The U.S. Plans to Start Stockpiling API by Entering into a Contract with a Startup Company

The government recently signed a 4-year, $354 million contract with Phlow Corp in an effort to bring drug ingredient manufacturing back to the United States.  There is an option for the contract to extend to 10 years, totaling $812 million. The contract’s main goal is to the reduce the reliance of the U.S. drug supply chain on foreign countries such as India and China.

Why has the U.S. decided to make this change now? The FDA estimated that the U.S. receives 40% of all generic medications from India. India receives two-thirds of the active pharmaceutical ingredients (API) it requires to produce these generic medications from China, who is the world’s largest raw ingredients manufacturer. The recent COVID-19 pandemic called attention to how drastically the drug supply chain could be impacted when ingredient production is concentrated outside of the United States.

Phlow’s CEO, Dr. Eric Edwards, stated Phlow will be responsible for implementing the first strategic API reserve. The reserve will consist of over a dozen medications to treat conditions such as hypertension, chronic pain, and infections. Phlow will lead a team with several other entities, including Civica Rx, Medicines for All Institute, and AMPAC Fine Chemicals, to execute this plan. There are concerns that the government is entrusting this large task to a new startup when an established manufacturer may be more adept to tackle this . A spokesperson for the Association for Accessible Medicines believes that this issue requires a policy discussion and not a singular .

Using stockpiled API before its expiration date will require rotating the stock and detailed attention to storage, production, and selling finished goods.  Used or expired API will need to be replenished to maintain the stockpile volumes. How does pricing factor into the stockpile?  Ingredient costs must be competitive in the market or Phlow will have difficulty selling a higher cost generic that is sourced from the United States.  Until Phlow’s plan is released, the logistics and pricing factors are uncertain and could impact the success of the project.


Posted July 2020

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