Recent developments at Bab El Mandeb, one of the region’s most important shipping routes, have drawn renewed attention to how sensitive supply chains are to any disruption along this maritime route. Any change in navigation conditions there, from heightened risks to rerouting or interruption of transit, can lengthen delivery times and delay resupply. This is where pharmaceutical security comes into play: The importance of preparedness becomes clear before a delay in supply turns into an actual shortage.

 

When resupply takes weeks, it is the stocks already in the country that keep medicines available until the supply chain recovers. In early September, Jordan’s Food and Drug Administration confirmed that market stocks across different therapeutic groups generally cover four to six months, depending on the category of medicine. A significant share of these stocks is held at pharmaceutical plants and in the warehouses of importers and distributors. In other words, through its normal operations, the market already provides part of the preparedness the health system needs when new supplies are delayed.

 

But this is where the distinction between having stocks and governing preparedness becomes clear. Manufacturers and importers hold inventory to ensure continuity of sales, while the state may need larger stocks of some medicines than commercial calculations alone would justify. The question therefore becomes less about the number of months in itself and more about the difference between the inventory companies hold for commercial purposes and the additional buffer required in the public interest.

 

That additional buffer comes at a cost. Larger inventories mean capital tied up in goods for longer, as well as storage space, management, labour, insurance and, in some cases, refrigeration. There are also the costs of rotating stock and the risk of expiry. If the state wants a manufacturer or importer to hold more inventory than its normal commercial decision would justify, it is asking for more than an additional quantity; it is asking the company to provide a public benefit that carries a cost. This leads to the more important question: how can the state make such preparedness economically sustainable rather than treat it as a burden the market is simply expected to absorb?

 

Jordan already has a legal basis for requiring this kind of availability in the market. Article 62 of the Drug and Pharmacy Law gives the Minister of Health, in coordination with the Jordan Food and Drug Administration and the Jordan Pharmacists Association, the authority to specify categories of registered medicines that their agents must keep continuously available in pharmaceutical warehouses.

 

International experience shows that preparedness can be organised in different ways. In Saudi Arabia, pharmaceutical manufacturers and warehouses dealing in pharmaceutical products are required to maintain six months’ stock of registered products, according to need and consumption. A mandatory requirement is therefore one possible tool, but it answers one question: who must hold the stock? It does not answer another that is just as important: How should the cost of keeping that preparedness available be distributed?

 

In the United States, some arrangements take a different approach, with the government paying for stocks to be stored and managed by the private sector. In some Vendor-Managed Inventory arrangements within the Strategic National Stockpile, the government had already purchased most of the products covered by its reviews under separate agreements. Suppliers were then contracted to provide services needed to keep them ready, including, depending on the product, storage, management, maintenance or distribution. Suppliers therefore did not have to finance the purchase of the stock from their own capital, while the government paid them for the services needed to keep it ready.

 

For some products, these arrangements also allow stock to be rotated through the commercial market, with older quantities moving out and newer ones replacing them. This allows the government to keep relatively fresh stock available while reducing waste and the cost of replacing products that might otherwise expire after sitting for years in a separate warehouse. The model does not suit every product, however, because rotation depends on the existence of a commercial market capable of absorbing the quantities involved.

 

This model shows that the state can separate ownership of the stock from its day-to-day management and the responsibility for keeping it ready.

 

Finland addresses the cost differently. Manufacturers and importers are required to hold mandatory stocks of certain medicines, but they receive annual compensation for the cost of keeping part of their corporate capital tied up in those inventories.

 

Supporting preparedness does not, however, have to take the form of direct cash compensation. In Switzerland, compulsory stocks remain privately owned while the state determines the quantities and conditions required. The cost of compliance is eased through tools such as loan guarantees and tax advantages, along with dedicated funds that contribute to storage and management costs.

 

In Australia, minimum stock requirements for some medicines were introduced as part of a broader package that included price increases, protection for certain products from price reductions and price floors. In this way, preparedness requirements are linked to the economic viability of keeping a product on the market. In Europe, the provisional legislative agreement on the Critical Medicines Act is moving towards incorporating elements of supply resilience, including stockholding and delivery capacity, into public procurement criteria and contract conditions. If suppliers bear the cost of building greater preparedness, the state can give that preparedness economic value through pricing, contract terms or competition in tenders, rather than requiring it while continuing to select solely on the basis of the lowest price.

 

These experiences show that preparedness can be built through different arrangements depending on the medicine, the risk and the cost.The question in pharmaceutical security then becomes more than simply how much stock the state owns. What needs to remain available during a prolonged crisis? Who can hold and manage it? And what economic terms will make that sustainable? This is where the distinction between owning stocks and governing preparedness becomes clear: what the state needs to own, and what the market can hold if the rules, incentives and contracts are designed to ensure that it is reliably available when needed.