The current coronavirus epidemic and subsequent shutdown of travel to and from affected areas in China make supply chain risk management a particularly timely topic this month.
While the last thirty years have seen us grow increasingly comfortable with extended, global supply chains, these past few years’ (and months’) events have wreaked havoc on the assumption that all is well.
There are many reasons why. Here are four of the most visible threats:
- Geopolitical trade uncertainties and the rise of nationalist economic policies.
- Emerging disease threats such as SARS & coronavirus with the potential to curtail global trade.
- Massive impacts from environmental challenges, including pollution-driven factory shutdowns, earthquakes, volcanic eruptions, weather-related delays and more.
- A shifting regulatory landscape forcing significant, rapid changes by manufacturers.
The reality is that supply chain turmoil can materialize quickly – and it’s a realization that the pharma industry has recently taken to heart.
But it isn’t just the unexpected, global events that have placed increasing scrutiny on supply chains. Shorter product life cycles and increasing pressures on drug pricing have also yielded higher demand for fast & flexible – and cost-effective – supply chains.
Other trends are longer-term but are an indicator that supply chain challenges will only continue to grow.
Physical Damage Risks & the Rise of Cold Chain Logistics
Logistics has always faced the additional risk of physical damage from couriers. Demand is rising for tighter control over product temperatures during transit, amid concerns over chemical damage which can occur when shipment temperatures rise of certain thresholds. This has been a key driver of cold chain logistics in recent years, and the need is expected to become even more acute as temperature-sensitive drug sales are growing twice as fast as pharmaceuticals generally.
Counterfeit Drugs & the Drug Supply Chain Security Act (DSCSA)
The Drug Supply Chain Security Act (DSCSA) – one of the key sections of the Drug Quality and Security Act of 2013 – was created to combat the proliferation of adulterated and counterfeit drugs on the market. From pharmacytimes.com:
“The purpose of the drug supply chain security act (DSCSA) was to create an electronic system to track and trace certain prescription drugs in the United States.”
Counterfeiting has raised significant supply chain security & product identification concerns in the sector. The CDC reports that 10%–30% of medicines sold in developing countries are counterfeit. And while the numbers are significantly lower in the industrialized world (by some estimates <1%), the high value and ‘lifestyle’ nature of pharmaceutical products has made counterfeiting more widespread.
To help address this, the DSCSA lays out the requirements to which the manufacturers of drugs and drug components, distributors, repackagers, dispensers and logistics providers must adhere. The various requirements phase in over time – with the earliest beginning in late 2014 and the last (product tracing) facing final implementation in 2023. It has affected stakeholders up and down the supply chain, and its reach continues to grow as additional requirements come online.
What are the Most Common Supply Chain Risks?
When it comes to crisis planning, the primary event we prepare help our clients prepare for is a natural disaster, followed by political instability and social unrest. As emerging markets lack infrastructure, they are more vulnerable to potentially disruptive events and require more steps to manage those risks.
Political discord, such as civil wars, protests, riots, and the like have unquestionably disrupted supply chains. A city or country dealing with civil unrest may be a constant source of a variety of issues that put your supply chain at risk. Loss of communications, travel hazards, and general time delays caused by this turmoil may make it difficult to solve supply chain problems in these volatile regions. Furthermore, it is impossible to predict the size and duration of these events.
The coronavirus outbreak (which at the time of this post’s publication may – or may not – still be a global pandemic crisis) is a good example of what such an interruption could look like. An article at AXIOS in January captured the potential supply chain impacts of the virus:
“China produces a large portion of the ingredients used to make drugs. As the coronavirus spreads and sends China increasingly into lockdown, it’s causing experts to question whether the supply chain is stable….13% of all facilities that make ingredients for drugs sold in the U.S. are located in China, and 85% of medicines in the U.S. strategic national stockpile use some component that comes from China.”
Potential quality issues are almost always a supply chain risk factor – and they require both crisis planning and preventative actions. In some cases, it’s possible to devise redundant supplier arrangements to ensure continuity of supply in the event of unforeseen issues. In other cases, backwards-integrated suppliers can reduce the length (and thus potential risk) of supply chains.
Minimizing Risk to Pharma Supply Chains
The best strategy, of course, is to pre-empt quality issues entirely – which is best achieved by screening & selecting the right suppliers from the start. As it can be a time-consuming process for which many companies lack the resources, a sourcing partner can help alleviate much of the risk by identifying suitable manufacturers which meet your project’s criteria – from R&D through commercial production.
At LGM Pharma, for example, we’ve built a vetted network of reliable API manufacturers with a tradition of regulatory excellence- holding approvals from leading health authorities (FDA, EDQM, TGA, UK-MHRA and others) – backed by accessible comprehensive DMF documentation.
In today’s global market – marked by both unforeseen natural disasters and the recognized risks posed by emerging markets, counterfeiting, and less-than-optimal delivery conditions – taking steps to minimize supply chain threats in critical.
Learn how LGM Pharma can help you manage risk while cutting lead times. Contact Us today.
