Critical Role of Supply Chain Management
In the pharma and biopharma industry, where even minor delays can have life-or-death consequences, supply chain management (SCM) plays a critical role in ensuring the timely and cost-effective delivery of vital medications, from raw materials to finished products, to healthcare providers and, ultimately, to patients.
Effective SCM in pharma involves meticulous coordination between numerous stakeholders, including raw material suppliers, manufacturers, distributors, wholesalers, and pharmacies. Every step in the supply chain, from procurement and manufacturing to storage, transportation, and distribution, must be meticulously managed to guarantee the quality, integrity, and efficacy of therapies. Delays or disruptions at any stage can lead to stockouts and price hikes, potentially preventing patients from accessing life-saving medications.
However, in recent years, the biotech and pharma industries have been faced with significant challenges that have compounded the complexity of SCM.
Growing Trends in SCM
Over the last two decades, the value of pharmaceutical goods has grown sixfold, from $113B in 2000 to $629B in 2019.1 As a result, pharmaceutical supply chains are inherently more complex than ever before, often stretching from one corner of the globe to the other. Events such as the COVID-19 pandemic and global conflicts have shined a spotlight on the current intricate nature of pharmaceutical supply chains.
In recent years, drug shortages have become a growing concern globally, with no single root cause, although there are several contributing factors.
1) Raw material issues
A recent FDA drug shortages task force report identified that drug shortages were most often caused by quality issues in production plants (almost two-thirds), including manufacturing process problems, equipment reliability issues, and raw material and API availability.2
When the production of critical raw materials is concentrated in a few countries or manufacturing facilities, any disruption at a single location can lead to significant shortages across various drug categories. U.S. Pharmacopeia (USP) recently highlighted this pharma supply chain issue, reporting that there are 114 facilities in India with more than 30 U.S.-approved API products as compared to three facilities in the U.S.3
Additionally, contamination, impurities, or changes in the source of raw materials can force some manufacturers to halt production while the issues are resolved, or new suppliers are found.
2) Regulatory hurdles
While stringent regulations are necessary to ensure drug safety and efficacy, their complexity can significantly slow the response to API supply disruptions. If a supplier faces a production or quality issue, these regulations can make finding and approving a new source a lengthy process.
Regulations also often focus on quality control at individual suppliers. This can unintentionally make it less appealing for pharmaceutical companies to proactively maintain multiple approved sources for raw materials, critical APIs, and drug substances. As a result, the supply chain will be vulnerable to disruptions due to the lack of redundancy.
Trade restrictions or changes in regulations surrounding the movement of drugs between countries can further contribute to shortages, especially during times of high demand.
Trans-border regulations, environmental regulations, and health and safety regulations must also be carefully considered and accounted for in SCM. One recent example of a regulatory change that could impact API SCM is the German Supply Chain Due Diligence Act which entered into force in 2023, requiring companies to identify and address human rights and environmental risks in their supply chains.4 Additionally, in September 2023, the American Petroleum Institute released a Methane Action Plan outlining industry actions and policy priorities for reducing methane emissions from oil and gas operations, which could affect API production.5
3) Reimbursement challenges
Low reimbursement rates for many essential drugs, particularly older generics, make them less profitable for manufacturers. This extends to suppliers of APIs and drug substances, who also face slim profit margins. When APIs and drug substances become less appealing to produce, fewer manufacturers invest in them, leading to a limited supply. This lack of competition and a reduced number of suppliers increase the risk of shortages if there’s a disruption in the supply chain.
The pressure on healthcare providers to cut costs can further exacerbate the problem. In pursuit of lower drug prices, buyers may be less concerned about the stability of the supply chain, inadvertently encouraging drug manufacturers to source APIs or drug substances from less reliable or overstretched suppliers. This can increase the overall vulnerability of the drug supply chain, further contributing to the risk of shortages.
With drug shortages resulting in delays in treatment, increased healthcare costs, and, in some cases, life-threatening situations for patients, there has been an increasing focus on preventing shortages by health ministries, legislators, and the public.
Trends in drug supply issues are also exacerbating challenges faced by the pharmaceutical and biotech industries that stem from the demand for accelerated timelines. The COVID-19 pandemic created an urgent need for accelerated production of biologics and pharmaceuticals that drove major changes in development timelines, regulatory pathways, outsourcing trends, and manufacturing approaches across the industry. Although the pandemic has ended, the demand for accelerated production of biologics and pharmaceuticals has not, with healthcare professionals and patients now anticipating medicines to reach them faster.
Although developers optimize timelines aiming for the smooth progression of each step from preclinical phases to commercialization, the approval pathway is not linear. A single setback stemming from regulatory hurdles, clinical setbacks, funding issues, or manufacturing problems can have a much larger impact on a schedule with limited tolerance for delays.
As pharmaceutical supply chains become increasingly complex, drug developers are increasingly turning to expert contract development and manufacturing organizations (CDMOs) to manage the challenges and ensure a reliable supply of high-quality drugs.
SCM Trends Impacting CDMO Selection
Operating in a global market means pharma and biotech companies must be prepared to cater to diverse needs while managing global supply chains and responding to varied regulatory environments and previously mentioned trends. However, in a recent industry survey by the International Data Corporation (IDC) and TraceLink Inc., 70% of supply chain leaders stated that they believe their supply chain is vulnerable, with 65% noting that they could no longer accurately plan their supply.6 When selecting a CDMO partner, biotechs and pharma companies will carefully consider how the company will effectively support their supply chain needs to navigate the above trends. They will be seeking a partner that can deliver:
With pressure for accelerated timelines to deliver their product to market, biotechs and pharma companies will need to rely on a CDMO that can help streamline their supply chains, ensure visibility, anticipate challenges, and reduce lead times. The CDMO must be able to pinpoint vulnerabilities in the supply chain network, such as an over-reliance on suppliers from a single territory.
By partnering with a CDMO with a proven track record of improving supply chain efficiency, biotech and pharmaceutical companies can gain a competitive advantage and deliver their products to market faster and more cost-effectively.
- Flexibility and scalability
In the rapidly changing bio and pharma landscapes, flexibility is key to navigating change in the market and supply. However, when surveyed, nearly half of pharmaceutical supply chain leaders admit they lack the necessary agility to survive major business disruptions.3
This highlights the need for CDMOs to be more flexible than ever before. They must be able to quickly adapt to changes in demand, regulatory requirements, and supply chain disruptions. This includes having the flexibility to navigate not only risks but also opportunities, such as meeting the escalating demand for a product through scaling due to its immense success.
With a flexible supply chain and the right systems in place, CDMOs can provide oversight of planned timelines and mitigate risks to ensure the uninterrupted supply of medicines to patients.
- Communication and visibility
A strong supply chain relies on upstream and downstream visibility. More than half of companies across the end-to-end pharma supply chain lacked the upstream and downstream visibility needed to respond effectively to the sudden marketplace disruptions caused by COVID-19.7 Without this visibility, resolving issues with upstream suppliers and downstream customers can be slow when problems arise.
Visibility is also key to ensuring the quality of supply. Less expensive routes of synthesis can lead to the contamination of products. The financial and legal costs incurred in these cases can be extremely high.
From start to finish, biotechs and pharma organizations want to know that they can rely on their CDMO’s supply chain. Having strong relationships with everyone involved in the supply chain and effectively communicating with them will enable a rapid response to changes and disruptions.
Working with experienced supply chain partners can go a long way toward solidifying supply chain security to ensure that medicines can be manufactured and delivered to patients on time, even in the face of challenges and unforeseen circumstances.
Strategies to Meet Supply Chain Needs
To meet the supply chain needs of biotech and pharma, CDMOs need to apply the right strategies to enable them to effectively navigate emerging trends and potential challenges ahead.
In the past, many CDMOs relied on a “just-in-time” approach, producing and delivering products only as needed, rather than maintaining large inventories. Although this approach can improve supply chain efficiency, it requires careful coordination with supply chain partners to ensure reliable and timely delivery. The COVID-19 pandemic also highlighted the pitfalls of this approach, with “just in time” becoming “just too late.”
Instead, an ideal strategy will encompass CDMOs building up their tolerance stack — the accumulated individual tolerances of each aspect of the supply chain — while capturing the essence of “just in time” and applying risk management filters. As part of this strategy, they must regularly examine every point in the supply chain to identify potential vulnerabilities and implement continuity plans as standard practice. Other factors that will be critical to ensuring reliable supply will include:
Although it is common to have multiple API suppliers, the diversity of a supply chain is often overlooked. If your suppliers are not spread out geographically or they obtain their raw materials from the same source, a supply chain will lack true diversity. Communicating with suppliers to elucidate their networks and sources will help to identify potential weak points before they become an issue. CDMOs can also harness multiple supply sources to stay prepared for any unexpected events that may affect suppliers in the same geographical region.
Many events are unpredictable; it is impossible to be fully prepared for every possible situation. However, CDMOs must anticipate likely scenarios, such as price fluctuations, and develop a plan accordingly. Establishing a strategy to address acute shortages of ingredients is essential to maintain supply continuity and absorb temporary price increases. Having alternative suppliers or stockpiling critical materials can contribute significantly to ensuring readiness for any eventuality. By fostering collaboration, maintaining effective communication, and gaining a thorough understanding of the supply chain, CDMOs can effectively respond to disruptions and plan for contingencies.
- Keeping quality front of mind
In the face of market disruptions, prioritizing the maintenance of a stable supply of high-quality APIs and intermediates is essential. Integrating reliable and quality-focused suppliers into primary and contingency networks can significantly enhance the security of API supply, irrespective of wider market conditions. In addition to a rigorous supplier selection process, implementing quality audits of suppliers’ facilities and processes can help to ensure they are meeting the high standards required both for regulatory compliance and patient safety. Failure mode effectiveness analysis (FMEA) for risk management is also critical in identifying and assessing potential issues with the quality of products and will enable the development of suitable mitigation plans to address these risks.
By implementing effective supply chain strategies, CDMOs can build supply chains that can “take a punch,” remaining strong in the face of challenges to ensure a reliable supply of high-quality APIs and intermediates.
Preparing for Trends on the Horizon
Having strategies in place that will allow CDMOs to de-risk their supply chains and provide security for their clients will mean they are well-positioned to face the challenges on the horizon.
This includes the impact of the BIOSECURE Act, a bipartisan bill designed to safeguard U.S. biotechnology interests and protect the sensitive genetic data of U.S. citizens from being accessed by adversaries. If passed into law, the act could have a significant impact on biotech and pharma supply chains, including potential supply chain disruptions, increased costs, and increased scrutiny of suppliers.
The biotech and pharmaceutical industries are also facing an increasingly complex and volatile geopolitical landscape that is challenging the resilience of global supply chains. This includes the conflict between Russia and Ukraine, which has caused supply shortages, price increases, and transportation disruptions for supply chains that rely on goods and services from the region. Additionally, ongoing trade tensions between the U.S. and China have led to tariffs on medical products, which could significantly disrupt supply chains for companies relying on materials from China.9
The Future of Pharmaceutical SCM
Pharmaceutical SCM entails unique complexities. Recent trends in drug shortages and demand for accelerated timelines have highlighted the need for biotech and pharma companies to rely on robust supply chains.
Relying on a CDMO partner that can secure sustainable supplies of raw materials will be paramount in navigating these challenges as well as those we can anticipate in the future. These CDMOs will have adopted innovative strategies to enhance efficiency, quality, and regulatory compliance. By implementing risk mitigation measures and collaborating effectively with pharma and biotech companies, these CDMOs will build a resilient and efficient supply chain to ensure the timely and cost-effective delivery of life-saving medicines to patients for years to come.
References
- Four ways pharma companies can make their supply chains more resilient https://www. mckinsey.com/industries/ life-sciences/our-insights/four-ways-pharma companies-can-make-their-supply chains more-resilient
- https://www.fda.gov/drugs/drug-safety-and-availability/drug-shortages
- https://www.abiresearch.com/blogs/2023/02/17/pharma-supply-chain-challenges/
- https://www.bmas.de/EN/Europe-and-the-World/International/Supply-Chain-Act/ supply-chain act.html#:~:text=The%20Act%20on%20Corporate%20Due,rights%20in%20 global%20supply%20chains.
- https://www.api.org/news-policy-and-issues/news/2023/09/21/api-releases-methane-action-plan
- IDC & TraceLink Inc. white paper on ‘Solving the COVID-19 Pharma Supply Chain Struggle’.
- www.tracelink.com-resources-resource-center-poor-visibility-tops-idc-list-of-6-obstacles-to-pharma-supply-chain-resilience.pdf
- https://www.gisreportsonline.com/r/supply-chain-risk-management/
- https://valityone.com/en/auswirkungen-der-geopolitischen-risiken-auf-die-supply-chain[1]in-der-life-science-branche.
Author Details
Thomas P. Wilson, Global Contract Manufacturing Leader- Pfizer CentreOne
Tom Wilson leads Pfizer CentreOne's global contract manufacturing commercial business. Tom was formerly Vice President of Contract Manufacturing Operations where he was the liaison between the Pfizer Global Supply (PGS) and Pfizer CentreOne organizations. He also led the Pfizer Optionality Program for PGS, as well as the Integration Team for Hospira Device Operations, oversaw the management of Pfizer’s Alliance External Suppliers worldwide, and provided counsel on Pfizer’s global manufacturing strategy. He joined Pfizer in 2010 with the acquisition of Wyeth, where he was Vice President of Product Operations.
Tom is a former United States Air Force Captain, serving as a Command and Control Officer. He holds a BSc in Physics from Saint Joseph's University and an MSc in Administration and Management from Saint Michael's College.
Publication Details
This article appeared in Pharmaceutical Outsourcing: Vol. 25, No. 2Apr/May/Jun 2024Pages: 32-34