Pharmaceutical Outsourcing Q2 2024 - 32

SUPPLY CHAIN
Navigating Trends and
Challenges Facing
Pharmaceutical Supply Chains
Thomas P. Wilson
Global Contract Manufacturing Leader
Pfizer CentreOne
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 a number of
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
Pharmaceutical Outsourcing | 32 | April/May/June 2024
Pharmaceutical Outsourcing Q2 2024

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