Pharmaceutical Supply Chains Entangled in Iran Conflict
The Impact of the Iran Conflict on the Pharmaceutical Supply Chain
As tensions between the United States and Iran escalate, concerns are growing about the potential effects on the pharmaceutical supply chain. This conflict has the potential to disrupt the availability and pricing of many essential medications, especially those that rely heavily on petrochemicals for their production.
The war in Iran and the effective closure of the Strait of Hormuz have already led to a surge in energy prices and disruptions across various industries. While the Middle East is not a major producer of pharmaceuticals compared to countries like China or India, there are still some products originating from the region, and many drugs depend on petrochemicals as part of their manufacturing process.
Gerren McHam, vice president of external affairs at the API Innovation Center, highlighted the potential consequences: “If the instability really persists, you’ll probably see lead times, transportation costs that can impact direct items that we need for our medicines, including the key starting materials into active pharmaceutical ingredients.”
Current Risk Assessment
The U.S. Pharmacopeia (USP) released a risk assessment report regarding the Middle East conflict, indicating that the impact is currently limited. The region contributes only 0.3 percent of active pharmaceutical ingredient (API) production and 0.6 percent of oral solid dose production, with most of this concentrated in Jordan and Israel.
Despite these low percentages, certain drugs are significantly affected by production in these countries. For example, Jordan produces about half of the world’s amoxicillin oral suspension and the same amount of API for etomidate, a fast-acting anesthetic. Additionally, 73% of API for flumazenil, used to reverse benzodiazepine effects, is produced in Israel and Jordan.
Availability of Alternatives
Healthcare experts emphasize that there are alternative treatments available for all these medications, and providers are well-prepared to handle any potential shortages. Michael Ganio, senior director of pharmacy practice and quality for the American Society of Health-System Pharmacists, noted, “There are therapeutic alternatives. We’ve actually weathered some drug shortages of those products in the recent past anyway, so we are familiar with some mitigation strategies if needed.”
Ganio also pointed out that while Israel is the sole supplier of some niche orphan drugs, the impact would still be limited if the conflict affects these medications.
Concerns Over Trade Routes
Beyond pharmaceutical production, the Strait of Hormuz remains a critical trade route, raising concerns among observers, particularly if the conflict continues for an extended period. The USP mentioned that the disruption of airspace and waterway trade routes could have a larger impact, although it’s challenging to quantify.
The organization identified the Red Sea, specifically the Bab el-Mandeb Strait, as a higher source of risk. This area is along the same trade route used by India to transport large volumes of API and finished doses to the U.S. and Europe. Houthi rebels in Yemen have threatened to enter the war, potentially shutting down this critical shipping corridor.
Economic Pressures on Generic Drugs
India plays a significant role as a global producer of generic drugs, which make up the majority of prescriptions in the U.S. With already thin margins, the added pressure of higher energy costs and more treacherous trade routes could push producers out of the market. Ganio described this potential pressure on generic drug imports as “almost an indirect tariff.”
Petrochemicals, derived from oil, are a key component in the production of most medications. If energy prices remain high, these cost increases may be passed on to consumers. A 2011 analysis found that 99% of pharmaceutical feedstocks and reagents are derived from petrochemicals, with few substitutes available.
Ongoing Monitoring and Preparedness
While the current situation does not appear to be directly impacting the U.S. pharmaceutical supply chain, experts remain vigilant. McHam emphasized, “At the moment, in terms of the U.S., there’s no indication that the conflict is having anything directly impacting the supply chain, or availability of medicines.”
However, the broader concern lies in the exposure of the pharmaceutical supply chain, particularly for generics. McHam added, “This is a reminder of how exposed we are… The real risk may not be today, but it raises a broader kind of bipartisan concern.”
