The UK is preparing to enter a lockdown phase similar to those across Europe and the rest of the world [текст от 19 марта]. Travel restrictions and quarantine measures are necessary to inhibit the spread of the novel Covid-19, but such restrictions also threaten global GDP growth and put healthcare businesses at risk. This EIU update will address the ‘high impact’ factors outlined in our Coronavirus Risk Matrix to assess how employee disruption, supply chain (API) disruption and reduction in demand are impacted by recent steps taken to reduce the movement of people and products in an effort to prevent contamination.
The coronavirus is already causing significant employee disruption across all industries, including healthcare. As measures to minimise the movement of people are enforced, organisations are no longer able to maintain a ‘business as usual’ approach which places increased strain on daily operations. To protect employees in the UK, most organisations are treating the coronavirus as qualifying for statutory sick pay (SSP) and communicating this to staff. Some employers might also offer more than SSP – ‘contractual’ sick pay.
To protect employers, the self-employed and public services, a package of measures was announced by the UK Chancellor to provide support for public services, individuals and businesses to ensure that the impact of the virus is minimised. Moreover, to protect small businesses, the government announced that the cost of providing 14 days SSP per employee would be refunded by the government in full for businesses with fewer than 250 employees.
The Federal Drug Administration (FDA), European Medicines Agency (EMA), and the Medicines and Healthcare products Regulatory Agency (MHRA), are monitoring the supply chain closely. Severe disruptions to supply involving shortages of critical medical products – particularly with regards to active pharmaceutical ingredients (APIs) – are expected.
Generic drug providers who source APIs from countries such as China or India are likely to face supply chain issues. Pharmaceutical demand from China is incredibly high. In the United States, the import of Chinese pharmaceuticals has increased 76% within the last decade, with approximately 80% of the medicines sold being produced in China. As such, the implementation of import and export restrictions on Chinese goods poses a significant threat to the global pharmaceutical supply chain. India also plays a vital role in the global supply chain and relies on China for a large percentage of APIs. Any restriction in supply is likely to result in rising drug prices.
Regulators are responding by enforcing special measures. Last week, the UK government banned parallel exporting and “hoarding” of three drugs used to treat coronavirus patients in anticipation of shortages in Britain. Exports of AbbVie’s Kaletra/Aluvia, combination lopinavir and ritonavir, the generic drug chloroquine phosphate and the generic drug hydroxychloroquine were restricted to meet the needs of UK patients. Hydroxychloroquine was placed on the restricted list from the 14th of March, and Kaletra and chloroquine phosphate were added on the 26th of February.
Similarly, in the United States, FDA released guidance last week designed to limit drug shortages that include:
The FDA continues to monitor 20 drugs that may become scarce as a result of the supply chain interruptions between China and the USA. While regulators maintain a strategic stockpile of drugs and medical supplies, these could fall short. To compound the issue further, pharmaceutical companies have shifted from stockpiling goods in warehouses to a “just in time” logistics model that ships products as the need arises – reducing costs but also increasing the likelihood of shortages.
Fundamentally, manufacturers will need to diversify and collaborate in order to mitigate risk, just as concerns are raised that some countries could look to nationalise the supply chain. No one organisation or country has adequate capacity to supply the world and ultimately cooperation and data sharing will be required in order to ensure the world remains fully supplied.
Brand pharmaceutical manufacturers and suppliers are likely to see a spike in demand for specific treatments, notably antivirals. However, the converse is also expected whereby demand for other pharmaceuticals may drop. This will occur as patients with other conditions are reluctant to visit their GP and are less willing to travel to pharmacies to collect prescriptions. The cancellation of non-emergency procedures and appointments to alleviate pressure on the NHS is also likely to reduce pharmaceutical demand. In the longer term, innovative drug developers may be impacted by slowing demand from China, a substantial growth market for international pharmaceuticals. These major shifts in demand will place strain upon systems, putting manufacturing risk mitigation strategies and capacity to the test.
Coronavirus Hub
Employee disruption
The coronavirus is already causing significant employee disruption across all industries, including healthcare. As measures to minimise the movement of people are enforced, organisations are no longer able to maintain a ‘business as usual’ approach which places increased strain on daily operations. To protect employees in the UK, most organisations are treating the coronavirus as qualifying for statutory sick pay (SSP) and communicating this to staff. Some employers might also offer more than SSP – ‘contractual’ sick pay.
To protect employers, the self-employed and public services, a package of measures was announced by the UK Chancellor to provide support for public services, individuals and businesses to ensure that the impact of the virus is minimised. Moreover, to protect small businesses, the government announced that the cost of providing 14 days SSP per employee would be refunded by the government in full for businesses with fewer than 250 employees.
Supply chain disruption
The Federal Drug Administration (FDA), European Medicines Agency (EMA), and the Medicines and Healthcare products Regulatory Agency (MHRA), are monitoring the supply chain closely. Severe disruptions to supply involving shortages of critical medical products – particularly with regards to active pharmaceutical ingredients (APIs) – are expected.
Generic drug providers who source APIs from countries such as China or India are likely to face supply chain issues. Pharmaceutical demand from China is incredibly high. In the United States, the import of Chinese pharmaceuticals has increased 76% within the last decade, with approximately 80% of the medicines sold being produced in China. As such, the implementation of import and export restrictions on Chinese goods poses a significant threat to the global pharmaceutical supply chain. India also plays a vital role in the global supply chain and relies on China for a large percentage of APIs. Any restriction in supply is likely to result in rising drug prices.
Regulators are responding by enforcing special measures. Last week, the UK government banned parallel exporting and “hoarding” of three drugs used to treat coronavirus patients in anticipation of shortages in Britain. Exports of AbbVie’s Kaletra/Aluvia, combination lopinavir and ritonavir, the generic drug chloroquine phosphate and the generic drug hydroxychloroquine were restricted to meet the needs of UK patients. Hydroxychloroquine was placed on the restricted list from the 14th of March, and Kaletra and chloroquine phosphate were added on the 26th of February.
Similarly, in the United States, FDA released guidance last week designed to limit drug shortages that include:
- Lengthening expiration dates
- Requiring risk management plans
- Improved data sharing
- More accurate supply chain monitoring
The FDA continues to monitor 20 drugs that may become scarce as a result of the supply chain interruptions between China and the USA. While regulators maintain a strategic stockpile of drugs and medical supplies, these could fall short. To compound the issue further, pharmaceutical companies have shifted from stockpiling goods in warehouses to a “just in time” logistics model that ships products as the need arises – reducing costs but also increasing the likelihood of shortages.
Fundamentally, manufacturers will need to diversify and collaborate in order to mitigate risk, just as concerns are raised that some countries could look to nationalise the supply chain. No one organisation or country has adequate capacity to supply the world and ultimately cooperation and data sharing will be required in order to ensure the world remains fully supplied.
Reduction in demand
Brand pharmaceutical manufacturers and suppliers are likely to see a spike in demand for specific treatments, notably antivirals. However, the converse is also expected whereby demand for other pharmaceuticals may drop. This will occur as patients with other conditions are reluctant to visit their GP and are less willing to travel to pharmacies to collect prescriptions. The cancellation of non-emergency procedures and appointments to alleviate pressure on the NHS is also likely to reduce pharmaceutical demand. In the longer term, innovative drug developers may be impacted by slowing demand from China, a substantial growth market for international pharmaceuticals. These major shifts in demand will place strain upon systems, putting manufacturing risk mitigation strategies and capacity to the test.
Coronavirus Hub
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