Over 300 drugs in the U.S. are in limited supply or unavailable, marking the worst national drug shortage in years. Patients struggle to get the necessary treatments, in some cases resulting in increased hospitalization and death. Although the driving factors of the shortage are complex, the bottom line is that drug manufacturers, particularly those that produce generic drugs, can’t afford to stockpile raw materials and products to prepare for shortages due to financial, storage capability, and product expiry limitations. However, companies will be better prepared to survive unexpected setbacks by better managing their supply chain and proactively identifying potential risks.
Disruptions in the Supply Chain Can be Disastrous
Supply chain encompasses business activities that ensure a consistent flow of goods and information, from acquiring raw materials to delivering a finished product to the customer. The end-to-end supply chain comprises material procurement, manufacturing, transportation, warehousing, and distribution. For pharmaceutical manufacturing, many of these processes are subject to good manufacturing practice (GxP) and oversight by regulatory bodies.
Pharmaceutical manufacturing companies must overcome key supply chain challenges:
- Ensuring regulatory compliance
- Ensuring product quality
- Navigating globalization of materials and services
- Navigating supply chain disruptions
Disruptions fall into three categories: difficulty procuring materials; disruptive events such as natural disasters, geopolitical changes, and personnel shortages; and financial instability.
Current drug shortages are the result of strain applied to various nodes of the supply chain. Production of generic drugs has been affected severely because of their extremely tight profit margins, particularly for complex injectables. The current market follows a “race to the bottom” trajectory: manufacturers compete against one another to sell their products at the lowest possible price or add to the company’s profit margin.
As such, companies have altered their supply chain; for example, by moving operations overseas to lower-cost countries. Financial restraints impact a company’s ability to buy excess raw materials or store buffer inventory. Furthermore, quality oversight overseas is often less stringent and can lead to safety problems, adverse regulatory actions, and production halts or recalls.
Alternatively, manufacturers may decide that no change in the supply chain can salvage profits for a specific drug and discontinue the product. Often, only a few manufacturers produce a drug substance or product; therefore, losing just one source can result in impaired supply. Some suggest that the government should incentivize U.S. drug manufacturers to continue producing generic drugs. However, other solutions may navigate these challenging times.
Several popular approaches help pharmaceutical manufacturers maintain a robust supply chain. These include considering supply chain risk and resilience through operational readiness assessments, minimization of operations and logistics vulnerability through business continuity planning, using big data and analytics, and implementing artificial intelligence (AI) and machine learning (ML). While planning and analytics financially benefit the business, they are also vital to sustaining manufacturing operations and continued drug supply, as they support scalability to meet actual demand. Through effective planning, manufacturers can anticipate and mitigate potential risks to help ensure they will meet global supply demands.
Success Through Operational Readiness and Business Continuity Plans
Even before a company starts operations, even as a facility is being built or modified, it will benefit from performing an operational readiness assessment to prepare it to efficiently achieve its manufacturing milestones and initiate or continue operations in a controlled and sustainable manner. The goal is to anticipate potential issues in each business workstream so that most issues are remediated before clinical or commercial manufacturing operations are up and running.
Companies should follow the following steps to achieve operational readiness:
- Select stakeholders for supply chain
- Generate a process map of supply chain elements
- Set a landmark objective and dates for clinical or commercial production
- Reevaluate the initial assessment against workstream changes to determine supply chain impact
Project Execution plans must be kept current with business goals and objectives to reveal potential gaps that impact the supply chain. Then, working backward from the primary objectives and dates, companies build a timeline to complete gap mitigation steps that drive successful project execution.
The counterpart to an operational readiness assessment is a business continuity plan: a set of strategies to ensure a business can act quickly to minimize downtime or continue essential operations in case of disruption or disaster. This plan involves identifying potential risks to operational functions and establishing frameworks to enable the timely recovery of critical business processes. It goes into considerable detail, outlining individuals responsible for responding to a given disruption, what actions must happen, and how to carry it out.
The business continuity plan should be periodically reviewed and included in the company change management and management review programs. Creating the business continuity plan as a Standard Operating Procedure and ensuring the plan is referenced in change control and management review procedures ensures the business continuity plan is accurate when a disruptive event occurs. Once a business continuity plan is in place, companies must assess their plans in periodic mock exercises to determine if their plan is sound before a crisis occurs.
Risk mitigation strategies such as having safety stock, qualifying multiple suppliers, producing additional goods, and having off-site warehousing, can help manufacturers withstand issues. The value of operational readiness assessment and business continuity planning activities lies in minimizing the costs and effects of manufacturing downtime and lessening the likelihood of product shortages while balancing the costs or risk mitigation.
The Benefits and Barriers to Employing Advanced Analytics
Advanced analytics can give manufacturers an end-to-end view of their business and reveal areas for improvement. The approach applies statistical models, algorithms, and ML to gain insights, optimize processes, and make data-driven decisions throughout the supply chain. The results can enable demand forecasting, inventory optimization, logistics management, supplier relationship management, and risk mitigation—particularly considering changing market conditions. Additionally, by analyzing historical and real-time data, organizations can gain clarity into their supply chain, uncover patterns and trends to help them make accurate predictions, identify inefficiencies, and improve overall performance. However, significant barriers remain to adopting this technology for supply chain management.
Primary barriers to adoption include:
- Companies need robust technology (IT) infrastructure to implement advanced analytics, including hardware, software, and data storage capabilities. It may require significant investment.
- Supply chains typically involve multiple systems, departments, and stakeholders separated by data silos. Integrating data from these onto a unified analytics platform can be difficult.
- Advanced analytics requires a specialized skillset that may be limited in the organization.
- Advanced analytics relies heavily on high-quality, relevant data, which organizations have historically struggled to acquire reliably.
Companies concerned about advanced analytics’ return on investment (ROI) may be hesitant to invest. Before adopting advanced analytics, organizations must ensure data security and privacy when assessing sensitive data and cultural or organizational readiness to support a system, including buy-in from the senior leadership.
The Supply Chain Looking Forward
By bolstering the U.S. drug manufacturing supply chain, companies may be able to produce the medicines desperately needed more reliably—especially generics. Additional policy changes are likely needed before the pharmaceutical manufacturing market can be considered sustainable. With efforts directed at planning and optimizing the supply chain, manufacturers can learn to adapt operations and elevate business practices to reach a higher standard of excellence.
