Four threats, one broken system: Moody’s onto something

A new white paper from one of the world’s most influential credit agencies maps the forces tearing apart pharmaceutical supply chains. The diagnosis is accurate. 
Drug shortages in the United States have been at their highest level since tracking began in 2001. According to a white paper published this month by Moody’s, 323 medications were in shortage in the first quarter of 2024 alone. The report identifies four converging forces driving that number: geopolitical disruption, manufacturing fragility, cybersecurity risk, and counterfeit drugs. The analysis is substantive and the data are largely verifiable. It is also, as any Moody’s publication eventually reveals, a product pitch — the final pages pivot to the company’s proprietary supplier monitoring platform as the solution to everything the preceding pages describe.
That tension does not invalidate the diagnosis. But it does invite scrutiny. And several of the most important questions the white paper raises are left unanswered.
What Moody’s said — and what checks out
On geopolitics, the paper is on solid ground (with everything else being fragile nowadays). Houthi attacks on commercial vessels in the Red Sea beginning in late 2023 forced six of the ten largest container carriers to halt or significantly reduce passage through the corridor, according to the report, cutting Suez Canal traffic by two-thirds and rerouting ships around the Cape of Good Hope — adding roughly 4,000 miles and close to two weeks to each voyage. For Indian generic manufacturers, whose products supply nearly 40% of U.S. generic prescriptions, the effect was immediate: shipping costs more than doubled, lead times stretched, and the just-in-time inventory model that governs most generic drug production offered almost no buffer. Those figures are consistent with reporting from Maersk and J.P. Morgan cited in the paper.
On tariffs, Moody’s cites analysis suggesting a proposed 25% U.S. pharmaceutical import tariff could add up to $51 billion in annual drug costs and push consumer prices up by as much as 12.9%. Manufacturers reported double-digit cost increases for staple molecules including amoxicillin, acetaminophen, and metformin. The paper also notes that India sources around 70% of its bulk drug imports from China — meaning U.S. tariffs on Chinese goods function as a second-order shock to Indian-manufactured generics, compressing the very supply chain the U.S. depends on for affordable medicines.
On manufacturing fragility, the paper identifies overcapacity utilization as the core structural problem. Many sterile injectable and high-volume generic facilities already operate above 80% utilization, leaving almost no headroom to absorb a shutdown. Qualifying an alternative manufacturing site takes between 12 and 24 months — far longer than the market can tolerate without disruption. The collapse of Akorn Pharmaceuticals in February 2023, cited by Moody’s, illustrates the point starkly: the company’s insolvency triggered an FDA-mandated recall of its entire product portfolio, eliminating supply across multiple therapeutic categories with no advance warning and no manufacturer positioned to backfill the lost volume.
On cybersecurity, the Change Healthcare ransomware attack of February 2024 remains the most consequential single incident in the sector’s recent history. Attackers from the BlackCat/ALPHV group gained access via a Citrix remote portal that lacked multi-factor authentication and went undetected for nine days. When Change Healthcare took its systems offline on February 21, it interrupted a platform processing 50% of all U.S. medical claims. Over 90% of the country’s 70,000 pharmacies were suddenly unable to process insurance claims. UnitedHealth Group paid a $22 million ransom. An estimated 190 million patient records were exposed — the largest healthcare data breach in U.S. history. Total financial impact reached $1.35 to $1.6 billion. In testimony before the U.S. Senate, UnitedHealth CEO Andrew Witty acknowledged that the attack succeeded because the acquired entity’s remote access infrastructure had not been brought up to the parent company’s security standard following its acquisition — a post-merger integration failure with systemic consequences.
On counterfeits, Moody’s cites WHO data valuing the global falsified medicines market at $200 billion, with falsified raw materials entering supply chains at upstream tiers where oversight is weakest.  It also refers via footnote that counterfeit drugs represent 10% of global supply chain risk. The FDA has separately flagged counterfeit Ozempic entering the U.S. supply chain — a data point that underscores how the GLP-1 shortage created commercial incentives for counterfeiters that the regulatory system was not positioned to intercept.