big consequences

The Strait of Hormuz is one of the world’s most critical transit points; 20% to 25% of global maritime oil trade flows through it. A prolonged disruption creates cascading risk, both in producing the medicine and in the ability to package and deliver it.

From plastic vials and blister packs to syringes and IV bags, many essential delivery systems are petroleum based. The Middle East is not only central to energy flows but also a major hub for global shipping and air cargo. Past disruptions in the Red Sea linked to Houthi attacks forced vessels to reroute around Africa, adding 10 to 14 days to transit times and raising freight costs. The airports in the Middle East are major transit hubs for time-sensitive air freight.

For temperature-sensitive biologics, extended transit times are not a viable option. The volume of refrigerated “reefer” containers is finite, and prolonged or delayed shipping lines mean that containers are likely to get stuck in the wrong ports. Similarly, delayed or rerouted temperature-sensitive air freight risks product deterioration.

Generics take the first hit but not the only one

Why has the focus remained on generics? In part, because their economic model makes them more immediately vulnerable. Generic manufacturers operate on thin margins with limited redundancy, meaning they have less capacity to absorb cost shocks or switch suppliers. Branded pharmaceutical companies, by contrast, tend to have greater visibility into their supply chains and more resources to invest in resilience.

But this is a difference of degree, not kind.

Innovative drugmakers may be further along in mapping their supply chains, but the fundamental challenge remains: True dependencies often lie multiple tiers upstream, and diversification away from single-source suppliers, especially raw material suppliers, can take time. A company may have strong oversight of its API suppliers and fill-finish operations yet still be exposed to a disruption several layers removed from its primary manufacturing lines.

Lessons from COVID-19 and what’s different now

These are not hypothetical risks. During the pandemic, localized supply disruptions and constrained logistics networks triggered global shortages of products ranging from personal protective equipment to basic medicines like amoxicillin. At one point, over 100 drugs were listed on the Food and Drug Administration’s shortage database, reflecting how quickly supply-demand imbalances can cascade. The lessons of COVID-19 echo loudly today: Once a “just in time” system is disrupted, it is difficult to restore equilibrium.

From cost efficiency to true resilience

For branded pharmaceutical companies, the imperative is clear: Companies must continue mapping their supply chain dependencies across the full production ecosystem and identify short-, medium- and long-term action plans to diversify identified choke points, even where no immediate solutions exist.

In addition, near-term cost efficiency should be weighed against the long-term costs of supply chain choke points. Diversifying suppliers, building redundancy and maintaining strategic inventories carry up-front costs, but as recent years have shown, the cheapest supply chain is only the cheapest until it fails.

The case for policy and collective action

Finally, there is a role for policy. True diversification, particularly for commodity chemicals and critical inputs, is likely to require government support, whether through incentives for domestic or diversified production, stockpiling strategies or coordinated international frameworks. Left to market forces, supply chains are likely to continue consolidating around the lowest-cost providers, particularly for upstream inputs and raw materials, and often in geopolitically sensitive regions.

The pharmaceutical industry has long understood the importance of scientific innovation. The emerging lesson from the Strait of Hormuz is that innovations in supply chain resilience may be just as critical to ensuring that medicines can continue to reach the patients who need them.

Geralyn Ritter is president and CEO and Monica Gorman, Ph.D., is managing director, both with Crowell Global Advisors