Global medicine supply chains face growing pressure, Moody’s warns

Dubai: Global pharmaceutical supply chains are facing mounting pressure from geopolitical tensions, shipping disruptions and manufacturing bottlenecks, raising concerns over medicine availability and costs worldwide, according to a new Moody’s report.

The report warned that pharmaceutical supply chains have entered “a period of sustained instability” as multiple disruptions increasingly overlap across trade routes, production facilities and sourcing networks.

For the UAE, which relies heavily on imported medicines and active pharmaceutical ingredients (APIs), prolonged disruption across global logistics and manufacturing hubs could affect delivery timelines, procurement costs and inventory management for hospitals and pharmacies.

Moody’s identified disruptions across Red Sea shipping routes as one of the biggest recent shocks to pharmaceutical logistics.

The report said attacks on commercial vessels during the 2023-2024 Red Sea crisis forced six of the world’s 10 largest container carriers to reduce or halt transit through the corridor, causing traffic through the Suez Canal to collapse “by two thirds.”

Ships were rerouted around the Cape of Good Hope, adding nearly two weeks and about 4,000 miles to shipping journeys. Moody’s said the impact was immediate for Indian pharmaceutical exporters, particularly generic drug manufacturers supplying Europe and global markets.

“Shipping costs more than doubled, lead times stretched, and the just-in-time model that governs much of generic drug production left limited margin to absorb the delay,” the report stated.

The report said the disruptions exposed the pharmaceutical industry’s dependence on vulnerable maritime trade corridors and concentrated sourcing networks.

The UAE’s position as a regional logistics and healthcare hub means disruption across Red Sea and Suez shipping corridors can directly affect medicine imports moving between Asia, Europe and the Gulf.

The report highlighted the pharmaceutical industry’s heavy dependence on India and China for APIs and raw materials. Moody’s said years of cost-driven consolidation concentrated API production in both countries, creating structural vulnerabilities across global supply chains.

It added that “the ongoing conflict with Iran is rapidly creating shockwaves throughout the pharmaceutical supply network as the supply of Indian-sourced APIs is severely restricted.”

According to the report, the United States imports nearly 40 per cent of its generic medicines using APIs sourced from India. India itself remains heavily dependent on China for bulk drug imports.

“India, which sources around 70% of its bulk drug imports from China, was particularly exposed,” Moody’s said. For UAE healthcare providers and pharmaceutical distributors, that interconnected supply chain creates exposure to disruptions originating far outside the region.

The report also warned that rising trade tensions and tariff proposals could significantly increase pharmaceutical costs globally.

Moody’s cited a proposed 25 per cent US pharmaceutical import tariff that could add nearly $51 billion in annual drug costs and raise consumer prices.

Manufacturers reported double-digit cost increases for medicines including amoxicillin, acetaminophen and metformin. Freight costs also surged during the disruption period.

The report said shipping rates from China to the US West Coast increased from $3,500 to $6,500 per container. Although the tariff measures referenced are US-focused, the report warned that pharmaceutical supply chains are deeply interconnected, allowing pricing and supply impacts to spread internationally.

“The long-term takeaway is clear,” Moody’s said. “Pharmaceutical supply chains may benefit from shifting from a model optimized for cost to one built for resilience.”

Moody’s also highlighted limited flexibility within global pharmaceutical manufacturing networks. The report said many sterile injectable and high-volume generic manufacturing facilities already operate above 80 per cent utilization, leaving little spare capacity during disruptions.

It added that qualifying an alternative production site can take between 12 and 24 months. That creates prolonged shortages when facilities face shutdowns, regulatory action or financial collapse.

Moody’s cited the 2023 collapse of Akorn Pharmaceuticals as an example of how quickly supply disruptions can spread through the healthcare sector.

“FDA rules required the immediate recall of its entire product portfolio, eliminating supply across multiple therapeutic categories with no advance warning,” the report stated.

The report added that no manufacturer had sufficient capacity or regulatory clearance to replace the lost production volumes quickly.

The Moody’s report underlines the growing challenge facing import-reliant healthcare markets including the UAE, where medicines, APIs and medical products depend on highly globalized supply chains.

Any sustained disruption to shipping corridors, manufacturing centres or raw material sourcing networks could increase procurement costs and extend delivery timelines for distributors and healthcare providers across the region.

The report said pharmaceutical companies are increasingly being forced to rethink supply chain strategies built primarily around efficiency and low costs.

“Companies that view disruptions as isolated incidents may remain exposed,” Moody’s said. The report added that diversification of suppliers, alternative logistics routes and regionalized production are becoming increasingly important as the sector adapts to a more volatile operating environment.