Crisis and Opportunity of Supplementary Material Supply Chain under Epidemic

At present, almost all countries and regions in the world are working hard to deal with the COVID-19 epidemic. In particular, governments of various countries are doing everything possible to alleviate the shortage of important medical materials. In order to ensure the supply of materials in their countries, some key raw materials and auxiliary materials have become a list of prohibited exports.

It is particularly important for enterprises to quickly return to a healthy operating state after a severe shutdown. During the recent process of resuming production and resuming production, China found that, in the context of globalization, in order to reactivate the entire supply chain, it is necessary to comprehensively assess the scale and duration of the impact of the new crown epidemic everywhere, and the global supply chain is generally interrupted. According to the short board theory, the weakest link in the supply chain is the key to the success of the entire production recovery. The supply of excipients has become a roadblock for the development and production of domestic pharmaceutical companies.

The manufacturing industry depends on a complex and complete production system. If there is a gap in a key area or link, the "butterfly effect" will easily appear. The epidemic made many companies feel the pressure from the supply chain. Since the volume procurement in 2018, the domestic pharmaceutical manufacturing industry has begun to have a new understanding of supply chain management. The integration of raw materials and preparations is the most cost-effective mode for domestic companies. This also reflects from the side that the entire supply chain management of Chinese enterprises is not global enough.

The reason why the supply of excipients has become a key point in the development and production of pharmaceuticals is inseparable from the version of the latest "Drug Registration Management Measures" and other policies in 2020. With the domestic reform of chemical drugs and other drugs, the related review of raw materials and excipients and the consistency evaluation regulations require that the basic materials need to be basically the same as the original research and need to meet the pharmaceutical compliance requirements. The marketing license holder has an overall assessment of the manufacturer and product quality system. The proportion of auxiliary materials in the overall production cost of drugs is not particularly large, but it is relatively trivial and must be subject to compliance with the quality system assessment. Costs are filed one by one, but the proportion of compliance costs in regulations is rather high.

Supply chain determines cost control. China's supply chain network of low-end APIs and excipients is fairly strong, but the supply chain network of mid- to high-end APIs and excipients is still under construction. The scale and types are not enough. This is the current status of domestic excipient companies. For most domestic pharmaceutical companies, they have not reached the one that really needs R & D, nor do they know the actual supply of auxiliary materials they need. In the case of unclear demand, it is also difficult to establish a project for the development of auxiliary materials.

This crisis certainly exposed the difficulties of the domestic pharmaceutical industry, but it also brought opportunities for improvement. If excipients and API intermediates are a key node that must be broken through in China's pharmaceutical industry, organizations such as industry associations can use information collection to obtain which are the scarce original auxiliary packages required by our manufacturing companies. What is the technical difficulty of solving the scarce original auxiliary package, can it concentrate on the big things like building a "square cabin". How to break through the capacity ceiling of the lack of "high-definition" capabilities of China's manufacturing industry during the epidemic situation or require the joint efforts of the entire industry.

A more resilient enterprise can survive better. The epidemic will force many companies to begin to select alternative suppliers of "Plan B" and improve the supply chain system. However, for the long term of the project, companies that integrate raw material preparations will be more inclined to lay out or strengthen their control over the supply chain of excipients.

To a certain extent, the epidemic will accelerate the reconstruction of the global supply chain and promote the adjustment of the global manufacturing landscape. Seizing the opportunity to enhance the competitiveness of manufacturing is a top priority. In view of the fact that production and supply cannot be restored in the short term, commercial cooperation to obtain authorization for auxiliary products may not necessarily be the solution to the current shortage of auxiliary materials in the supply chain.

On the other hand, accelerating the development of the Internet of accessories industry to increase the integration of the supply chain is also a current opportunity. In a series of recent "new infrastructure" initiatives, the Ministry of Industry and Information Technology specifically proposed to speed up the industrial Internet pilot demonstration and popularization. Promote the sharing of information, technology, production capacity and orders in domestic auxiliary materials supply, and can provide third-party auxiliary material manufacturers' production qualification audits to achieve precise configuration and efficient docking, thereby enhancing the coordination of auxiliary materials supply chain.

Industry Outlook

Under the epidemic, survival is the only goal in the short term. But in the long run, how to find a way out of the fog, how to survive the crisis, and how to position yourself after returning to normal. What we can foresee is that after the epidemic, domestic companies will strengthen their foundation-manufacturing, especially for pharmaceutical companies, who want to maintain their position, the trend of self-supplied raw materials is inevitable. In the short term Excipients still have to rely on domestic and foreign business cooperation, but resilience substitution efficiency may become the main trend pursued by domestic pharmaceutical companies, that is, pharmaceutical companies have shifted production and procurement to the end market. The trend of globalization of the supply chain may change. Realize real estate through business cooperation, establish a base point in each region, and eventually become a global network. It is also a general trend for core accessories to be transformed into domestic self-sufficiency.