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Pharmaceutical supply chains have entered a period of sustained instability in which risk no longer arrives as an isolated incident but as a convergence of simultaneous pressures, according to a report from credit ratings agency Moody’s.

Although the report - Supply chain insights: Navigating disruption in pharmaceutical supply chains - focuses on the situation in the USA, many of its findings will resonate with the UK pharmaceuticals sector.

“These shortages are not anomalies. They reflect decades of decisions that optimised for cost rather than resilience, concentrating manufacturing capacity into a handful of geographies, building lean inventories across critical drug categories, and treating risk management as a compliance obligation rather than an operational capability.

“At the same time, cyberattacks, climate-driven disruptions, global trade volatility, and regulatory enforcement have intensified, exposing structural fragility across every tier of the supply chain,” the report says.

Four main factors are contributing to record-high drug shortages and straining pharmaceutical supply chains: they are geopolitics and trade shocks, manufacturing fragility, cyber risk and counterfeit drugs. These risks are increasingly interconnected, the report points out, yet many organisations still manage them in silos, limiting their ability to respond effectively.

Disruptions across key trade routes and sourcing hubs are compressing margins and extending lead times. For example, the Red Sea crisis cut Suez Canal traffic by two-thirds, and the ongoing Middle East conflict is further restricting Indian active pharmaceutical ingredient (API) supply.

Manufacturers have limited capacity to absorb disruptions. Many sterile injectable facilities already run above 80 per cent utilisation, while qualifying an alternative site takes 12–24 months.

Cyber risk means a single point of failure can disrupt drug supply at scale. The report cites the Change Healthcare ransomware attack in the USA which disrupted claims processing for 70,000 pharmacies, exposed 190 million patient records, and cost UnitedHealth up to $1.6 billion.

AI adoption through third-party APIs and cloud infrastructure is creating new vulnerabilities, including risks to data integrity in AI-assisted regulatory workflows — an emerging threat not fully addressed by existing cybersecurity frameworks, the report warns.

Counterfeit drugs are a growing problem due to weak oversight across complex supply chains. Falsified raw materials are entering supply chains at upstream tiers with the weakest oversight, while expanding e-commerce channels are giving counterfeiters distribution routes that are difficult to distinguish from legitimate supply.