Issue Date: October 17, 2011
A Sense of Urgency
Supply chain management is a procurement and distribution discipline that in most industries is considered, like total quality management, well established and highly routine. In the drug and active pharmaceutical ingredient (API) sectors, however, supply chain management has become an urgent concern.
After a spate of drug supply adulteration cases, most prominently the heparin disaster of 2008 (C&EN, March 24, 2008, page 46), regulators in the West have moved to better police imported pharmaceutical materials. Drug producers and their suppliers are increasingly being called upon to answer for the safety of their products with a full accounting of the source and quality of raw materials.
Suppliers of APIs and drug intermediates say the heightened regulatory scrutiny—and resultant increase in audits and inspections—could eliminate a competitive advantage currently enjoyed by Asian producers that do not comply with Western standards. But most agree that Asian firms are improving their quality standards and that any advantage will be short-lived.
Other executives see an opportunity to lower costs and improve the quality of their operations with the implementation of more modern supply chain management practices. Mostly, though, API providers are anxiously trying to navigate rapid shifts in the regulatory landscape.
“Supply chain security is uppermost in the concerns of a great many people, both in the industry and among regulators,” says Guy Villax, chief executive officer of Hovione, a Portuguese pharmaceutical chemical producer. “I think [Food & Drug Administration Commissioner] Margaret A. Hamburg is really worried about the security of food and drugs coming into the U.S. I have never seen things move so fast at FDA.”
It can be said that the eyes of the API world are on Washington, D.C. The opposite is also true. European and U.S. API executives, including Villax, have testified before Congress on the need for better supply chain controls, and the city has been the regular meeting place of Rx-360, a consortium of drug companies and their suppliers established to exchange information on quality, safety, and auditing (C&EN, June 22, 2009, page 24).
FDA has also come before Congress. In testimony last month before the Senate Committee on Health, Education, Labor & Pensions, Deborah M. Autor, the agency’s deputy commissioner for global regulatory operations and policy, told lawmakers that FDA wants greater policing authority to ensure the quality of drugs and drug ingredients coming into the U.S. (see page 44).
Autor asked lawmakers to consider granting FDA the authority to issue mandatory recalls, detain or destroy materials at the border, and refuse shipments into the U.S. Sens. Tom Harkin (D-Iowa) and Michael B. Enzi (R-Wyo.) support including such powers in the reauthorization of the Prescription Drug User Fee Act, Autor told the committee.
FDA’s Center for Drug Evaluation & Research reengineered its supply chain security oversight function earlier this year with the creation of the Office of Drug Security, Integrity & Recalls. According to ODSIR’s Division of Supply Chain Integrity Deputy Director Leigh Verbois, the new group will act as a single point of contact for the industry on supply chain issues. If FDA is granted new powers “through legislation, this office will use those powers to protect public health,” she says.
ODSIR consolidates the efforts of drug security staffers who had been dispersed throughout FDA, Verbois says. ODSIR is also reaching out to industry groups such as Rx-360, with whom Verbois recently met. “We want to make sure they understand our focus and the point of our organization, and we want to understand how we can work together to achieve the shared goal of ensuring the integrity of the supply chain,” she says.
Rx-360, which focused heavily on standardizing auditing in its first two years, announced its own new organization last month. The Supply Chain Security Workgroup will pool expertise from member companies on managing procurement, manufacturing, and other links in the supply chain, according to Martin Van Trieste, senior vice president of quality at Amgen and chairman of Rx-360. The unit will bring logistics, risk management, brand protection, anticounterfeiting, and supply chain security staff from member companies together with the quality managers who launched the group, Van Trieste says.
Establishing a single point of contact for supply chain security at FDA is a step in the right direction, Van Trieste says. The attention on the supply chain may appear to create an advantage for Western API suppliers, he adds, but in the long run it won’t complicate efforts by drug companies to outsource to Asia.
“It will make sure that everybody plays by the same rules and that nobody gets competitive advantage by cutting corners or making substandard materials,” Van Trieste says. “Let’s be honest. There are noncompliant companies in the West. This will raise the bar and level the playing field.”
Brant Zell, vice president for quality at the pharmaceutical chemical maker PolyPeptide Laboratories and former chair of the Society of Chemical Manufacturers & Affiliates’ Bulk Pharmaceuticals Task Force, contends that the increased regulatory scrutiny will not mean big changes for Western API producers, whose supply chains are at less risk than those of finished-dose pharmaceutical manufacturers.
“We aren’t as attractive to counterfeiters,” Zell says. “We have a lot of security and supply chain management in place, and we track shipments closely.” Many shipments of raw materials come from China, he acknowledges, but safety and quality can be managed through regular direct contact with suppliers.
Although such contact is not a regulatory requirement, Zell says, it is often a requirement of drug company customers, who routinely query API suppliers about their raw material sources. “I don’t think we are seeing much change,” Zell says. “Everything is good, but I don’t think it’s a bad idea to continue to improve supply chain management.”
European API suppliers likewise contend that they are accountable for their supply chains, and they want their competitors to do the same. To this end, the European Fine Chemicals Group, an association of chemical firms that serve the drug industry, worked with the Active Pharmaceuticals Ingredient Committee of the European Chemical Industry Council to get the European Parliament to address the issue of counterfeit or falsified APIs entering Europe, particularly from Asia.
In February, the European Union issued the Falsified Medicines Directive (FMD), a suite of regulations aimed at ensuring that APIs brought into Europe are made in plants that comply with European current Good Manufacturing Practices (cGMP). The fine chemicals group is also spearheading a move to establish quality standards for excipients, nonactive drug components often used at a higher volume than APIs.
“The FMD is a major step forward and will change the supply chain in the years ahead,” says Heinz Sieger, CEO of CUChemie Uetikon, a German API producer. Sieger, who chairs the German custom fine chemicals association CASID, says his firm is already experiencing an increase in audits by customers and regulators. “But we also see more inspections outside of Europe as a consequence of the new FMD,” he notes. “This will help to level the playing field and ensure the protection of human health in the EU.”
Experience varies, but most API executives are feeling the pressure of increased scrutiny of the supply chain. “We see it in discussions with our customers, and there’s an overall higher scrutiny and demand for transparency from regulators,” says Gilles Cottier, president of SAFC, the fine chemicals business of Sigma-Aldrich. “But the intensity of the effort is definitely greater on large, rather than small, molecules.”
Therapeutic proteins are not as well characterized as small molecules, he says, and regulators are now requiring more information from biopharmaceutical companies on components used to create large-molecule therapies. This scrutiny, he says, includes the cell culture media used in production of biopharmaceuticals, which is a big business for SAFC (C&EN, Oct. 3, page 24).
SAFC has responded by investing in quality control at facilities like its cell media plant in Irvine, Scotland. The company has spent “tens of millions of dollars” on upgrading facilities in the past 18 months, Cottier says. “But this has also created opportunity, because customers are coming to us to make products they cannot find at cGMP levels elsewhere.”
Roger LaForce, general manager of Fabbrica Italiana Sintetici (FIS), an Italian API firm, agrees that tougher regulatory oversight of supply chains will create opportunities for some API suppliers. It also provides an incentive for chemical producers to improve efficiency and lower operating costs. “We are learning from our customers that the value of supply chain management is that you can achieve remarkable cost reductions through renegotiating contracts for important products,” he says. And by setting quality requirements for its own suppliers, FIS generates more business with its pharmaceutical industry customers.
Since LaForce joined the company seven years ago, he says, FIS has made big strides in managing its supply chain. “FIS was procuring from China over the telephone and fax,” he recalls. “I said, ‘We need to get on a plane and see what is there.’ ” The company has in recent years formed a marketing joint venture in Hangzhou and launched an intensive supplier qualification program, primarily aimed at Asian raw material providers.
FIS has doubled the volume of starting materials it purchases from China over the past two years, LaForce says. The company also plans to increase the amount of products it sells into emerging markets such as China, where it registers its products through the marketing joint venture. “So far we have not been inspected by a Chinese manufacturer,” he quips. “But that may happen in the future.”
LaForce says the push for supply chain security will likely elevate the science of procurement management at the mid-sized chemical firms that have traditionally served the pharmaceutical industry. SAFC’s Cottier also embraces the increased discipline. “Fighting the change is not a winning scenario,” he says. “We have to embrace the change, adapt, and look at opportunities to make life better for our customers.”
At FDA, Verbois attests that this is a common view expressed by API executives with whom she has met. “Everyone has been willing to provide us with the information to make our jobs easier,” she says. “There has been no push-back.”
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