To secure reliable API supply chains, pharmaceutical companies must qualify suppliers, diversify sources, maintain safety stocks and leverage digital tools.

The critical challenges to pharmaceutical supply chains that surfaced during the pandemic – global shortages of raw materials, shipping disruptions and extended lead times – opened the industry’s eyes to the fragility of highly interdependent global networks. Since then, geopolitical instability and tariffs have heightened these concerns. Fortunately, companies can lessen the risks by implementing strategic sourcing strategies.

The impact of tariff uncertainty

As an example of the interdependence of global supply chains, European Union (EU) companies may source active pharmaceutical ingredients (APIs) from China or India, process and package in Europe, then export finished drugs to the United States – a chain where small policy shifts ripple end-to-end.

As of February, 2026, tariff uncertainty persists, but most finished pharmaceutical products enter the US duty-free under the WTO ‘zero-for-zero’ pharmaceutical agreement. China-origin goods remain subject to Section 301 measures, with product-specific rates and exclusions. Many finished drugs (HS Chapter 30) still clear at 0%, while some inputs/intermediates (often HS Chapter 29) can face surcharges1-2. A US-UK deal (December, 2025) explicitly guarantees 0% tariffs on UK-origin pharmaceuticals. For EU exports, a 2025 framework has discussed a tariff cap of up to 15% on branded medicines – with generics and many ingredients unaffected – but implementation details are still evolving3.

Even when duties don’t ultimately apply, tariff uncertainty drives earlier buying, higher safety stock and working-capital drag. Uneven regional tariffs can also shift competitiveness by origin, unexpectedly pushing some products out of contention. For thin-margin categories like generics, the risk of a sudden landed-cost change can negatively influence investment.

Managing supplier vulnerabilities

Sponsor and manufacturing procurement teams can no longer rely on ‘just-in-time’ delivery of APIs or other critical ingredients. Managing upstream risk now requires diversified sources, safety-stock planning and tight forecasting.

Avoid single points of failure: The risk of failure from factors beyond any company’s control is much higher in today’s unstable global climate. Supply chains built around a single critical point of failure – most often the API – face the greatest risk, especially for generics, where thin margins and a single offshore source are common.

Given extended lead times and intermittent raw material shortages, MAHs/NDA-ANDA holders and their manufacturing partners should size API safety stock by risk, qualify multiple suppliers and, when practical, diversify across regions. It’s worth noting that sourcing an API from two different suppliers does not meaningfully reduce risk if both rely on a key starting material from the same source or geographic region. In that case, an underlying supply chain vulnerability remains.

Where only one viable source exists for a specialised or complex API, a more deliberate supplier relationship can help sustain production over the product’s lifecycle. Early visibility to production forecasts, premium payments for exclusivity and potential royalties or shared upside terms tied to end-product sales are examples of mechanisms sponsors sometimes use to reinforce continuity. It is best to make these arrangements proactively rather than waiting until discontinuation occurs. Any loss of a critical API supplier leads to a rush to qualify a new source, slowing time to market or disrupting commercial availability.

Building a strategic partnership is particularly important for companies that represent only a small share of an API supplier’s market; a supplier may reduce capacity or even discontinue API production if it loses a major customer, regardless of smaller customers’ needs. Rising GDUFA facility and DMF maintenance costs amplify this risk, so it’s prudent to assess supplier economics and long-term intent as part of routine supplier risk reviews.

Evaluate safety stocks

The Covid-19 pandemic taught the pharmaceutical industry the importance of maintaining safety stocks of critical raw materials and components. Many firms now maintain six-to-nine months of safety stocks compared to only three to four months before the pandemic. Large buffers, however, tie up working capital and can limit investment elsewhere, so targets should be risk-based.

Ideally, your supplier should also have a robust safety-stock program, maintaining a three-to-six month supply of the raw materials needed to produce your API. You might also negotiate with them to maintain a safety stock of the API itself. It’s wise to conduct quarterly rolling demand forecasts for the upcoming 12-18 months, sharing regular updates with your suppliers so they can proactively plan for your needs.

This way, your combined safety stocks provide critical back-up in case of a shortage and support longer supply continuity.

Qualifying API suppliers

Thorough supplier qualification is a cornerstone of supply chain risk management. It identifies potential vulnerabilities early, supports consistent quality and reduces disruption risk.

API supplier qualification always starts with quality. Quality agreements should be put in place early to clarify responsibilities and notification windows. There should be an obligation for suppliers to disclose adverse regulatory findings, including import alerts, warning letters, Form 483 observations, VAI or OAI findings and corrective responses.

A comprehensive paper audit by a qualified quality professional should assess the supplier’s quality management system (QMS), SOPs and performance history, reviewing several years of past data (often up to five years) to ensure alignment with expected standards. It is important to select a manufacturing partner who can support the regulatory and quality requirements of your entire lifecycle.

Your QMS should include pre-qualification performance checks and shipment checklists that reconcile CoAs to end-use requirements, tightening sampling or testing for infrequent or campaign-based production. When qualifying a second API source, it’s critical to do so well before a supply chain disruption occurs. FDA approval of prior approval supplements for changes to a manufacturing process have lengthened and it’s not uncommon to see this take 11- 14 months.

The importance of on-site inspections

Regulators have largely returned to stringent in-person audits to verify that site conditions match paper records and reported practices. The EMA has indicated that remote assessments should not replace on-site inspections except in crises and are not advised for consecutive inspections4.

On-site frequency should be risk-based. New or higher-risk API sources, particularly from offshore sites or for complex chemistries, generally warrant an initial on-site audit, with scope and cadence set b y your internal policy and the supplier’s risk profile.

Requalify and reassess suppliers regularly: Reassessment cadence is best set by risk tier, usage and quality history. For many portfolios, that translates to a roughly two-to-four year on-site cycle, with intervening desktop reviews and performance monitoring. Where you cannot revisit a site on schedule, credible third-party or regulator audits can help maintain oversight provided your QMS reviews the reports and tracks any follow-ups.

Digital supply chain monitoring with AI and predictive analytics

As deliveries have become less reliable, companies have adopted more sophisticated inventory and safety-stock planning, typically building 12-18-month rolling forecasts and reviewing recent supply interruptions, including raw-material constraints.

Large pharma companies are investing in digital supply chain monitoring and AI for inventory management, planning safety stocks and logistics. Using sales trends, external indicators and historical variability, predictive models help prevent shortages months in advance and minimise unnecessary costs. Adoption is broadening as the business case strengthens, though effectiveness depends on data quality, cross-functional use and governance (i.e. who acts on the alerts).

Ensuring API resilience

As we navigate an uncertain environment, ensuring security in API supply involves more than implementing a series of practical steps; it requires a strategic business shift from focusing on short-term cost efficiency to emphasising risk mitigation and long-term planning.

Resilient API supply chains depend on companies anticipating potential points of failure, maintaining safety stocks and adequately qualifying suppliers to maintain consistent quality and ensure supply continuity in the future. Supply chain resilience must be treated as a design choice, not an emergency response.

References

1. U.S. International Trade Commission. Harmonized Tariff Schedule of the United States Revision 2 (2026), Chapter 30, Pharmaceutical products. Accessed February 3, 2026. https://hts.usitc.gov/ reststop/file?release=currentRelease&filename =Chapter%2030
2. U.S. International Trade Commission. Harmonized Tariff Schedule of the United States Revision 2 (2026), Chapter 29, Organic chemicals. Accessed February 3, 2026. https://hts.usitc.gov/reststop/ file?release=currentRelease&filename= Chapter%2029
3. European Commission. EU-US trade deal explained. July 29, 2025. Accessed January 13, 2026. https://ec.europa.eu/commission/ presscorner/api/files/document/print/en/ qanda_25_1930/QANDA_25_1930_EN.pdf
4. European Medicines Agency. Guidance related to GMP/GDP and PMF distant assessments. June 13, 2024. Accessed January 8, 2026. https:// www.ema.europa.eu/en/documents/scientific-guideline/guidance-related-gmp-gdp-pmf-distant-assessments_en.pdf