KPMG Holdings Ltd.

Recently, the Food and Drug Administration (F.D.A.) released information indicating that Hurricane Helen caused significant damage to a manufacturing facility in North Carolina, which further exacerbated the ongoing shortage of intravenous fluids in the United States. The plant is responsible for producing about 60 percent of the intravenous infusion products used in U.S. hospitals. As a result, the F.D.A. has begun importing products from overseas to ease patient demand. At the same time, the European Medicines Agency (EMA) reported that shortages of many essential medicines, including antibiotics and cancer treatments, are becoming more severe due to multiple factors such as production disruptions and regulatory challenges. In response to the current crisis, the EU has launched mechanisms aimed at strengthening cooperation among its 23 member states. Together, these two geographically dispersed and seemingly unrelated cases reveal the pharmaceutical industry's heavy reliance on fragile supply chains and the urgent need to reassess and restructure them. So what is the source of the problem? According to a KPMG report, the US dominates the generics market with a prescribing rate of about 90 per cent, while prescribing practices across Europe are showing similar trends. KPMG said: "Global demand for generics continues to grow as payers and consumers seek to reduce healthcare costs. Yet even as demand rises, buyers are consolidating, giving them more leverage in pricing. This leads to greater margin pressure on suppliers and increased likelihood of manufacturers exiting unprofitable products." As a result, some companies are under intense pressure to ramp up production to meet soaring demand while trying to maintain drug efficacy and safety standards. This double pressure leads to quality problems as one of the main reasons for drug shortages. In addition, many drug manufacturers lack real-time inventory data, which seriously hinders their ability to effectively manage supply. The lack of communication between manufacturers, pharmacies and hospitals further complicates forecasting and addressing shortages. Visibility and collaboration are key to addressing these inefficiencies and achieving supply chain resilience. From raw materials to finished products, real-time inventory tracking significantly improves visibility for pharmaceutical companies and facilitates agile decision making. Assuming that manufacturers are able to predict potential shortages by analyzing current inventory levels of active ingredients, this will allow them to proactively adjust production schedules. Real-time inventory tracking also enables healthcare providers to effectively manage inventory levels and prevent over - or out-of-stock critical drugs. This will enable the industry to detect disruptions, such as procurement or material delays, early and take proactive action before these issues evolve into severe shortages. In addition, leveraging predictive analytics enables companies to simulate various scenarios and develop contingency plans, ensuring they are prepared for potential disruptions. By analyzing historical data, market trends, production capacity, regulatory changes and previous shortage events, the pharmaceutical chain is able to provide accurate forecasts. This proactive approach allows healthcare systems to adjust inventory levels in advance or ensure the presence of alternative suppliers. If one facility is affected by a natural disaster, others can continue to operate, ensuring that the supply of essential medicines is not affected. However, visibility alone does not realize the full potential of the supply chain. Communication must be enhanced as medicines move from manufacturer to distributor to hospital. A complete loop of communication needs to be established between various stakeholders, including suppliers, healthcare providers, and regulators, so that manufacturers can match their production rates to actual usage. This smooth flow of data will allow organizations to better coordinate responses during shortages. Notably, the approval rate for drugs in clinical trials is low, at 14%, resulting in an average development cost of $1 billion per approved drug. This financial burden further highlights the need for more efficient processes, and commercial AI is expected to be the key to solving this problem. For example, Gilead Sciences, Inc., a biopharmaceutical company, is co-innovating with SAP to develop the SAP Life Sciences Batch Release Center. The tool enables control checks of manufactured drug batches, helping organizations maintain compliance with regulatory standards in all regions of the world. The rise of generative AI has provided researchers with unprecedented opportunities to explore a wider range of potential compounds than traditional methods. Ai can be used to detect disease patterns across a wide range of data sets, helping to determine the best drug compositions for a variety of conditions. By leveraging AI, the pharmaceutical industry can reduce research and development costs, minimize human error, and shorten research times, thereby making essential medicines more accessible, affordable, and profitable. While the global drug shortage is a complex and difficult challenge to solve quickly, prioritizing cooperation, transparency, and proactive strategies will help build a more resilient drug supply chain.

Recently, the U.S. Food and Drug Administration (FDA) revealed that Hurricane Helen caused significant damage to an important manufacturing facility in North Carolina, further exacerbating an IV infusion shortage that has been ongoing for some time. The plant is responsible for producing about 60 percent of the intravenous fluids used in U.S. hospitals, so its shutdown has had a major impact on the health care system. To alleviate this shortage, the FDA has begun importing products from overseas to ensure that patients receive the treatment they need in a timely manner. At the same time, the European Medicines Agency (EMA) also reported a worrying trend: growing shortages of essential medicines, including antibiotics and cancer treatments, due to production disruptions and regulatory challenges. In response to this crisis, the European Union launched a coalition aimed at strengthening cooperation among its 23 member states to ensure the stability and reliability of the drug supply chain. These seemingly unrelated and geographically dispersed examples actually highlight the pharmaceutical industry's dependence on fragile supply chains, which further underscores the urgent need to reevaluate and restructure supply chains. According to a KPMG report, the US leads the generic market with a prescribing rate of around 90 per cent, while prescribing practices across Europe show a similar trend. "Global demand for generics continues to grow as payers and consumers look for ways to cut healthcare costs," KPMG noted. However, despite the rise in demand, buyers in the market are also consolidating, creating more leverage in pricing. That means increased profit pressure on suppliers and the increasing likelihood that manufacturers will exit unprofitable products. As a result, some companies are under intense pressure to ramp up production to meet soaring demand while maintaining drug efficacy and safety standards. This double pressure makes quality problems one of the main reasons for drug shortages. In addition, many drug manufacturers lack real-time inventory data, which hampers their ability to effectively manage supply. Inadequate communication among manufacturers, pharmacies and hospitals further complicates efforts to anticipate and address shortages. Visibility and collaboration are key to addressing these inefficiencies and thus achieving supply chain resilience. From raw materials to finished products, real-time inventory tracking enables pharmaceutical companies to significantly improve visibility and facilitate agile decision making. Suppose manufacturers predict potential shortages by analyzing current inventory levels of active ingredients; This enables them to proactively adjust production schedules. It also enables healthcare providers to effectively manage inventory levels and prevent overstocking or out of stock of critical drugs. This allows the industry to detect disruptions early, such as delays in procurement or materials, and take proactive action before these problems turn into serious shortages. In addition, leveraging predictive analytics enables companies to simulate various scenarios and develop contingency plans, ensuring they are prepared for potential disruptions. By analyzing historical data, market trends, production capacity, regulatory changes, and previous shortage events, the pharmaceutical chain can provide accurate forecasts. This proactive approach allows healthcare systems to adjust inventory levels in advance or secure alternative suppliers. If one facility is affected by a natural disaster, others can continue to operate, ensuring the supply of essential medicines. However, visibility alone will not unlock the full potential of the supply chain. Communication must be enhanced as medicines move from manufacturer to distributor to hospital. A whole cycle of communication needs to be established between various stakeholders, including suppliers, healthcare providers, and regulators, so that manufacturers can match their production rates to actual usage. This smooth flow of data allows organizations to better coordinate responses during shortages. Only 14 percent of drugs in clinical trials are approved by the FDA, resulting in an average development cost of $1 billion per approved drug. This financial burden underscores the need for more efficient processes, and commercial AI has the potential to be the missing ingredient. Gilead Sciences, Inc., a biopharmaceutical company, is co-innovating with SAP to develop the SAP Life Sciences Batch Release Center. The tool performs control checks on manufactured drug batches to help organizations maintain compliance with regulatory standards across regions. The rise of generative AI has allowed researchers to explore a wider range of potential compounds than traditional methods. It can be used to detect disease patterns across a wide range of data sets, helping to determine the best drug compositions for a variety of conditions. By leveraging AI, the pharmaceutical industry can reduce research and development costs, minimize human error, shorten research times, and make essential medicines more accessible, affordable, and profitable. While the global drug shortage is a complex challenge that will not be solved quickly, prioritizing cooperation, transparency, and proactive strategies can help build a more resilient drug supply chain.

Welcome back to another episode of MedCity FemFwd, a podcast dedicated to discussing the breakthroughs and challenges in women’s health. In this episode, we’re joined by Carolee Lee, CEO and founder of Women’s Health Access Matters (WHAM), and Ash Shehata, KPMG U.S. sector leader for healthcare. In April, WHAM and KPMG launched a $1.1 million partnership that aims to improve women’s health research and investment in autoimmune disease, brain health, cancer and heart health. In the episode, Lee and Shehata talk about their goals for the partnership and their progress so far. To hear the full episode and learn more, click here: presented by Health Tech The Promise of Value-Based Care and MedTech Innovation Monica Vajani, Executive Director for mHUB’s MedTech Accelerator, discusses how mHUB is helping innovators transition healthcare towards value-based care. By Monica Vajani