October 11, 2022 PAO-10-022-NI-04
All industries have struggled with an interrupted supply chain, but nowhere is ensuring supply as crucial as it is in pharma. A lack of cohesion or of goods available immediately (especially for cold-chain perishables) is more than an inconvenience — it puts lives in jeopardy. To provide guidance for companies, improve supply chain management, and return control to the sponsor, the U.S. Department of Health and Human Services (HHS) Office of the Assistant Secretary for Preparedness and Response released The Essential Medicines Supply Chain and Manufacturing Resilience Assessment in May 2022.1
Laying out these issues serves as a useful starting point, but the real question remains — is the industry willing to implement these widespread changes and unify, even if that means sacrificing cost-saving measures? How a company responds will be indicative of its priorities, whether that’s continuing to hope for the best overseas or reshoring supply to ensure access even in emergency situations. Ultimately, the assessment is just that — companies are required to do nothing, which has repercussions for patients everywhere, especially those in developing nations.
How did the supply chain get so out of hand? While operational systems are clearly in place, chaotic events — whether war in Ukraine or a global pandemic — are going to be felt in the supply chain. As a global system of moving parts, the supply chain is by definition vulnerable. Additionally, as evidenced by COVID-19, the longer an event persists, the more far-reaching and detrimental its effects can be.
The supply chain has grown increasingly unstable over the last 20 years, due in part to cost-cutting measures set up to offset the high price of R&D, drugs losing patent protection, and continuously evolving payer reimbursement practices that are subject to constant scrutiny. Instead of looking internally to remove inefficiencies, pharma has ubiquitously tried to mimic the manufacturing practices of other industries, notably automotive and retail, and adopted supply change initiatives that do not translate.
Not only has this been a poor solution and done patients a disservice, but while the cost of manufacturing has a tremendous impact on consumer goods, it is comparatively lower for pharma — especially considering most of the other expenses in the drug development process. As such, while pharma may have borrowed supply chain practices from other industries with the goal of reducing costs and generating higher profits, the reality is that it has created little value and is instead responsible for sparking a growing list of complications.
From drugs being totally unavailable to a never-ending news cycle of supply chain gaffs — for example, shipments going missing, vaccines going to waste, and product spoiling due to excursions or deviations from temperature control — supply chain problems amount to millions in waste. The IQVIA Institute for Human Data Science projects that pharma loses $34 billion annually due to cold-chain failures alone.2 Similarly, Cloudleaf and Sapio Research estimate that cold-chain problems amount to $1 billion in lost revenue or 1 million doses lost per company.3
There are many challenges affecting the supply chain — by involving so many parties across such extensive geography, the industry has created a situation that’s in a perpetual state of near disaster. No matter how it happens, at any given turn, inefficiencies across the supply chain can result in a patient not being able to take a drug they depend on.
A survey by Pharmacopeia on health care practitioners reflects this — a staggering 83% of physicians believe that drug shortages have become a greater problem in recent years, and 78% personally knew of shortages of drugs that patients needed amid the pandemic, with 80% indicating that their hospitals faced the risk of shortages at times. Despite this dire situation, 95% anticipate no change in the medical supply chain in response to the vulnerabilities revealed by COVID-19. Given this widespread sentiment, it’s not surprising that 90% view the supply chain as unreliable during a crisis.4 While it’s hard to pinpoint a single challenge causing shortages and this startling lack of confidence among healthcare providers, the following issues resonate across markets.
Subpar machines used to cheapen the manufacturing process can lead to quality issues. However, superficial cost reduction schemes often result in unusable supply — and this ironically winds up being more expensive for the sponsor company. Even worse, low-quality medications may be distributed to patients and can lead to adverse events.
A lack of skilled employees needed to ship, pack, and aid in manufacturing goods creates bottlenecks throughout the supply chain. This is especially detrimental if there’s no trustworthy chain of command monitoring all activities — for instance, if an issue occurs overseas when a manager is unreachable in the United States.
Without total transparency and the ability to track and monitor all goods, preventable issues in the supply chain will no doubt continue. Outsourcing valuable supply to overseas suppliers comes with great risk, namely the inability to know exactly what’s going on at the site, as many fail to properly integrate and train the CMO to comply with the pharma customer’s best practices.
A site closure or a problem that arises from a single-source supplier can wipe out an entire drug supply. While sole providers improve cost efficiency and may decrease risk in other areas since the product is supplied by one provider instead of many, depending on just one company creates too much potential for error. This is especially true in areas more susceptible to natural disasters, which is a lesson that the industry learned in 2017 after Hurricane Maria wreaked havoc in Puerto Rico. Unfortunately, the destructive storm wiped out much of the injectable saline supply used in the United States.
Biopharma is increasingly dependent on single-use systems (SUS). SUS manufacturers typically manufacture a range of components used to assemble SUS that require that all components be purchased from that provider. Companies usually deal with one SUS manufacturer due to consolidation in the market and partially because of limited capacity overall. It’s very difficult for a company to change SUS providers after manufacturing has begun, because they create proprietary systems tailored to the individual client. Though this lack of standardization is partially what makes SUS manufacturing attractive, it can prevent companies from accessing a drug entirely if something goes wrong.
Concentrating all activity in a single region poses similar risks as sourcing from a single supplier — if there’s a problem in the area, be it a government mandate or natural disaster, the supply chain will suffer. This is a classic don’t put all your eggs in one basket” situation. No matter how cheap or convenient an area may be, companies must go beyond one region and diversify supply so that backup materials are accessible.
Perhaps the greatest risk throughout the supply chain occurs during transportation, when it’s harder to protect drugs (especially those that are perishable) from the elements. Whether products are handled improperly or there are uncontrollable delays, such as heavy traffic or flight cancelations, there are many unanticipated events that can occur as a drug moves to its destination.
Limited capacity and running plants to near full capacity might be necessary to maintain profit, but by definition this hampers flexibility. When dealing with an emergency situation where supply might be in jeopardy, it’s unlikely that changes could be made when a facility is completely occupied, as the option of moving supply to avoid waste is eliminated.
Any temperature variation can make a major difference to product quality, as an excursion of even a few degrees can render supplies totally unusable. This presents a particular challenge when a drug or molecule is transported through very hot climates or handled by an unqualified labor force.
To overcome these issues, pharma needs to reimagine and then restructure the supply chain. By optimizing individual pain points, proactively anticipating problems, and creating multi-tiered solutions, the industry can get ahead of reoccurring disrupters. Companies can overcome supply chain risks by diversifying suppliers and implementing a smart system, leaning on technology, including solutions powered by artificial intelligence.
Instead of engaging a single provider, companies should ensure a dual supply for each material, ideally in a different geography — even if it’s the same partner, a second location is key. If materials can be produced internally within the company, that eliminates many of the variables of outsourcing.
All companies should have a temporary production site that they can turn to in case of an emergency — this supplier should not be normally used for production. As this is a short-term solution, it can be cost-prohibitive if a second-tier, plan B facility is engaged for too long.
It’s not enough to monitor production — companies must evaluate how supplies are allocated on an ongoing basis, estimating risk levels to determine if the current manufacturing regions and contract providers are still meeting the business’ needs best. By conducting a daily analysis, companies can close gaps before they worsen.
Reshoring materials to the United States eliminates many risks and gives companies more control over their supply, especially if a facility is close by. Companies are increasingly considering this as a viable option, with many stressing that, by focusing on North America, quality will improve.
A successful tracking system can help identify inefficiencies across the supply chain and enable decision-makers to double down on working processes. Monitoring all products when they are shipped is necessary to determine exactly where they are and at what temperature, as well as who is responsible for them, so that person can always be contacted.
Likewise, having an adaptive stock supply is key to realigning inventory as potential threats are detected. Whether to move materials and how much can be difficult decisions. However, the right AI can predict the likelihood of impactful changes. With a system in place such as Discrete Event Simulations (DES), leaders can better determine if a company should hold on to supply and if so, how much, more reliably.
Working with suppliers daily, especially those overseas, reduces the risk of falling into pitfalls later on and creates a culture of transparency. Before moving forward, all contract provider personnel should be adequately trained to deal with a specific product. There must be a direct channel between the sponsor and these suppliers, not only to establish constant communication but also to facilitate impromptu and frequent audits that guarantee that quality standards are being met.
The main takeaway is that the supply chain is constantly in flux — even on a good day. The only way for a pharma company to get ahead of this and ensure supply is to be proactive. If the pandemic demonstrated anything, it’s that waiting around for something to happen is no longer acceptable — by then, it’s already too late. Planning for a worst-case scenario and strengthening efficiencies and relationships with suppliers will only benefit the organization as a whole while mitigating the risk of shortages.
Danielle is a Scientific Editor at Pharma’s Almanac, responsible for generating and developing scientific original and client-owned content. She also serves as a Project Manager for Nice Insight’s promotional and multimedia initiatives, including Pharma’s Almanac TV and other upcoming ventures. Before joining Nice Insight, Danielle worked in digital marketing in the biotech industry. She holds a BS in biology from Brown University.