Case Study: Supply Chain Disruption – API Shortage

Background

A U.S.-based pharmaceutical company manufacturing essential cardiovascular and anti-diabetic medicines faced a sudden API (Active Pharmaceutical Ingredient) shortage in 2024. The primary API supplier was located in China, and geopolitical tensions and export restrictions caused a halt in supply.

Products affected: Multiple high-demand generic medicines and one branded cardiovascular drug.

Challenge

1. Operational Impact

   • Production lines halted due to insufficient raw material.

   • Risk of missing shipment deadlines and contractual obligations.

2. Regulatory & Compliance Pressure

   • FDA requires advance notification of drug shortages.

   • Need to ensure new suppliers meet cGMP compliance.

3. Business & Market Risk

   • Potential loss of market share to competitors.

   • Risk of reputational damage among patients and healthcare providers.

Root Causes

1. Single Sourcing

   • The company relied heavily on a single API supplier, with no alternate sources approved.

2. Global Dependencies

   • Supply chain concentrated in one country made it vulnerable to political, logistical, or environmental disruptions.

3. Lack of Risk Assessment

   • Risk management for API shortage was insufficient. Contingency plans were either absent or outdated.

Actions Taken

1. Short-Term Mitigation

   • Communicated with FDA under the Drug Shortage Reporting Program.

   • Prioritized API allocation to critical products to minimize patient impact.

2. Alternate Sourcing

   • Identified and audited secondary suppliers in India and Europe.

   • Conducted tech transfer and analytical method validation to ensure product equivalence.

   • Submitted FDA prior approval supplements for new suppliers under accelerated timelines.

3. Supply Chain Resilience

   • Implemented dual/multi-sourcing strategies to reduce dependency on a single supplier.

   • Increased safety stock levels for critical APIs.

   • Enhanced supply chain monitoring, including geopolitical risk tracking.

4. Long-Term Strategy

   • Integrated risk-based supply chain management into corporate SOPs.

   • Introduced real-time inventory dashboards and vendor scorecards.

   • Negotiated long-term contracts with multiple suppliers to ensure uninterrupted supply.

Outcome

• API supply restored within 6 months without compromising product quality.

• FDA approved the new suppliers and supplements successfully under expedited review.

• Business continuity ensured with minimal market disruption.

• The company strengthened internal policies for supplier audits, contingency planning, and risk management.

Lessons Learned

1. Never rely on single sourcing for critical raw materials.

2. Risk management is crucial — assess supply chain vulnerabilities regularly.

3. Regulatory communication is key during shortages.

4. Flexible tech transfer and validation processes allow quicker response to disruptions.

5. Multi-national sourcing reduces geopolitical and logistic risks.