By Karl Schmieder
In an ideal world, the people and organizations that make up your supply chain would be connected and share information seamlessly. You’d be part of an ecosystem working together to transform raw materials and components into a finished product delivered to your end customer.
You’d know all the ingredients going into your product conformed to regulatory guidelines. And, you’d be able to access any part of your supply chain, in any country, at any point in time to check on ingredients and status. Internal systems would provide you visibility and control over your product as they left your loading dock and arrived at your customers’ clinics, offices, or retail stores. And finally, everyone in the supply chain would work together, understanding they were common stakeholders sharing both risks and rewards.
Unfortunately, the reality of global supply chains is far from ideal. According to FDA data, in 2009 there were more than 1,742 drug recalls, a 400% increase from the 426 recalls in 2008.
While globalization cannot be blamed for all of those recalls, a recent Axendia report titled “Global Supply Chain Visibility, Control & Collaboration; Business Imperative, Regulatory Necessity” suggests improving communications and collaboration can increase efficiencies in drug development and improve the safety of supply chains.
Globalization Drives Supply Chain Initiatives
Globalization increases access to medical innovations developed outside the United States and represents new markets for the sale of life sciences products. U.S. government figures show that over the past five years the growth in imports of life sciences products has grown by nearly 50% and represents nearly $81.5 billion. Today, about 80% of active pharmaceutical ingredients (APIs) come to the United States from overseas suppliers.
But, raw materials sourced outside the United States and contract manufacturing represent areas of vulnerability. Ninety-four percent of those responding to the Axendia survey indicated non-U.S.-sourced raw materials represent the greatest risk to the value chain. According to Richard Freeman, director of the Division of Manufacturing & Product Quality in the Center for Drug Evaluation and Research, FDA Office of Compliance, “An increasingly complex, and thus more risky, supply chain environment means manufacturers have to adapt their quality systems, including their ingredient audit program and ingredient qualification program to address those risks.”
In January 2008, Baxter International recalled nearly all its heparin injections in the United States after some patients experienced extreme — and in some cases fatal — allergic reactions after being administered the products. Similar recalls by other manufacturers of Chinese-sourced heparin occurred in Denmark, Italy, France, Germany, and Japan. In total, the FDA said tainted heparin has been identified in 12 countries. The FDA went on to inspect Shanghai No. 1 Biochemical & Pharmaceutical company and found the facility had never manufactured heparin for the U.S. market as claimed. Instead, Shanghai No. 1 had subcontracted manufacturing to two other facilities not inspected by the FDA. For many within the industry, the heparin scandal served as a wake-up call to increase the scrutiny of global supply chains.
The Current State Of The Global Supply Chain
“In certain areas, the supply chain is a black box, especially when it comes to outsourcing. Gathering relevant information across the supply chain is slow; that translates to higher risk because brand owners can’t outsource liability, compliance, or safety,” says Daniel Matlis, president, Axendia. “Ten years ago, the pharmaceutical industry followed the lead of companies like General Electric, Motorola, and Intel to implement Six Sigma, focusing on quality by design, process analytical technology, and tightly controlling manufacturing processes. Once outsourcing became commonplace, control over multiple processes was often lost. The industry’s efforts to improve quality, to build quality in, are rendered moot if the supply chain is not secure.”
Sponsored by PriceWaterhouseCoopers, IBM, and Camstar, the Axendia report polled some 110 industry executives representing 75 companies from 12 countries around the globe. According to the report, brand owners — who are ultimately responsible reputationwise and liable for their products — have lost the ability to collect, act, and capitalize on critical-to-quality indicators and process parameters. Only 25% of the executives polled indicated they shared common practices and information with suppliers, and only 3% have access to real-time supplier data.
The Future Of The Global Supply Chain
Axendia calls for life sciences stakeholders to implement a new paradigm for operating in an increasingly global and outsourced world. The paradigm includes a call for on-demand visibility, “the ability to obtain relevant information about the product at the appropriate time to enable decisions with a high degree of confidence based on the analysis of contemporary data.” An example would be the use of electronic batch/device records at every step of the supply chain, created at each step of the manufacturing process, reviewed by exception, and available on demand to support inquiries and investigations.
Axendia also calls for complete control over the global supply chain and increased collaboration. This new life sciences ecosystems model would capitalize on the benefits of globalization while proactively reducing and controlling risks.
Enabled by available, interoperable Internet and cloud computing-based technologies, on-demand visibility would allow organizations to get the information they need to support the full genealogy and traceability across the supply chain. Distributors, suppliers, and suppliers of suppliers would be interconnected and share interoperable systems.
To gain complete control over the supply chain, Axendia suggests shifting from supply chains to supplier networks. Supply chains provide only two touch points at each end of every link. Supplier, distributor, and repackager arrangements require more than two touch points, and remote audits of suppliers’ supply networks can ensure quality systems are adhered to at all times, not only during scheduled inspections.
Supply Chain Visibility Extends Beyond Ingredients
Supply chains extend beyond ingredients and components and have grown to include maintaining control over the product once it leaves the factory, though issues outside the factory vary from region to region. According to Doron Levin, managing director, Supply Chain Africa, “The challenges in Africa are very different from those of the developed world, and each region has its own issues. Beyond infrastructure problems that make it difficult to deliver medicines in remote areas, red tape and rampant corruption are common. Tracking using the Internet is difficult because it is only intermittently available. The biggest risks are product diversion or deterioration due to weather conditions. Pharmaceutical companies operating in these environments need some type of supplier/manufacturer registry combined with a comprehensive book of procedures and constant training and monitoring.”
To address the growing threat of counterfeiting and diversion, the Intellectual Property Enforcement Coordinator issued a report in 2010 recommending modifications to the Food, Drug & Cosmetic Act. These modifications require manufacturers, wholesalers, and dispensers to implement track-and-trace systems to allow for the authentication of life sciences products and the creation of an electronic pedigree using unique identifiers. The report also called for increased enforcement efforts to guard against the proliferation of counterfeit pharmaceuticals and medical devices.
Collaboration Increases Global Supply Chain Security
The most viable and cost-effective path to achieving on-demand visibility across the life sciences product ecosystem and securing the global supply chain involves improving communications. This can ensure the safety, efficacy, and quality of products for all involved. Information sharing can reduce redundant, costly audits and improve supplier, distributor, and shipper performance via published quality parameters.
Industry initiatives such as Rx360, a supply chain consortium driven by the pharmaceutical industry, are actively promoting industry and regulator collaboration, recognizing it as the most viable solution given the scope and costs associated with securing global supply chains. Key stakeholders in Rx360 include industry organizations, pharmaceutical companies, generics companies, medical device companies, and suppliers.
The Chemistry Playbook, a series of proven, modular, expedited chemistry, manufacturing, and controls (CMC) solutions designed to accelerate drug development, was formed in early 2010 to help United States-based biotechnology and pharmaceutical companies come together to discuss the benefits of interorganization communications and strategies that will help companies complete projects more effectively while guaranteeing quality.
According to Brian Scanlan, chief business officer at Cambridge Major Laboratories and a cofounder of the Chemistry Playbook, “Communications is a great word, but unless it’s done right, it doesn’t necessarily help. Whether it’s buying an API from China or working with an API supplier that is sending your API to a formulation house, you need to understand what is happening upstream or downstream. The ideal would be to have the people in charge of quality talking to each other, understanding and aligning project management and the implications to the program.”
Life sciences companies recognize today’s changing environment and are embracing partnership and harmonization initiatives. Improved communication and collaboration is the most viable approach, given the scope and costs of securing a supply chain. In order for this to succeed, everyone needs to come together to reevaluate supply chain activity as a whole. In global supply ecosystems, quality is not a competitive advantage, it is part of the cost of entry. To have a transparent, interconnected supply chain benefits everyone.