Medicines the weak link in strong supply chain: report

Productivity Commission report says chemicals for medicine manufacturing a risk area

The import of chemicals used to manufacture medicines was one of few areas of vulnerability in Australia’s supply chain, according a newly published report by the Productivity Commission.

The pan-industry Vulnerable Supply Chains report was generally positive about how the nation’s supply lines held up during the onset of the COVID-19 pandemic but found that the main risks surrounded “vulnerable chemical imports”, not just in the context of medicines manufacture but also in petrol and coal product refining and for water treatment.

Taking a broad-based approach using combined import and production data to come to its conclusions, the authors of the 238-page report and its attendant 19-page executive summary said that while the some of the vulnerable chemical products may be critical, it admitted “this evidence is not conclusive and industry experts are required to determine criticality”.

The report also said confidentiality around some patented products like medicines meant not there may be “areas of vulnerability that cannot be identified in the present analysis”.

It also said that its purely data-driven approach might not reflect the effect of some low value imports, noting “the value of imports may not reflect their importance in production” – their cost might be “tiny” but “the effect on individuals may be large”.

“For example, the absence of lifesaving medicines jeopardises the wellbeing of Australians whatever the value of these medicines or their share in consumption or production,” it said. 

It also said that diversification of supply was important with a high societal cost if “the entire system that supplies an essential product is disrupted.

“For example, one brand of amoxicillin (a widely used antibiotic) disappearing from pharmacy shelves would not be a problem; but the disappearance of all amoxicillin could be a serious problem,” it said.

The report’s Box 6.3 was devoted entirely to pharmaceutical supply chains and manufacturing processes.

There was concern at the start of the pandemic about Australia’s reliance on imports.

“Australia imports most of its pharmaceutical goods from Europe and the United States, who rely increasingly on APIs manufactured in India and China,” it continued.

It said with China producing 40 per cent of APIs globally and India supplying 20 per cent of global exports of generic medicines, early in the pandemic’s early “disruptions to Indian and Chinese production of APIs led to concerns of shortages in Australia”.

While there had been “panic buying and stockpiling” of medicines government imposed purchasing limits had led to ensured “equitable access”.

It cited Medicines Australia’s contention that despite these concerns, the Australian pharmaceutical supply chain was “strong and stood up well to the challenges posed by the COVID-19 pandemic”.

While risk management strategies existed and the TGA and industry worked to solve supply problems “a lack of transparency did lead to confusion about whether there were actual shortages of medicines”.

It quoted the Pharmaceutical Society of Australia’s submission to the Senate Committee on the COVID-19 pandemic that noted; “While pharmaceutical wholesalers may have been in contact with the Therapeutic Goods Administration about supply issues, [information on shortages and wholesale limits] were often not shared more broadly with practitioners at the coalface, such as pharmacists and doctors”.

It said that in spite of shortages of some hormone replacement therapies and antidepressants, “this does not appear to be out of the ordinary”, quoting Medicines Australia’s statement that “medicine shortages were common even before the COVID-19 pandemic.”

The industry’s high level of regulation meant that “modifying existing facilities to respond to a crisis (was) a potentially slow process”.

It also said that “domestic infrastructure is where the highest degree of vulnerability is likely to be found” with ports “becoming a bottleneck that can affect many firms”.

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