The pharmaceutical industry continues to outsource production, with the global contract manufacturing market expected to reach $604.11 billion by 2030. To bolster domestic manufacturing and safeguard the pharmaceutical and medical device supply chain, the United States has introduced the BIOSECURE Act.
As a key provision, federal agencies or recipients of federal funds under the proposed legislation are prohibited from acquiring biotechnology equipment or services from any “biotechnology company of concern” or forming contracts with entities that rely on these items. The five companies of concern are BGI, MGI, Complete Genomics, WuXi AppTec, WuXi Biologics, and their related entities.
The bill, which last year passed the House of Representatives with bipartisan support, could cause notable ripples across the U.S. economy. The Biotechnology Innovation Organization (BIO) reported in May 2024 that 79% of 124 companies surveyed have some form of contract or purchase agreement with Contract Development and Manufacturing Organizations (CDMOs) or Contract Management Organizations (CMOs) in China. Alongside this, a Global Data analysis reveals that about 120 U.S. biopharma drugs are under development in partnership with the Chinese companies specified in the legislation.
The legislation includes a grandfather clause of eight years, but the 2032 deadline may still pose challenges for companies reliant on restricted entities. Government officials hope the BIOSECURE Act will spark reshoring, with a KPMG report predicting that by 2026, the share of U.S.-serving supply chains based in the Americas will rise from 59% to 69%. We have already begun to see this impact with WuXi Biologics selling its Irish facility to U.S.-based Merck.
Let’s explore how American pharmaceutical and medical device manufacturers, particularly CDMOs/CMOs, can prepare to reevaluate their supply chains to mitigate the impact of the BIOSECURE Act.
Diversify supplier base and sourcing options
To prepare their operations for the increased supplier scrutiny from the BIOSECURE Act and future-proof against any additional regulatory frameworks stemming from the incoming administration, pharmaceutical and medical device manufacturers should diversify their supplier base and find alternative sourcing options.
Manufacturers should utilize suppliers or contractors across multiple countries and regions, balancing local and global options. Supporting local businesses closer to manufacturing facilities can provide quicker shipping and make manufacturers more adaptable. Tariff fluctuations can significantly impact costs and disrupt supply chains, making diversified sourcing essential to maintaining stability.
If any sources cannot fulfill an order, are regulated against, or face new tariffs, they can quickly shift to a reliable backup option. Building stronger relationships with these key suppliers or contractors can also increase collaboration and promote shared growth. Manufacturers can ensure that contracts always run smoothly by establishing trust and open communication with their sources.
Leverage digital tools for advanced forecasting and risk assessment
American CDMOs are poised to see a surge in orders due to the BIOSECURE Act. However, many may struggle to meet this demand, having been slow to modernize their operations. According to a GlobalData survey, 39% of pharmaceutical manufacturers face challenges with digital transformation, largely citing the complex and ever-evolving regulatory environment. To handle this increased business effectively, they should adopt digital tools for advanced forecasting and risk assessment.
Data analytics is critical for projecting demand and aligning it with production capabilities. Tools such as Enterprise Resource Planning (ERP) software can manage inventory levels and component lead times to project when additional materials need to be ordered. By managing the shelf-life and age of all components, they can ensure none expire before they are utilized. In turn, facilities are well-equipped for additional orders and never run out of critical supplies.
Keeping quality and compliance at the forefront
The BIOSECURE Act also underscores the need to address the pharmaceutical and medical device industries’ existing challenges, including maintaining strict quality standards and managing complex record-keeping requirements. An influx of orders can strain production facilities, so to effectively expand their operations and prevent costly recalls, these industry manufacturers should adopt robust digital tools that address these needs.
ERP systems can play a pivotal role in quality assurance by establishing quality control measures and evaluating them against actual outcomes. By pinpointing ingredient or formulation issues early, processes can be adjusted immediately and before products leave the facility. CDMOs can also implement tailored quality thresholds to ensure products consistently meet customer expectation.
Manufacturers adopting ERP systems can address not only the fallout from this act but compliance with broader regulations. The software can automatically generate serial numbers for finished products, complying with serialization rules like the Drug Supply Chain Security Act (DSCSA). They can also automatically create and manage regulatory documents such as Global Harmonized System (GHS) Labels and Safety Data Sheets (SDS). This advanced lot tracking supports audits and recalls, allowing troubled lots to be quickly identified and removed from circulation. For CDMOs/CMOs, ERPs can also incorporate customer-specific information for toxicological, ecological, or other assessments.
Navigating the future
Looking ahead, manufacturers that leverage the right digital tools will be better equipped to succeed in a more regulated and competitive market. By leveraging tools like ERP systems, CDMOs can manage demand, maintain compliance, and safeguard quality throughout their operations. With the right strategies and technologies in place, manufacturers can not only meet the requirements of the BIOSECURE Act but also strengthen their position in an evolving industry.
