Kate Coleman - Senior Director/Principal Consultant - PharmaLex
Anne Marie Gaffney - Senior Associate Consultant - PharmaLex
We are now into our second year of dealing with the impact of the COVID-19 pandemic and there are several questions on our mind such as, how is the COVID-19 crisis influencing pharma supply chains for the future? Is the global pharma supply chain under sustained threat? And what has been the impact of moving manufacturing to Asia and its resulting dominance in the supply chain? These are all valid questions considering recent and current events across the world as we have managed through the worst of this pandemic.
It is generally agreed that the COVID-19 pandemic marks a historical point in the understanding of the risks associated with the supply of medicines, but will it fuel efforts to establish local supplies of chemicals and APIs as a “matter of national security”? In the last 12 months, pharmaceutical companies have become acutely aware of their dependency on increasingly complex supply chains that span several global locations. As a result, the pandemic has finally convinced all stakeholders to take note of the weaknesses and build more resilience into their supply chains in the future.
In the last 10 years or so, lower costs have been a key decider in the relocation of a significant share of manufacturing capabilities to China and India, particularly for Active Pharmaceutical Ingredients (APIs), oral solid dosage forms and liquids. We have, therefore, seen a large increase in production volumes in these countries. According to FDA data published in 2019, almost 40% of registered manufacturing sites for Active Pharmaceutical Ingredients were located in India or China, and this figure does not include suppliers of raw materials, fine chemicals and other necessary materials required for pharmaceutical production.
The relocation of key manufacturing capabilities to Asian countries such as China, Taiwan and India, has had a direct impact on supply chain reliability and has led to drug shortages for a myriad of different reasons including transport distance and workforce availability.
Believe it or not, drug shortages are not considered rare events and don’t just happen when there are worldwide pandemics such as COVID-19. The average drug shortage in the US lasts for 14 months and some last for years when based on a high-risk supply chain.
Before COVID-19, the FDA had already placed 145 pharmaceutical products on its drug shortages list. In April 2021, in the middle of the pandemic, there were 175 drugs on the FDA drug shortages list, an increase of only 30.
COVID-19 didn’t have the foreseen catastrophic effect on drug availability and there are several reasons for this:
- The pharma industry had a sufficient inventory buffer (average inventory is about 180 days for the entire industry).
- Drug manufacturing has long lead times, so the effect of 1-2 weeks manufacturing cessation in China or other Asian manufacturing hubs would take some time to cycle through the supply chain and result in shortages to the end user.
- Supply disruptions of APIs or finished products made in Asia were not hugely prolonged; otherwise, the effects would have been more severe.
- Regulatory challenges for medicines were largely overcome, where required, through collaboration and flexibilities introduced by regulators to fast-track regulatory processes. For example:
- Fast tracking approvals to alternative sources of supply of reagents and APIs.
- Ensuring availability of GMP certification for manufacturing and import
- Introduction of remote auditing options for supplier audits and regulatory inspections
- Labelling and packaging flexibility to facilitate supply continuity
- Switching sources of supply (which is not straightforward in the pharmaceutical industry) was not extensively required...
- Interestingly, there was a relatively short period of logistical and distribution challenge. Demand spikes for transportation capacity were placed under enormous strain compounded by (i) surge in international demand for PPE, sanitizer, critical care medicine and medical devices (ii) Disruptions at ports (iii) Decreased capacity on air freight (iv) Re-routing of transportation (v) Personnel availability constraints due to lockdowns/quarantine (vi) Increased prices.
Although the COVID-19 pandemic is not yet over, routes have already opened and lockdowns in most countries are slowly being phased out with worldwide workforces expected back on site by later this year, if not back already.
However, despite all of this, local, regional and therefore shorter supply routes are still preferred in the current crisis. There is a new realization that this preference is also aligned with the global environmental agenda with a focus on reduced air and road freight and the reduction in the length of journeys in any supply chain.
This preference, however, does not fully align with the expectation of cost in the industry. Even if the manufacture of APIs or fine chemicals was more regionally dispersed or locally based, the raw materials for these manufacturers may not be available in these locations. Also, differing legislation in terms of environmental impact, labor and other elements may quickly increase the cost of these materials when manufactured in more local settings, thus impacting the supply chain again.
It appears that we will have to manage the reality that raw material availability and cost are critical factors in deciding where pharmaceutical manufacturing and the manufacture of raw materials resides. The balance of availability and cost is a delicate one and there is no easily implemented solution. As a result, increased resilience will need to be factored into our supply chains which will include sourcing, at some level, from Asia and the rest of the world. Moving production closer to home markets would be costly and would take years to accomplish. The smarter and most practical approach is to build resilience into the supply chain in the shorter term while also considering the longer-term options. But how do we build this resilience?
One of the key steps is to ensure that there is a risk management plan in place that focuses on the evaluation of all potential issues arising from the loss of a supply chain partner or an unforeseen impact in any region that may impact supply. This requires:
- Alternate supply arrangements
- Inventory levels to provide a potential buffer
- Agile Manufacturing
- Dual sourcing
This is infinitely more challenging than it seems. It means that organizations need to precisely know the quantity of each raw material or medicinal product in the supply chain and where it is at any given moment, allowing them to react quickly to any potential supply issue. This leads to hyper complexity where advanced algorithms (and data analytics/artificial intelligence) will be required to help design supply chains with greater resilience and risk monitoring capability.
Designing resilience into the supply chain should incorporate a system for placement of inventory at the right points of the supply chain network (i.e., the right inventory commensurate to the risk at that point in the supply chain). In this scenario, areas at higher risk of supply chain shortages may, for example, hold larger buffer volumes or incorporate dual sourcing or preferential contracts, ensuring that changing scenarios in the region have less impact on the supply chain as a whole.
Investment in real-time production monitoring systems and integrated planning and scheduling tools (LEAN tools) could increase the agility of existing manufacturing sites to speed up supply and reduce requirements for additional expensive production equipment. This can be achieved by the companies sourcing the materials themselves or through partnership with suppliers in territories such as Asia, giving these suppliers the opportunity to work with their customers to optimise supply.
The pharmaceutical industry will continue to build resilience and secure itself against volatility in supply from Asia and, perhaps, at a faster pace and with more focus than prior to the COVID-19 pandemic.
The COVID-19 pandemic has taught us a valuable lesson regarding the weaknesses in our supply chains and the urgent need for us to build security and risk avoidance into our supply chains. Prior to 2020, we did not foresee an event such as COVID-19 having such a worldwide impact and if we look at the positives, we have managed, as an industry, to keep everything moving and ensure patients needs are met. However, we need to make sure that next time, whether it be another virus or alternative scenario that tests our resilience, we have more robust processes in place to ensure our industry continues to deliver to our patients.
The last 12 months have also shown us, through the development, manufacture and supply of COVID-19 vaccines, that as an industry we can pull together to deliver solutions to patients worldwide. We can also learn from our successes in getting vaccines out to patients, which has played a key role in turning the tide of the COVID-19 pandemic. This success gives us an opportunity to not only learn from the difficulties, but also to learn from the ability of pharmaceutical companies, suppliers and regulators to work together in a dynamic and proactive way to meet patient needs.
Kate Coleman has worked in Quality roles in the Pharmaceutical Industry up to management level for 16 years, covering several platforms including Biologics, Sterile Fill Finish, Vaccines and Oral Dose. Kate is a practicing QP, a qualified Lead Auditor and an SME in Risk Management, New Facility Design/Start Up, QC and Sterility Assurance.
Anne Marie Gaffney is a Senior Associate Consultant with over 20 years’ experience in the Pharmaceutical Industry and an Associate of MPI. Anne Marie holds an honours BSc in Analytical Science from DCU, an MSc in Food Science from University College Dublin and a Diploma in Pharmaceutical Manufacturing Technology (QP) from the University of Dublin, Trinity College. Anne Marie was formerly employed with Mylan Dublin where she held positions of Quality Director, Quality Assurance Manager and Qualified Person.
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