If we talk about the years between 2020 to 2023, we are all aware of the changes that come to the global procurement systems and how it impacts the business around the world.
In this period, various weaknesses in the global pharmaceutical supply chain came to the limelight.
During this period, for the first time, the global API supply chains came under the burden of a pandemic, and not only this, factory flooding, port crisis, and the global supply shortages, apart from the geopolitical factors.
During this period, the U.S. has faced a shortage of 258 fundamental medical resources, and 74 countries have a shortage of all medicines.
This example can become a good case study to understand how to establish a more robust pharmaceutical team.
The API Supply Chain Was Built for Efficiency, Not Resilience
It is from the year 2020 that the global API supply chain puts more focus on greater interest in cost, not on consistent supplies.
In the coming parts, we can explore the reasons why it happens and the disruption caused by fragility in a supply chain.
How the API Supply Chain Was Architected, and Why It Was Always Vulnerable
The Pre-2020 Warning Signs That Were Ignored
The disruptions in 2020 were preventable. The 2007-2008 heparin contamination was an early example of the geopolitical API sourcing risk that relies mostly on China and India.
After a Chinese company supplied the tainted heparin and caused the deaths of 81 individuals, the FDA had to perform a full recall of the drug.
Not only this, the 2011 FDA Drug Shortage Report cited shortages of drugs as a result of production issues with APIs.
| Short Summary: In a world engineered to prioritize cost, the API dependency alone has led to (1) geostrategic dependency, (2) single producer dependency, and (3) no buffer. The design of the supply chain was recognized as fragile and lacking before 2020, and now we need to see the consequences of that. |
Five Disruption Events, 2020-2023: What Actually Happened and What It Cost
In the period of three years, the world has faced major pharmaceutical supply chain problems. To understand the true impact of these events and know the reason behind them, we need to dive deep.
COVID-19 Factory Shutdowns and Port Closures (2020)
With the advent of the COVID-19 pandemic, the Asian pharmaceutical active ingredient (API) manufacturers faced enormous problems.
The closure of API manufacturing plants in the provinces of Hubei, Shandong, and Zhejiang in China creates chaos in the whole pharmaceutical supply chain.
This also impacted the Indian API manufacturers who heavily rely on the Chinese KSM raw materials.
The disruption in the availability of antibiotics, antipyretics, and cardiovascular and vitamin preparations impacted the international pharmaceutical supply chain.
Also, to treat the COVID-19 virus, different nations are using Azithromycin. This demand leads to a 400% hike in its purchase.
Only buyers who held 8+ weeks of safety stock were able to maintain supply continuity those without were immediately impacted.
The Metformin ER Voluntary Recall Cascade (2020)
The withdrawal of Metformin Extended Release by the FDA in the year 2020 is the result of the increased N-Nitrosodimethylamine (NDMA) levels found in the API batches, above the prescribed threshold of 96 nanograms/day.
Due to this reason, the treatment of millions of type II diabetes patients gets compromised.
Not only this, the FDA has reported a violation of the ICH M7 in the progression of the Metformin ER crisis.
The companies had not performed the API impurity testing for nitrosamines.
Impurities like valsartan, losartan, irbesartan, ranitidine, nizatidine, and metformin must not be part of the API batches.
The Suez Canal Blockage and Global Port Congestion (2021)
The blockade in the Suez Canal during the year 2021 had a significant effect on the global active pharmaceutical ingredient (API) shipments moving from Europe and India.
This has resulted in negatively impacted USD 9.6 billion worth of trade on a global scale.
This blockade brought light to the cold chain failures. The loss of various high-temperature-sensitive APIs due to this blockade is the first and foremost effect the world has seen.
The blockade had also increased the average transit time for the API by 10-21 days.
Ukraine-Russia War: API Raw Material Price Shock (2022)
Each war comes with its own price. The same is the case for the Russia-Ukraine War.
The supply of one of the important materials (ammonia) in the manufacturing of paracetamol and different anti-biotic medicines comes from this region.
The war had increased the cost of ammonia by 40% and impacted API manufacturing cost negatively.
The production of APIs became a costly process that, in relation, increased the pharmaceutical prices.
Also, the supply from Russia had resulted in an 80-120% increase in energy costs in the second half of 2022 in the different European countries.
It had increased the manufacturing cost of APIs produced in Europe by 15% to 30%.
China’s Zero-COVID Policy: The 2022 Factory Closure Wave
The Zero-COVID policy adopted by China gives rise to the single-source dependency risk and closure of different API manufacturing units.
This made Indian manufacturers with limited options for Chinese key starting materials (KSM) to face shortages and stoppages of API production.
In 3 years, the API supply chain underwent a pandemic, nitrosamine recall, blocked canals, war, and state-mandated closures.
These events plagued the same weaknesses of geographic concentration, single-source dependency, and no safety stock.
We have studied disruptions. It’s now time to analyze the resilience framework.
Redesigning API Supply Architecture for Resilience
The minimum requirements for a viable API supplier are the standardized safety stock, KSM traceability standards for business continuity, and multi-source geography.
Single-Source API Dependency Is a Business Risk, Not Just a Supply Chain Risk
To qualify a secondary API supplier, regulatory submission and validation batches cost between $50,000 and $200,000.
The Department of Health and Human Services stated in their January 2025 Drug Shortage Report that only 24% of API manufacturers that sold drugs in the U.S. were based in the U.S. in August 2025.
The disruptions that occurred between 2020 and 2023 have not led to systematic dual sourcing.
The use of dual sourcing for the management of API supply chain risks is a matter of business survival and not merely an optimization of the supply chain.
Dual-Source ROI Comparison Table:
| Molecule Type | Dual-Source Qualification Cost | Annual Safety Stock Cost | Cost of 6-Month Shortage (Modelled) | Break-Even Timeline |
| Commodity API (e.g. Paracetamol) | USD 50,000-80,000 | USD 120,000-200,000 | USD 5-10 million | < 6 months |
| Mid-Complexity API (e.g. Metformin ER) | USD 100,000-150,000 | USD 300,000-500,000 | USD 15-30 million | 6-12 months |
| High-Complexity API (e.g. Oncology/ARV) | USD 150,000-200,000 | USD 500,000-900,000 | USD 30-50 million | < 6 months |
Geographic Diversification Is Non-Negotiable for Critical APIs
The India-to-India supplier diversification strategies used during the 2020 and 2022 China shutdowns have proved to be inadequate.
India’s KSM supply chain is punctured by China; India uses 60 to 70 percent of the KSMs for manufacturing APIs in China, with some KSMs going beyond 80 percent.
If a KSM used in an API is sourced from China, a secondary supplier in India does not offer protection from disruptions caused during the vacuum period.
The true geographic resilience of supply chains is possible only through safe, segregated KSM supply chains across the differing regulatory jurisdictions.
For critical APIs (sterile injectables, oncology, ARVs), ensure you have a manufacturer listed in the WHO Essential Medicines and a Regulated Market (FDA/EMA).
Safety Stock Norms Must Be Rebuilt: and Contractualized
After 2020, disruptions in the supply chain revealed the risks associated with low inventory.
This compels the pharmaceutical firms to augment safety stocks and fortify ICH Q10 contracts by committing to specific volumes and stipulating batch release obligations.
Safety stock targets should be reviewed on an annual basis based on updates to the FDA Drug Shortage Database.
Any API that enters the shortage monitoring list will trigger an immediate safety stock review.
| Short Summary: The resilience framework has three main components: dual-source qualification, true geographic diversification (beyond India-to-India), and safety stock norms through criticality tiering. Before we look into logistics, let’s analyze the framework contracts and the compliance safeguards that protect buyers at the procurement level. |
Contract Structures and Compliance Safeguards That Protect Buyers
API supply agreements signed before 2020 assumed relatively stable conditions likely candidates for disruption after 2020.
In this section, we identify some of the changes likely needed.
What 2020-2023 Exposed in Standard API Supply Agreements
Agreements signed before 2020 would have generally considered prices, volumes, delivery, and quality.
They likely did not consider the disclosure of KSM sources, force majeure details, prioritization of shortages, advance notice of regulations, and the control of nitrosamines.
| Contract Element | Pre-2020 Standard | Post-2023 Requirement | Risk Addressed |
| Force Majeure | Broad “acts of God” clause | Pandemic, shutdown, port closure + 48-72hr notice | COVID / Zero-COVID disruption |
| KSM Disclosure | Not required | Full KSM/intermediate list + annual updates | Hidden China KSM dependency |
| Priority Allocation | First-come-first-served | Priority supply for contracted multi-year buyers | Shortage / spot market risk |
| NDMA/Impurity Monitoring | Limited pre-2018 | Annual nitrosamine assessment + batch testing | Recall cascade risk |
| Change Notification | 30-day major change notice | 60-day notice for spec, route, or KSM change | Silent supplier changes |
| Regulatory Disclosure | Often absent | 5-day disclosure of 483, Warning Letter, Import Alert, GMP non-compliance | Delayed enforcement visibility |
The KSM Traceability Requirement: The Post-2020 Non-Negotiable
The key takeaway from 2020-2023 is that API supply chain risk management is impossible without starter material origin knowledge.
KSM traceability is now a legal requirement in contracts. This is from the chemical precursor, through key intermediates, all the way to the final product.
After reviewing the risks of the contracts, we focus on the logistics and the cold chain resilience rules.
Supply Chain, Logistics, and Cold Chain Resilience Protocols
The 2020-2023 period exposed a lot of business flexibility holes with the most acute impacts on logistics.
Logistics challenges were increasingly aggravated due to a rise in port dwell times, cold chain disruptions and Incoterms misalignments.
Port Risk Management: What the Suez Canal Event Made Mandatory
The Suez Canal blockage 2021 and the 2020-2022 congestion of the ports showed risks that most of the API supply contracts bypassed.
Most API purchasers with CIF contracts had no choice of supplier routing during the crisis and the decisions remained with the suppliers.
Only purchasers with FOB contracts and their own freight forwarding had the option to change.
Cold Chain API Shipments: The Lessons from 2020-2022 Logistics Failures
Temperature-sensitive APIs (biological APIs, certain beta-lactams, peptide APIs, and insulin) need a validated cold chain from the manufacturer to the buyer’s warehouse.
The disruptions from 2020 to 2022 introduced two cold chain failure modes.
The first was extended port dwell time with no refrigerated storage.
The second was the collapse of air freight during COVID, resulting in the loss of alternative routes.
Now that we have discussed the logistics resilience, let’s evaluate the post 2023 risk profile for major API sourcing countries.
Country-wise API Supply Risk Breakdown Post-2023 Landscape
API source nations have changed considerably in your 2023 assessments. The table shows risk levels and primary concerns and indicates what is required from buyers in each country.
| Country | API Export Volume | Risk Level | Primary Risk Factor | Resilience Action |
| India | USD 30.47 bn FY2024-25 (+9.4% YoY) | Medium | KSM dependency on China (60-70%); FDA audit pressure | Dual-source EU/Israel; mandatory KSM traceability audit |
| China | ~35-40% global API volume | High | Regulatory transparency and EDMF filings, geopolitical tension | Do not single-source; KSM limit for secondary source |
| EU (Italy/Germany) | Strong CEP availability; 98% GMP favorable | Low | Higher costs; energy volatility post-Ukrainian war | Keep as regulated-market secondary source for CEP APIs |
| Israel | Niche APIs; EU-GMP aligned | Low | Limited product range | Complex APIs as secondary; regulated-market docs as primary |
| South Korea | Developing ICH Q7/KGMP capacity | Low-Medium | Fewer pre-existing FDA/EMA DMF filings | Qualify now for 2025-2027 secondary sourcing |
| Short Summary: India continues to lead the world in APIs, and while complete KSM reliance on China means there is no real supply chain resiliency from Indian partners alone.For buyers in regulated markets, South Korea should now be strategically qualified. This is the scope of the sourcing risk. Let’s look now at the supply chain in the scenario post-2023. |
Forecast: API Supply Chain Risk Outlook 2024-2028
Real worldwide policy changes regarding APIs transpired between 2020 and 2023. While opportunities have presented themselves, challenges remain, some new.
Structural Changes since 2023: Improvements
India’s Schedule M Amendment (2023): Traditionally, both imported and Indian-manufactured APIs exhibit large gaps in Good Manufacturing Practices (GMP), which have resulted in various forms of the US FDA’s enforcement actions against Indian manufacturers. With the Schedule M Amendment, compliance with WHO-GMP is now mandatory for all Indian manufacturers.
India PLI Scheme: The scheme primarily focuses on decreasing the dependence of domestic pharmaceutical companies on Chinese imports. The scheme promoted 261 manufacturing units with an investment of more than ₹3420 crore.
FDA’s Drug Shortage Prevention Initiative: Under this initiative, the pharmaceutical manufacturers are permitted to stop production of any specific product. However, they need to submit a proper notification to the US FDA in advance (at least 6 months before).
ICH M7 Nitrosamines fully operational post-2021: For testing of valsartan and metformin, it has become mandatory to test certain nitrosamine impurities (NDMA and NDEA)
Risks That Remain: What Has Not Changed
| Risk Category | Current Status (2024) | Buyer Action Required |
| China KSM Dependency | India relies on China for over 60% of its KSMs, fully decoupled most likely by 2026 to 2028 | Audit KSM traceability and keep extra safety stock |
| Geopolitical Risk | Taiwan and US-China tension may impact API/KSM supply | Secure non-China secondary sources |
| Climate Disruption | KSMs/APIs from Indian coastal hubs are impacted by floods and cyclones | Verify disaster recovery and maximum stoppage limits |
| Drug Shortage System Lag | FDA shortage alerts may lag 2 to 8 weeks behind buyer visibility | Implement Redica and monitor FDA alerts and IQVIA |
| Regulatory Enforcement Surge | FDA inspections increased by 27% and carry a greater risk of enforcement for FY2024 | Reassess FDA Import Alert and EudraGMDP on an annual basis |
FAQ
Q: What was the single most important cause of drug shortages during 2020-2023?
A: Quality level issues during manufacturing, coupled with a concentration of geography and single-source API dependency. The disruptions caused by COVID led to the closures of factories and breakdowns in logistics. This led to the disruption in the supply of pharmaceutics in a chain reaction. Analyzing the causes of drug shortages in 2020 found that 62% of shortages were the result of manufacturing and quality issues.
Q: What is KSM traceability and what is it to API buyers post-2020?
A: KSM traceability prevents circumvention of suppliers by showing full precursor visibility. This is further supported by ICH Q10 pharmaceutical quality system frameworks and the WHO’s essential medicines shortage analysis. KSM traceability shows the full pathway of a chemical precursor through key intermediates to the final API.
Q: How much safety stock of critical APIs does a pharma buyer need to carry?
A: Six months of safety stock for critical APIs, three months for strategic APIs, and eight weeks for commodity APIs is recommended. This fulfills the WHO essential medicines shortages framework and accounts for a reduced single-source dependency. An FDA analysis showed that a majority (78%) of shortage notifications were related to manufacturers that had less than 60 days of safety stock on critical APIs.
Q: What Incoterm should I use to get APIs from India after the 2021 port congestion?
A: The 2021 congestion crisis changed online sales and transport contracts. New forms of control and cold chain fulfillment in freight shifted contracts from CIF to FOB. This protects buyers from supply chain disruptions in pharmaceuticals. During the Suez Canal crisis in 2021, CIF Contracts essentially abandoned control to the buyer regarding routing of the goods.
Q: What changes should be made to API supply agreements relative to those made prior to 2020?
A: Prior to 2020, agreements did not include clauses regarding force majeure events, KSM (Key Starting Material) disclosure clauses, nitrosamine control clauses, a notice of change of source clause, or regulatory notification clauses. Those clauses shift the management of risk on the API supply chains. They allow for the management of the risk of the supply chain being solely reliant on a single source. The agreements should require 48-72 hour notice for a pandemic or a government-imposed lockdown, and a 60 day notice for a change of KSM source.
Q: Is China a viable sourcing option for APIs post 2022?
A: China is still a viable option for sourcing KSMs and Secondary Sourcing, although not KSMs if they are the only sourcing option. Due to geographical political factors, dual sourcing has to be employed in order to lessen the risk of relying on the India – China Covid supply chain.
Q: How do I monitor my API suppliers’ regulatory status on a continuous basis?
A: FDA Import Alerts, EIRs, EU GMP (Good Manufacturing Practice) databases, and your suppliers’ transparency all allow for a more active control mechanism. ICH Q10 Pharmaceutical Quality Systems as well as WHO essential medicines shortage analysis, add more tools to address the situation. Your supply agreements should require suppliers to notify you within 5 days of a Form 483, a Warning Letter, or an Import Alert.
Conclusion
The years from 2020 to 2023 were an intense concentration of all the risks that can be summed up in the lack of safety stock, geographic concentration, single-source focus, and black-box sourcing in a commercial supply chain.
This period documented a sort of playbook on how KSM sourcing fails, why it fails, and what resilient API sourcing supply chains should contain.
The buyers that emerge resilient from this crisis are the ones that did not view supply chain risks as an uninsurable crisis, but a crisis of discipline in procurement that is contractually, systematically, and compliantly required.
From 2020 to 2023, Actiza Pharmaceuticals API products have served APIs to 40+ countries, adapting to the challenges of the changing world like factory shutdowns, port disruptions, and scarcity of raw materials.
Reach out to Actiza’s Supply Chain Team for qualification of clients, KSM traceability, options for dual sourcing, and DataLogger cold chain protocols for any API in the catalog.
