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Background An explosion in a Chinese factory in 2016 caused a global shortage of essential broad-spectrum antibiotic piperacillin-tazobactam. Hitherto, no detailed, policy-relevant analysis has been conducted on this major shortage event. Thus, we aimed to (1) investigate causes; (2) describe supply chain challenges; and (3) uncover policy gaps to support possible mitigation actions.Methods Applying an analytical framework for security of medical supply chains, we investigated the changing roles of Pfizer-led and Chinese API suppliers. We identified demand surge, capacity reduction and co-ordination failures. Triangulating between scientific literature, corporate, and regulatory documents, we analysed the impact of Western and Chinese policy contexts on supply chain resilience.Results We uncovered ‘red flags’: geographically dispersed manufacturing failures due to complexity of sterile production; undetected supply chain concentration and interlinkages; and Chinese policy-led API supplier consolidation. We found these warning signals were ignored in the absence of a co-ordinated policy framework to identify and mitigate emerging global supply risks. Firstly, policy makers lacked visibility on growing ‘volume dependency’ in the chain. Secondly, national policy makers lacked a global view of supply risk. Thirdly, we show antibiotic API manufacturing economics were impacted by a number of non-pharmaceutical policy decisions (e.g. state aid, environmental standards, procurement rules) which contributed to supply chain vulnerability.Conclusions Our findings suggest possible policy gaps in governance of supply chain resilience. Firstly, disclosure of API suppliers including degree of dependency may better pre-empt bottlenecks, facilitating priority setting for public investments in re-shoring where global API supply currently relies on few, or single plants; secondly, a whole-of-government approach may counter the potential impact of non-pharmaceutical policies on supply chain resilience. Our findings confirm suggestions from previous studies that international data sharing would be beneficial considering the global shortage effects which can emerge from a single point of failure.

Abstract The need for novel antibiotics to combat emerging multi-drug resistant bacterial strains is widely acknowledged. The development of new therapeutic agents relies on small and medium-sized biotechnology enterprises (SMEs), representing 75% of the late-stage pipeline. However, most SME sponsors of an antibacterial approved by the FDA since 2010 have gone bankrupt, or exited at a loss, below investment cost. Uncovering financial flows related to the development and commercialisation of a single drug is complex and typically untransparent. There is therefore a lack of empirical research on the financial vulnerabilities of these critical SMEs. The development of plazomicin by Achaogen (2004–2019) entailed financial disclosures as a public company enabling application of financial analysis methods to: determine quantum and timing of public and private investments; quantify development costs; and provide a deeper understanding of the role of capital market dependency in exacerbating pipeline fragility. Achaogen’s widely cited bankruptcy, and plazomicin’s commercialisation failure, created a perception that novel antibiotics have zero market value, causing investors to question the SME developer business model. Our analysis of Achaogen’s inability to fund commercialisation suggests three key implications for the antibiotic investment ecosystem: (1) novel antibiotics with narrow approval for small patient populations affected by severe resistant infections cannot be successfully commercialised in the current US antibiotic market; (2) SMEs need incentive payments structured to enable them to survive the commercialisation cashflow drought, and (3) these changes are necessary to restore industry and financial investor confidence in the antibiotic SME development model. Achaogen’s demise demonstrates that proposals to incentivise innovation, e.g. by providing one-off payments at registration, may be insufficient to ensure access to novel antibiotics developed by SMEs. In plazomicin’s case, moreover, US government biosecurity investments have not resulted in access, as the Indian and Chinese companies which bought post-bankruptcy rights have not widely commercialised the drug. This study is timely as new market-based incentives are currently being proposed by the US, EU, Canada and Japan. In order to make further government funding effective, ensuring access, not only innovation, these must support sustainable financial models for the SMEs critical to novel antibiotic development.