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As the coronavirus outbreak continues to disrupt business in China, it could lead to a shortage for some prescription drugs.
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Already, the US Food and Drug Administration reported a shortage for one drug connected to the outbreak, though it didn’t name the drug.
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China makes a lot of the key ingredients used in pharmaceuticals, especially antibiotics and the heart medication heparin.
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The spread of coronavirus and the subsequent closures of factories where ingredients are made could lead to a shortage if the shutdowns persist beyond another month or two.
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The coronavirus outbreak is already starting to lead to drug shortages in the US.
On Thursday, the US Food and Drug Administration said it had identified the first drug shortage caused by the coronavirus outbreak’s effect on the supply chain for pharmaceuticals. The FDA said it’s identified 20 other drugs that rely on ingredients or final products from China, where the novel coronavirus has been spreading, but didn’t name them.
Concerns of what shortages might mean for medical care in the US are now front and center. Much of the world’s supply of generic drugs relies on ingredients made in China, and some factories have shut down in an effort to curb the coronavirus outbreak.
Additionally, India said Tuesday that it is restricting the export of 26 drugs and ingredients to ensure it has supplies of key drugs like antibiotics, which could further limit supplies of medications to the US.
Should shutdowns persist, they could prevent supplies for key drugs like antibiotics and the heart drug heparin from reaching generic drugmakers and ultimately patients around the world, experts told Business Insider.
Read more: The FDA just announced the first drug shortage caused by the coronavirus, but wouldn’t identify the drug
‘It has reached crisis stage for companies that haven’t diversified’
Steve Ferreira, founder of maritime transport consultancy Ocean Audit, highlighted the antibiotic penicillin as a product that’s at risk as manufacturers in China temporarily shut down.
Ferreira said his clients, which include several Fortune 100 companies, are especially slammed if their supply chains lack a non-China manufacturer.
“It has reached crisis stage for companies that haven’t diversified,” he told Business Insider.
The base ingredient for penicillin is manufactured largely in China, Ferreira said. China claims 44% of the exports of “Penicillins, derivatives, in bulk, salts,” according to data from the Observatory of Economic Complexity. Nearly half of that goes to India, where it’s repackaged into dosage form.
In producing goods ranging from nails to snow shovels to medicine, Ferreira said he’s forecasting a gap of three to six weeks in companies’ supply chains — and executives will have to scramble to find alternatives.
“Expenses are going to go up, and it will increase the price of consumer products,” he said.
Why a shortage could happen
There are a number of factors that can lead to drug shortages, even when a new disease isn’t menacing manufacturing plants.
In some cases, companies make business choices that led to shortages, such as giving up on unprofitable drugs. Other drug shortages are related to manufacturing problems. There’s also been a consolidation of the manufacturers that produce generic drugs, meaning there are fewer companies around to pick up the slack if one runs into trouble.
There are currently 202 drugs in shortage in the US, according to a list maintained by the American Society of Health-System Pharmacists.
Bernstein analyst Ronny Gal wrote in a February 26 note that he spoke with supply chain experts who said that should the situation with the coronavirus not improve, we could expect to see shortages start to pop up later in the second quarter of 2020 and early in the third quarter.
Because China plays such a key role in making the chemicals used in generic drugs — especially those used in antibiotics and the heart drug heparin — the spread of the coronavirus and the subsequent closures of factories where the chemicals are made could lead to a shortage if the shutdowns persist beyond another month or two.
For the most part, big branded pharmaceutical companies like Eli Lilly have been quick to say they’re not anticipating any shortages. Lilly noted that it doesn’t source ingredients for its approved drugs, including insulin, from China.
“Contrary to some other industries, the early impact across our coverage does not appear meaningful, but it is still early and that could change,” RBC analyst Randall Stanicky said in a note Monday.
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