Australia’s pharmaceutical supply chains are facing a period of sustained instability as geopolitical tensions, manufacturing constraints, cyber threats and counterfeit medicines converge to create complex risks.
According to a new whitepaper from Moody’s, ‘Supply Chain Insights: Navigating Disruption in Pharmaceutical Supply Chains’, organisations can no longer afford to tend to these accumulating threats in isolation.
The report argues that disruptions are becoming increasingly interconnected, with events in one area rapidly cascading across global supply networks.
It also paints a clear picture of the problem, claiming that 323 medications were in shortage in the United States in the first quarter of 2024 alone, the highest level since tracking began in 2001.
In Australia, the stakes are particularly high, with the country relying heavily on imported medicines and pharmaceutical ingredients.
This is leaving healthcare providers exposed to disruptions occurring thousands of kilometres away, with many relying on active pharmaceutical ingredients manufactured in India and China.
The Moody’s report identifies four major threats:
1. Geopolitical and trade disruptions
Global pharmaceutical supply chains have become increasingly vulnerable to geopolitical shocks and trade disputes, according to Moody’s.
The report highlights how attacks on commercial shipping lanes in the Red Sea – which forced six of the world’s ten largest container carriers to reduce or halt transit through the Suez Canal – cut traffic through the corridor by approximately two-thirds, disrupting one of the world’s most vital trade routes.
Ships were rerouted around the Cape of Good Hope, adding nearly two weeks and about 4,000 miles to journeys, and shipping costs more than doubled on many routes.
At the same time, ongoing conflict in the Middle East is putting pressure on the supply of Indian-sourced active pharmaceutical ingredients, which is a critical concern given India’s key role in global generic medicine production.
Australia’s pharmaceutical sector is particularly exposed, with the supply chains supporting Indian manufacturers dependent on raw materials from China and logistics networks in the Gulf region.
Industry experts have warned that disruptions around the Strait of Hormuz and broader tensions in the Middle East could affect medicine availability, increase freight costs and lengthen delivery times for Australian importers.
Trade policy is also creating additional uncertainty, with Moody’s estimating that a proposed 25 percent US pharmaceutical import tariff could add US$51 billion in annual drug costs.
This shift, it says, could reshape global sourcing decisions and intensify competition for manufacturing capacity.
2. Manufacturing fragility
The pharmaceutical manufacturing sector has little capacity to absorb major disruptions, according to the report.
Many sterile injectable manufacturing facilities already operate at utilisation rates above 80 percent, while qualifying an alternative production site can take between 12 and 24 months.
This leaves limited room for manufacturers to respond when facilities experience operational issues, regulatory action or unexpected shutdowns.
Moody’s points to the collapse of Akorn Pharmaceuticals in 2023 as a prime example.
The Illinois-based generic drug maker went bankrupt in February 2023 and quickly ceased operations, with FDA rules triggering an immediate recall of its entire product portfolio, covering around 70 generic medicines.
No other manufacturer was able to quickly replace the lost supply, demonstrating how concentrated manufacturing networks can rapidly lead to shortages when a major supplier suddenly exits the market.
3. Cyber attacks on critical supply infrastructure
Cybersecurity has emerged as one of the fastest-growing threats to pharmaceutical supply continuity.
The Moody’s report highlights the 2024 ransomware attack on Change Healthcare, which disrupted claims processing at more than 90 percent of the country’s 70,000 pharmacies, exposing data from nearly 193 million individuals.
This made it the largest healthcare data breach on record, ultimately costing the parent company, UnitedHealth Group, nearly $2.5 billion.
The incident demonstrated how a single cyber event can have system-wide consequences across healthcare supply networks.
The growing adoption of AI is introducing additional risks, with pharmaceutical companies increasingly using AI-powered tools, cloud platforms and third-party application programming interfaces (APIs) to support regulatory compliance, supplier management and operational decision-making.
While these technologies can drive greater efficiency, Moody’s warns that they also create new avenues for cybercriminals.
The growing use of AI in regulatory processes is raising concerns about data integrity, with existing cybersecurity frameworks potentially ill-equipped to address these emerging risks.
The challenge extends beyond internal systems to include suppliers, logistics providers and software partners whose digital vulnerabilities can become supply chain vulnerabilities.
4. Counterfeit pharmaceuticals infiltrating supply networks
Counterfeit medicines remain a significant threat to patient safety and supply chain integrity, both in Australia and overseas, says Moody’s.
It estimates that counterfeit medicines now represent a global illicit market worth around US$200 billion, with falsified raw materials entering supply chains at upstream tiers where oversight is weakest and visibility is most limited.
The rise of online pharmacies and e-commerce distribution channels is further adding to this challenge, with counterfeiters gaining access to sales channels that can appear legitimate to buyers.
This is amplifying the problem and making it more difficult to distinguish authentic products from falsified alternatives.
Increasingly complex international supply chains mean counterfeit or substandard ingredients can enter production networks long before finished products reach local distributors or healthcare providers.
Research has shown that weaknesses in supply chain visibility can make it difficult to pinpoint the source of falsified pharmaceutical products once they enter the market.
As these risks continue to converge, Moody’s argues that pharmaceutical organisations need to move beyond traditional supply chain risk management approaches and adopt more integrated risk frameworks that connect geopolitical, operational, cyber and compliance risks.
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