Pharma fallout from Iran war won't end with ceasefire

• The conflict is also disrupting clinical trials of experimental cancer, heart and other treatments in countries like Turkey, Israel and Egypt, according to data science company Phesi.

State of play: 10-20% of global pharmaceutical commerce passes through the Middle East, according to Prashant Yadav, senior fellow at the Council on Foreign Relations.

• The conflict set off a scramble to find alternate arrangements for generic medicines made in India that require temperature controls and other complex handling and often are flown through hubs like Dubai.
• Pharmaceuticals and drug ingredients also had to compete with fertilizer and other commodities held up by the bottleneck, creating a logistics nightmare.
• There are no assurances that the two-week ceasefire will bring a lasting peace, keeping key players up in the air.

What they're saying: "The disruption to the operations of the Gulf airlines is a big cargo disruption," Yadav told Axios on Tuesday, before the ceasefire was announced.

• "People are trying to find reroutings and people are trying to find alternative carriers," he added. "But anytime you look for reroutings and alternative carriers, it's ... more expensive."
• After the ceasefire was announced, Yadav said even if short-term snags ease and cargo backlogs are resolved, drug distributors may look to stock up more on supplies to get a buffer, which can lead to market pressure in places without the capital to do that.

Between the lines: The conflict has not led to any U.S. drug shortages. But the health care sector is "monitoring closely and developing contingencies," said Michael Ganio, senior director at the American Society of Health-System Pharmacists.

• Rising costs of drugs and medical supplies already were squeezing health systems' margins before the war.
• The conflict brought additional threats, like the availability of helium, a byproduct of natural gas production that cools magnets in MRI machines.

Zoom in: One particularly vulnerable area is clinical trials, which hinge on time-sensitive drug shipments.

• Phesi found 6.7% of global clinical trials were impacted by disruptions in the Middle East, with the biggest effects on drugs for lung cancer, breast cancer, heart failure and multiple myeloma.
• "A clinical trial, to be valid, needs to be done at a specific period of time, a specific place," said Alex Guillen, subject matter expert for life science and pharma at the shipment tracking company Tive.

• "If you move televisions and you are late by two days or three days, well, it's the same television," he said.
• "If you move temperature-controlled drugs, and you're late by two, three days, you might just as well throw the merchandise away, because it just goes bad," he added.

What's ahead: The lingering effects of the war could be seen in generic drugs, whose low prices squeeze manufacturers' margins. Even small increases in transportation costs or the price of ingredients could have outsized effects.

• "If you increase the cost of an input material, that shows up much more in an inexpensive medicine than, let's say, for something that is $1,000 a treatment course," Yadav said.
• Resulting price increases could result in supply shortages in developing countries that don't have the capital to deal with the shocks.

The bottom line: The war illustrates how complex global supply chains can be easily shaken — even after COVID-19 forced many manufacturers and distributors to build in new resiliency.

• "Disruptions now are so common ... it's almost living in a survival mode, [rather than], you know, being the best," Guillen said.