Drug Shortage Fears, Uncertainty Erupt in Puerto Rico Following Hurricane Maria

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--In the early morning of September 20, Puerto Rico took a direct hit from Hurricane Maria and its 150-mile-per-hour winds. The island is in shambles from the storm, as workers struggle to reestablish clean water, phone service and electric power. Governor Ricardo Rossello said that the situation was nearly a "humanitarian crisis." It is also a crisis of unknown ramifications for the island's most prominent industry, the Pharmaceutical-Biotech Industry.

With the island's power grid expected to be at least partly down past Christmas, and supplies only available by air and sea, the pharmaceutical industry essentially has been shut down on the island, along with virtually everything else. With so much uncertainty, it is impossible to calculate the long-term impact on the Pharmaceutical-Biotech Industry. Even for those facilities that escaped major destruction and are operating on generators, employees are unable to communicate or travel to work.

Puerto Rico is home to dozens of medical manufacturing plants, including some of the industry's biggest names, such as Abbott Laboratories (NYSE:ABT) (Abbott Park, Illinois), Amgen (NASDAQ:AMGN)(Thousand Oaks, California), Johnson & Johnson (NYSE:JNJ) (New Brunswick, New Jersey), Merck & Company Incorporated (NYSE:MRK) (Kenilwork, New Jersey) and Pfizer (NYSE:PFE) (New York, New York). The industry sources nearly 30,000 direct manufacturing jobs, another 100,000 ancillary positions on the island, and the industry comprises about half of the island's total exports.

Click on the image at right for Industrial Info's Map of Pharma-Bio Plants in Puerto Rico.

What is surprising to many is the fact that the drug business has generated more than 25% of the island's gross domestic product (GDP) for the past four decades, far more tourism's 7% contribution. According to the U.S. Bureau of Labor Statistics, pharmaceuticals represented 72% of Puerto Rico's 2016 exports, valued at $14.5 billion.

Food and Drug Administration (FDA) commissioner Scott Gottlieb issued a statement that his agency is "working closely with pharmaceutical and device companies with manufacturing sites in Puerto Rico to prevent shortages of medically necessary drugs and devices." Neither the drugmakers nor the FDA have identified specific medications at possible risk. The list of what is produced on the island is extensive, including but not limited to, active pharmaceutical ingredients (APIs), injectables, tablets, pills, medical devices, etc.

Big Pharma, originally drawn to Puerto Rico in the late 1960s largely due to generous tax breaks, gave pause to its seemingly unbridled investment when the main federal tax incentive, Section 936, was allowed to expire in 2005. The incentive allowed U.S.-based companies to send all profits from local plants to stateside parent plants without having to pay any federal taxes. Coupled with the industry's major reconfiguration in 2009, the island was already feeling the financial pinch.

Despite those challenges, the island's production remained essential to the industry. A notoriously tight-lipped bunch to begin with, since the hurricane, the drug companies are saying little beyond carefully worded public statements, ranging from the positive "we remain committed to Puerto Rico" and "only minor damage reported"; to the more typical industry standard of "no comment."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.