Blockbuster weight-loss drug supply hit in trade shutdown

As a port strike stretching from New England to Texas halted close to half of all trade coming into the U.S., customs data shows that critical medical devices and drug components for the booming, expensive weight-loss and diabetes drugs from Novo Nordisk and Eli Lilly — Ozempic, Wegovy, Mounjaro and Zepbound — are among the trade casualties in the ILA union port work stoppage.

Bills of lading, the digital receipts of freight containers, show that the delivery mechanisms for insulin and weight-loss drugs rely on East Coast ports for incoming trade.

“Novo Nordisk and Eli Lilly are both heavily reliant on the Port of Norfolk,” said William George, director of Research at ImportGenius, which tracks the customs data.

Novo Nordisk has imported 419 twenty-foot equivalent (TEU) containers worth of pharmaceuticals through Norfolk in the past year, according to George, and filled-injection devices containing semaglutide, a compound in the branded weight-loss drugs. “Novo fine syringes commonly used for insulin injections come into the U.S. by ocean freight as well,” he said.

Novo Nordisk has raked in nearly $50 billion in sales from Wegovy and Ozempic, with most of that revenue coming from the U.S., its CEO said in recent testimony before the U.S. Senate.

A Novo Nordisk spokesperson stated in an email to CNBC that the company has mitigation plans in place to minimize or prevent any production disruption due to the potential seaport strikes. “We plan to ship our products to and from the U.S. via airfreight,” the spokesperson said.

An Eli Lilly spokesperson said it does not discuss the details of its external supplier relationships.

Dennis Monts, global chief commercial officer at PayCargo, said air sector volumes were strengthened in the month of September, peaking about two weeks ago. “We are watching October numbers anticipating a surge of air freight for fast-moving and perishable items such as produce, seafood, medical supplies and other just-in-time inventories,” said Monts.

Some drug shipments are labeled “high-value pharmaceuticals” and “low-value pharmaceuticals.”

Other shipments identify the active pharmaceutical ingredients (APIs) used in the U.S. to make weight loss drugs, as well as the syringes and disposable needles.

Noushin Shamsili CEO & President of Nuco Logistics, which specializes in pharmaceutical imports and exports, told CNBC on Monday that the strike comes at a critical time for inventory replenishment for the drug sector. “Almost all of this industry is just on time,” said Shamsili. “Raw materials are being brought in to complete drug manufacturing.”

Approximately 48% of the active pharmaceutical ingredients (APIs) used in the U.S. are being imported from India. Without these APIs, medications cannot be produced. APIs are also manufactured in Europe which also use the East Coast ports as U.S. points of entry.

Some of these APIs are critical components needed for the manufacturing of the blockbuster weight-loss drugs.

“The strike by ILA at East and Gulf Coast ports could impact the importation and distribution of medications like Ozempic,” Shamsili said. “The potential effects of the strike include supply chain disruptions, increased shipping costs, inventory shortages of APIs, and production delays.”

Eli Lilly, which makes Mounjaro and Zepbound, has been expanding its production facilities in the U.S., as well as in Ireland, but imports some APIs from Swiss manufacturer Corden Pharma, to produce tirzepatide for the branded drug to be manufactured. Novo Nordisk imports some of its APIs for the weight-loss drugs for Ozempic and Wegovy. The  API that is used for both Ozempic and Wegovy is semaglutide.

East and Gulf Coast ports strike risk to medical supplies

The risk to medical supplies more broadly is being monitored by the Biden administration and state governments, such as New York.

On Monday, Biden administration leadership at the Department of Health and Human Services met with trade associations, distributors, manufacturers, and other stakeholders to assess vulnerabilities and supply chain impacts.

“Current preliminary assessments indicate immediate impacts across medicines, medical devices, and infant formula for consumers, parents, and caregivers should be limited,” the administration said in a statement. “The Administration is taking action to monitor and address potential impacts on consumers of labor disputes at East Coast and Gulf Coast ports.”

In addition to the HHS, the Food and Drug Administration, and Administration for Strategic Preparedness and Response (ASPR) have been in touch with trade associations, distributors, and manufacturers to limit impacts on consumers and assess vulnerabilities.

Shamsili said the East Coast ports are also a gateway for generic medicine made in India.

Compounding the problem for the health-care industry supply chain is the ripple effects of Hurricane Helene.

Mirko Woitzik, director of intelligence solutions at Everstream Analytics, said that Baxter International has a key facility in North Cove, North Carolina, that was damaged. That facility makes IV fluids that supply 60% of the U.S. market, including hospitals. The plant is also the largest U.S. supplier of intravenous and peritoneal dialysis solutions.

“The U.S. has just overcome a general shortage of IV fluids that lasted since 2014 due to production issues, recalls, and higher demand due to Covid-19,” said Woitzik. “In 2023, the U.S. FDA still listed 55 IV injection bag-related shortages.” 

Governor Kathy Hochul of New York, which is home to the largest port in the strike, said in a statement on Monday night that the state is “working around the clock to ensure that our grocery stores and medical facilities have the essential products they need.”

Woitzik said while other IV fluids manufacturers include ICU Medical (17% market share) and B. Braun (23% market share), they are unlikely to be able to make up the supply shortage in the short term. 

“IV fluids are essential medicines used in hospitals for routine and critical care,” Woitzik said. “In the case of a shortage, elective surgeries may be impacted and patients have to stay in hospital longer due to rationing.”

He added that a similar incident in 2017 occurred when Hurricane Maria devastated multiple pharmaceutical and medical device plants in Puerto Rico, leading to shortages of IV fluids and other patient critical materials across the U.S. for years. 

The Alliance for Chemical Distribution (ACD) has said the strike will result in severe delays, reroutes, and greater uncertainties on the delivery of essential products at countless U.S. ports.

Brandon Daniels, CEO of supply chain risk management consultant Exiger, said the disaster relief agencies and the critical infrastructure providers are scrambling to triage the most important and impacted critical goods. “Although 90% of containerized imports of pharmaceuticals are handled by these ports, we were able to identify that only 23 medicines in the 165 critical medicines are only manufactured through foreign sources,” said Daniels. “High value medicines will go through air freight. We are more concerned about the existing shortages of medicines that we are already tracking and how this disruption hurts the ability to source important APIs and precursors for everything from antibiotics to pain medicines.”

Daniels also warned consumable products that are necessary in disaster relief such as sterile gloves and medical plastics are also processed through these ports.