How Has The Strait of Hormuz Situation Shaped The API Innovation Center's Thinking About Geographic Diversification?

Gerren McHam, vice president of Government and External Affairs, API Innovation Center, addresses how tensions in the Strait of Hormuz influence thinking about geographic diversification and pharmaceutical supply chain fragility. McHam notes specifically for APIs, that there have not yet been direct ripple effects from these tensions. However, he emphasizes that downstream sectors involved in maintaining shipping lanes and logistics do experience consequences, which in turn can increase the costs of components and processes that ultimately feed into the pharmaceutical industry.

In response to these kinds of geopolitical risks, McHam explains that the API Innovation Center is developing what it calls a national fragility index. The goal is to move beyond static lists, such as drug shortage lists or essential medicines lists, to a more nuanced, structured way of determining which medicines and products are most vulnerable. He observes that the current landscape is cluttered with different lists, but there is no standardized method for deciding which pharmaceutical products to prioritize when considering reshoring or risk mitigation.

McHam illustrates the complexity with scenarios in which one drug may already be in shortage without a U.S. source, while another has a U.S. source and is not yet in shortage. The latter, however, might be heavily dependent on key starting materials that, if disrupted, could have significant, even life-impacting, consequences for patients.

The center’s work, as he describes it, is to integrate multiple dimensions spanning, geopolitical developments, weather events, and economic decision-making around key starting materials, into a comprehensive view of supply chain risk. This enables more informed decisions about which products to prioritize for reshoring or diversification first.

Ultimately, McHam argues that a robust understanding of product origins and interconnected risks is essential for building a more resilient pharmaceutical supply chain in the face of evolving geopolitical and environmental disruptions.