People are all adjusting to a new normal that COVID-19 has brought to business operations, including social distancing by limiting interactions with peers and colleagues. These temporary changes to business operations have redefined how people work and interact on a day-to-day level, with work-from-home policies being enacted out of the abundance of caution and only mission-critical staff members allowed to work in manufacturing and production environments.
The collective effect of these changes has disrupted the markets, with organization leaders reevaluating where and how we operate from a risk perspective. With the rise in availability of low-cost labor and access to growing populations in Asia in the last 30 years, manufacturing plants across all industries are offshoring, primarily to China and India. Free-trade policies with no restrictions on imports and exports internationally have resulted in the overwhelming majority of Active Pharmaceutical Ingredients (API) being sourced from outside of the United States, making the supply chain vulnerable to geopolitical risks.
The Congressional Research Service estimates with independent research that China supplies 30% of U.S. medical personal protective equipment (PPE). An immediate shortage is occurring of PPE consumables available for first responders and medical team professionals responding to the COVID-19 crisis. Within the coming weeks and months, we will begin to see reduced availabilities of critical pharmaceutical products as countries of origin limit exports to protect their own populations. The end result will likely be a loss of visibility and control of the United States manufacturing base. In response to the pandemic, United States manufacturers are increasing production of medical supplies to combat COVID-19. While the pandemic has exposed public health and economic vulnerabilities in the United States, there are signs that those same vulnerabilities will not be repeated, that we will see a restructuring and retooling of pharmaceutical and medical device supply chains not seen since World War II. Once the COVID-19 pandemic is behind us, it will be hard to imagine pharmaceutical and other critical manufacturing sectors remaining offshore and vulnerable to geopolitical risks.