How Impactful are Adverse Weather Events to Pharma Supply Chains?
Hurricane Helene was the second major hurricane of the 2024 Atlantic hurricane season as it hit the southeastern United States just two weeks ago. Sadly, over 200 people have already lost their lives, and Initial estimates suggest it to be the eighth costliest U.S. hurricane on record.
Global medtech company, Baxter International, faced the full force of the natural disaster as its North Cove facility in North Carolina was affected by flooding due to the storm and has been forced to cease production since. Although no structural damage to the plant has been identified (so far), remediation efforts are ongoing to provide temporary transport in and out of the facility and ensure the necessary electrical and water supplies to the plant are ready for when production can resume.
Clearly a significant issue for business operations, but as the top supplier of hospital IV fluids in the U.S., the implications are far-reaching. A temporary pause in shipments to hospitals and dialysis patients has now been reversed, and other finished goods will be further inspected to support short-term allocations. Fortunately for Baxter, they have several other manufacturing sites that can increase production until North Cove is functioning again.
Whilst Hurricane Helene has been and gone, Hurricane Milton is currently causing significant disruption over the West Coast of Florida...
Assessing the Risks of Natural Disasters on Supply Chains
The COVID-19 pandemic and recent shortages of medical products have highlighted vulnerabilities across pharma and medical supply chains, with drug shortages at their highest in over a decade. Natural disasters have notably disrupted manufacturing, such as the 2023 tornado at a Pfizer facility.
Despite these risks, natural hazards are rarely considered in site selection for manufacturers, who tend to be lasered focused on regulatory, cost, and workforce factors.
Utilizing composite risk index scores from FEMA's National Risk Index (NRI), a recent publication has evaluated community risk across 18 hazard types - including hurricanes, flooding, and wildfires – with scores assessing the expected annual losses in property, population, and agricultural value, factoring in social vulnerability and community resilience, as outlined below:
Source: ASPE
The graphic highlights just how many medical product manufacturing facilities in the U.S. are situated in high-risk areas for natural hazards. Specifically, 15% of drug and 23% of device manufacturing sites are in earthquake-prone zones, while 33% and 25% are in tornado areas, respectively - risks which can lead to substantial physical damage, power outages, and workforce disruptions, significantly affecting the supply chain.
In response, The FDA has issued varying guidance to manufacturers that recommends incorporating natural hazards into their risk management strategies. In 2022, the agency recommended considering geographic risk factors in planning, and more recently emphasizing the need for medical device manufacturers and distributors to prepare for potential supply chain disruptions due to natural disasters.
For manufacturers looking to open new facilities and manufacturing sites, natural hazard evaluation should be an important criterion for consideration on business performance. For existing facilities, it should serve as a reminder to consider infrastructure upgrades to enhance protection against natural disasters and mitigation plans that minimize business impact should disaster strike.
