PharmExec Blog

What Happens When the Pharmaceutical Supply Chain Goes Global?

A report by PwC on managing the global supply chain—based on a survey of industry  executives around the globe—provides a road map for achieving real-time control over the supply chain, as well as a call to action for better collaboration with suppliers, distributors, shippers and regulators.

Global pharmaceutical outsourcing has become increasingly prevalent, but is creating a complex and risky supply chain environment that has pharmaceutical and life sciences executives on high alert, according to a major study co-sponsored by PwC and published by Axendia, a life science and healthcare analyst firm. In the report, 50 percent of pharmaceutical and life sciences executives surveyed said they see raw materials sourced outside of the US as the greatest vulnerability to the supply chain, and 61 percent view contaminated or nonconforming raw materials as the top threat in the next five years.

According to the report, titled “Achieving Global Supply Chain Visibility, Control & Collaboration in Life Sciences: Business Imperative, Regulatory Necessity,” the emerging economies of China, India, Mexico, and Brazil are becoming the most attractive places in which to sell medicines. In the drive to lower costs, these countries also are playing a more prominent role in the manufacturing and sourcing process. Yet, outsourcing drug development to manufacturers in developing nations carries significant operational risks. Moreover, it is more difficult to manufacture and distribute biologics, which are more sensitive to the elements, than chemical entities. Against this backdrop, Axendia’s survey of 112 industry executives from pharmaceuticals, medical devices, and biotechnology companies around the globe found:

• Ninety-four percent said global product sales outside of the US will be increasing in the next few years, while 78 percent said global sourcing outside of the US will be increasing, followed by 76 percent who said their global manufacturing outside of the US will be increasing.

• Threats that were considered limited or small scale as few as 10 years ago, such as drug counterfeiting and illegal product diversions, are becoming major concerns, with 44 percent and 35 percent of industry executives, respectively, citing them as business risks in the next five years.

• Visibility into the supply chain is primarily based on “snapshots in time,” with little sharing of common practices and information. Seventy-seven percent of industry executives stated that the primary method used to gain visibility into their suppliers’ practices is a periodic audit. Only 25 percent stated that they share common practices and information with suppliers and only 3 percent have access to suppliers’ data in real time.

• When asked about their ability to gain global visibility into the supply chain, including accessing data from multiple locations and sites to provide a global view, 66 percent said although they can do it, the procedures are still primitive; most need to manually aggregate the data.

• Nearly 60 percent of industry executives said they are concerned about the willingness of suppliers to provide information to address regulatory requirements, and 44 percent are concerned about their distributors’ willingness to provide information required to meet these requirements.

• The availability of track and trace technology to enable the industry to gain better control over the supply chain exists today. However, industry executives identified four hurdles to implementing such technology: cost, difficulty of implementation; lack of industry standards, and lack of regulatory requirement and guidance.

• Industry executives said their preferred method for creating best practices around standards and guidance is through industry consortium, such as the Pharmaceutical Supply Chain Initiative, the Experimental Physics and Industrial Control System, and the Rx-360 consortium.

According to the report, these forces are driving the industry to develop a supply chain that is more extended, globally dispersed, and virtual. However, the ability to control the safety, efficacy, and effectiveness of products will continue to be a challenge until the industry implements systems that can provide real-time, global visibility into the supply chain, including practices and information from suppliers, distributors, shippers, and contract manufacturers.

“With manufacturing, sourcing, and the sale of medical products expected to increase dramatically in the emerging markets, the geographical
expansion of the supply chain will make it more difficult to manage, as will the industry’s changing product mix,” says Wynn Bailey, Pharmaceutical and Life Sciences Advisory Services Partner, PwC.  “In order to meet the demands of globalization, the pharmaceutical supply chain will need to become much more flexible, with different manufacturing routes and distribution channels for different kinds of products. Companies will need to implement new strategies, processes, and technology to proactively reduce and control risks.”

Because of the size and complexity of global supply chains, the most cost-effective option to oversee them end to end involves the sharing of information to facilitate the safety, efficacy, and effectiveness of products.

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