Some three weeks into the U.S. and Israel’s war with Iran, the expanding conflict’s impact on energy prices and shipping in the region has become impossible to ignore.
While much of the immediate concern, insofar as it pertains to trade, has centered on the flow of oil through the Strait of Hormuz, a resulting rise in transportation and energy costs could echo across industries, including that for pharmaceuticals.
And with the war embroiling Iran’s neighbors, generic exports, drugs for clinical trials and local shipments of biologics that rely on cold chains in the region are likely to face increasing pressure if the conflict persists, multiple experts and news outlets have cautioned in recent days.
“As disruptions escalate around the Strait of Hormuz, the most affected shipments are often medicines for clinical trial distribution,” Alex Guillen, global SME for pharma and life sciences at Boston-based supply chain visibility firm Tive, said in an emailed statement to Fierce Pharma, cautioning that there “will be an impact on commercial distribution as well.”
With regards to marketed drugs, "ultra-cold chain shipments carrying biologics are the most vulnerable to disruption,” Guillen added.
On a broader level, spikes in oil prices have the potential to affect the supply chain of “most global manufacturers,” Aaron Lober, manufacturing intelligence lead at AI production platform developer CADDi, said in a separate statement to Fierce.
“Very few manufactured goods actually travel through the Strait of Hormuz, so the bigger issue is how rising oil prices ripple through transportation and energy costs across the entire system,” he explained.
Still, the constriction of shipments in the Strait is no longer the only issue global businesses are grappling with as key air transit hubs have been knocked out in the region, too, Reuters reported Monday, flagging airports in Dubai, Abu Dhabi and Doha that have been closed following Iranian strikes.
Now, with supply routes for cancer meds and other products tethered to the cold chain disrupted, drugmakers are working to reroute flights and lock down new overland access in the region, the news service said.
Executives from Western pharmas, speaking anonymously, told Reuters that they’re now looking at alternative routes into the Gulf and trucking some drugs by ground from airports like Jeddah and Riyadh in Saudi Arabia. While there haven’t been signs of major medicine shortages in the Gulf just yet, that could change if the war persists, some executives warned.
In an example of how pharmas are grappling with shipping constraints in the region, one of the executives told Reuters that their company is moving some Europe-Asia cargo—typically routed through Dubai or Doha airports—through China or Singapore. The executive explained that making shipments by sea is not tenable given the longer timeline and Iran’s closure of the Strait of Hormuz.
For his part, CADDi’s Lober estimated that the situation in the Gulf is likely to be “temporary,” before cautioning that if the conflict stretches on for multiple weeks, “it will become increasingly important to hedge energy cost and inflation risks.”
He continued: “An increase in the price of oil is also likely to have an inflationary impact on all manufactured products, which will put pressure on margins for manufacturers in the U.S.”
While much of the initial focus on medicine supply concerns products destined for the Middle East and other nearby regions, supply chain experts are already weighing the potential for the war and Iran’s closure of the Strait to impact U.S. supplies of generic medicines.
Nearly half of the generic prescriptions supplied in the U.S. come from India, which itself relies on the Strait of Hormuz both to receive manufacturing inputs and ship finished medicines west, CNBC reported earlier this week, citing Rohit Tripathi, VP of industry strategy for manufacturing at the pharma supply chain software firm RELEX Solutions.
India relies on the Strait of Hormuz for some 40% of its crude oil imports, which feed into petrochemical inputs used in drug manufacturing, Tripathi pointed out, noting that “even though American consumers are not buying medicines directly from the Gulf, they are still at the end of a supply chain that runs through it.”
The good news is that many manufacturers have buffer stock on hand for now, meaning any potential disruption to supply in the U.S. is still several weeks out, Tripathi said, citing common antibiotics, blood pressure medications, diabetes drugs like metformin and common painkillers as some of the products facing the greatest potential risk.
The story is similar in some other countries closer to the conflict, such as Pakistan, where the nation’s drug regulator has said it does not anticipate sudden medicine price hikes, at least for now, given strategic medicine stockpiles in the country, according to Dawn, Pakistan’s oldest English-language newspaper.
At the outset of the U.S.-Israeli military action in Iran, many global drugmakers with operations in the Middle East told Fierce Pharma that they had set to work monitoring the safety of local employees and navigating potential supply disruptions. In particular, Saudi Arabia has seen an increasing number of international pharma companies set up shop or forge strategic agreements in recent years, attracting the likes of Sanofi, Vertex and CSL.
Meanwhile, many other drugmakers boast operations in the greater Middle East region, including Boehringer Ingelheim, Roche, Merck & Co., Novo Nordisk and Takeda, to name a few.