How Strait of Hormuz closure hits America’s generic drug prescriptions

Closing the Strait of Hormuz by Iran is a military strategy with huge consequences for the global economy. oil priceshowever, supply chains including metals and manufacturing, as well as agriculture and food prices, were disrupted. Supply chain experts say that at some point in the future, Iran’s attempt to choke the strait will also hit American medicine cabinets. The only question is exactly how long current stocks of generic drug prescriptions can last before the US-Iran war becomes a major health problem in the US.

The connection between a Middle Eastern seaborne passage and a pharmacy counter in the United States is less obvious than it seems and more direct than most consumers think. The U.S. gets nearly half of its generic prescriptions from India, according to Rohit Tripathi, vice president of manufacturing industry strategy for RELEX Solutions, a Helsinki-based pharmaceutical supply chain planning software company. Roughly 47 percent by volume. India provides approximately 40 percent of its crude oil imports through the Strait of Hormuz. “This oil ultimately feeds the petrochemical inputs used in pharmaceutical production. So even though American consumers are not buying drugs directly from the Gulf, they are still at the end of the supply chain that passes through the Gulf,” Tripathi said. he said.

Many materials needed to manufacture many medicines in India usually pass through logistics centers in the Gulf first. Chemical inputs produced in China are often consolidated by distributors in places like Dubai and across the UAE before being shipped to Indian pharmaceutical manufacturers. “Even though materials move directly from China to India, production is heavily reliant on petrochemical supplies from the Gulf,” said Steve Blough, chief supply chain strategist at supply chain execution software firm Infios. “Disruptions around the Strait of Hormuz could quickly spread across global pharmaceutical supply chains and eventually impact U.S. consumers,” Blough said, adding that the situation could quickly manifest as shortages and higher costs for critical drugs in the United States.

“Fuel costs will impact the cost of everything, but the biggest impact will be on generics because they have the tightest margins,” said Mark Hahn, former dean of the University of Las Vegas school of medicine and current chief of hematology. Hahn points out that glycerin, a common petroleum-based pharmaceutical ingredient, can be affected if oil supplies become clogged. He points out that acetaminophen is traditionally produced from phenol, a chemical derived from petroleum.

D., professor of medicine in the department of pulmonary, critical care, sleep medicine, clinical immunology and allergy at the UCLA David Geffen School of Medicine. “I am particularly concerned about generic drugs, which represent 90% of prescriptions written in the United States and provide low profit margins for manufacturers,” said William Feldman, MD. “India and China are the largest suppliers of generic drugs to the United States, and prolonged or expanded conflicts could increase costs for generic companies, leading to higher prices and/or shortages for patients,” he said.

The United States is allowing Iranian tankers to pass through the Strait of Hormuz to supply countries including India, U.S. Treasury Secretary Scott Bessent told CNBC’s Brian Sullivan on Monday morning.

While recent supply chain disruptions and increases in freight rates are a warning sign, they are not a red alert, according to Tripathi. “Early signals are already starting to emerge in freight markets, with some reports of air cargo rates rising from India and growing concerns among manufacturers about potential inventory pressure,” he said. If the strait remains closed, “famines will start to surface,” he said.

Air cargo rates from India have reportedly increased by 200 to 350 percent on some routes, according to Blow. He cautioned that the rolling outage could begin to show up to consumers in four to six weeks, as most pharmacies and wholesalers operate on a just-in-time inventory model for generic drugs; First, as shortages or delays in high-volume medications such as diabetes medications, hypertension treatments, statins, and antibiotics, and potentially extending to some temperature-sensitive treatments, including some cancer treatments.

Amanda Chawla, senior vice president and chief supply chain officer and post-acute care officer at Stanford Health Care, said there is a real possibility that the longer the war continues, the consumer and healthcare system will see price increases and supply chain disruptions. It’s not just drugs he’s worried about. Beyond acetaminophen and antibiotics, insulin syringes, hand sanitizers, nitrile examination gloves and ointments that require petroleum or petroleum byproducts in production are also at risk, he said. As the price of oil increases, this will translate into the cost of production of such goods.

The maritime shipping table not only increases the cost and time required to transport finished drugs but also brings its own set of complications due to shipping delays. While some shipments use sophisticated cryogenic containers, most still rely on cooler-style packaging that requires ice or battery-powered fans to be refreshed every few hours to prevent cold chain failure. Refrigerated “refrigerated” containers operate on strict transit timelines, and due to canceled sailings and diverted routes, some containers become stuck at origin ports while others become stranded at diversion centers that may not have enough power capacity to operate large volumes of refrigerated cargo. Empty containers are also stuck in the Middle East and prevented from returning to Asia to load new shipments. Container shortages, typically caused by supply chain disruptions, mean Indian exporters may have to compete for limited cargo space.

“This creates a cascading problem: full containers cannot move, cargo in transit must remain cold, and manufacturers may struggle to secure the specialized equipment needed to ship the next batch of drugs,” Blough said. Some carriers may even declare force majeure, eliminating their liability for delays or damage caused by the disruption.

From India to Ohio, there’s no reason for supply panic today

The key question when it comes to healthcare supply is timing. According to Tripathi, most manufacturers and distributors currently keep 30 to 60 days of buffer stock, so the first two to four weeks may seem manageable. When the buffer runs low, the most vulnerable products will likely be everyday generics for which supply chains are already tight and margins thin – common antibiotics like amoxicillin, blood pressure drugs like metoprolol, diabetes drugs like metformin, statins and common painkillers.

But in Germantown, Ohio — population around 5,000, half a world away from the smoldering refineries and sinking ships in the Strait of Hormuz — a single-screen theater screens new releases, a colorful barber’s pole beckons customers for haircuts, and the mood remains subdued at the Germantown Pharmacy, where prescriptions are filled far from the chain giants. Pharmacist Katie Perry, who owns the pharmacy, says it’s business as usual. He noted that the country’s strategic national stockpile is a mainstay and noted that Covid has helped many pharmacists build resilience in their supply chains. If a drug is not available from one source, there is usually sufficient surplus to obtain it from another source.

The current message in the India-based pharmaceutical manufacturing industry is that patients should not live in fear of supply panic. Consumers shouldn’t expect to see empty medicine cabinets in the short term, says Kathleen Jaeger, a U.S. spokeswoman for the Indian Pharmaceutical Alliance, a trade organization that represents India’s generic drug industry. “There is no risk today. People will watch and be careful, but when you realize this industry has gone through Covid, the Red Sea issue and Ukraine, everyone is doing their best to manage these disruptions,” he said. He notes that most companies have three to six months’ worth of medication in stock. “Companies are making extensive plans for disruption,” he added.

Indian Pharmaceutical Association members Sun Pharma, Dr. Leading Indian generic makers, including Reddy’s Laboratories and Lupine, have not issued independent statements on the conflict and have instead deferred to the trade group’s assurances. Jaeger emphasized the importance of lasting public-private partnerships to help bring production to the U.S., and some Indian companies have begun investing more in reincentive initiatives. Lupine announced plans to invest $250 million to build a new manufacturing facility focused on respiratory medications in Coral Springs, Florida.

Customers haven’t expressed concerns about war-related shortages, Perry said. “PBMs are much more concerned about the battle between pharmacies and consumers,” he said, referring to the complex reimbursement rates pharmacy benefit managers set for local pharmacies that directly impact prices. Perry, who is also a member of the advisory board of Cedarville University School of Pharmacy, has seen supply shocks before. Last year, a fire broke out at a wholesale outlet, forcing him to buy products elsewhere. “Crazy things happen every day,” he said. “These things can happen at any time.”

For now, the pills are on the shelves. The question experts are wondering is how long this will last. “The region is a critical transit point for pharmaceutical cargo,” Blough said.