Understanding Risk In Pharmaceutical Supply Chains
Understanding riskin pharmaceuticalsupply chains
Authors:Catherine Geyman1, Ettore Settanni2, Jagjit Singh Srai2.Contributing partners within the ReMediES consortium:AstraZeneca, DHL, GSK, Intersys1, Munich RE,University of Cambridge2, Walgreen Boots Alliance. The authors, 2020Terms of Use:This work is licensed under a Creative CommonsAttribution-NonCommercial 4.0 License. Non-commercialuses are thus allowed without any further permission butmust be correctly attributed and referenced. Permissionsbeyond the scope of this license are administered bythe University of Cambridge on behalf of ReMediES. Forinformation on how to request permission please contactthe authors at: cim-admin@eng.cam.ac.ukThis work is attributed to the Authors and the originalversion can be found sources/Please reference as:Geyman C., Settanni, E. and Srai J.S. (2020),Understanding risk in pharmaceutical supply resources/Outer cover: iStock/ballykdy, iStock/ipopbaInner front cover: iStock/ipopba, iStock/ballykdyPage 4: iStock/ipopbaPage 11: iStock/ipopba4 INTRODUCTION TO REMEDIES AND SUPPLY NETWORK RISK
Understanding riskin pharmaceuticalsupply chainsContentsINTRODUCTION - Pharmaceutical Supply Chain Risk4– Introduction to ReMediES and supply network risk4– Key outputs4Predicting Disruption Through Incident Data Analysis5– Data Gathering and Analysis5– Key Triggers for Drug Shortages6Identifying Risk Interdependencies7– Defining a sector-wide pharmaceutical supply chainrisk classification7– Understanding interdependencies between risks:A Gamification approach7Evaluating risks and benefits in Just-In-Time clinical supply9– Inventory in pharmaceutical supply chains9– The “JIT pharmacy” concept9Concluding remarks on pharmaceutical supply chain risk11– Academic references12
Introduction/PharmaceuticalSupply Chain RiskIntroduction to ReMediES and supply network riskThe ReMediES (Reconfiguring Medicines End-to-end Supply) project involving 22 industrial partners comprising global pharmaceutical companies,major contract manufacturing organisations, equipment manufacturers,and logistics specialists – examined future pharmaceutical supply chainssupported by novel technology.These technology interventions spanned theend-to-end pharmaceutical supply chain: R&D,Primary Manufacturing, Secondary Manufacturing,and Distribution to patients. The ReMediES projectdelivered outputs that are captured in Badman andSrai (2018) – see academic references at the endof this document.This briefing sets out the key outputs emergingfrom the strand of activity linked specifically tothe management of pharmaceutical supply risk.Key OutputsThere are multiple challenges involved in thesupply of pharmaceuticals. Some of these includequality and availability of key ingredients, as wellas issues around the authenticity of drug products.This project therefore offers multiple lensesto focus on pharmaceutical supply chain risk:The safety and reliability of medicines supply isoften affected by long lead times, complex globalmanufacturing footprints, and the challenges thesepresents on forecast accuracy. Supply security isfurther compounded by the need to comply withstrict requirements in manufacturing, and regulatoryscrutiny that may result in production disruptions.2. Expert-driven risk prioritisation, to unravelcomplex interdependencies between potentialcauses of supply failure;Risk in this context is often associated with drugshortages: events that prevent patients gettingthe right medicines at the right time. In traditionalsupply chains, supply risk is typically managedthrough increased inventory. However, excessiveinventory is unsustainable, and may conceal thevariety of factors that may result in supply disruption.4 UNDERSTANDING RISK IN PHARMACEUTICAL SUPPLY CHAINS1. Real-world data analysis to aid better predictionof disruptions and supply shortages;3. Simulation-based assessment of newmanufacturing technologies to mitigatedisruption and reduce inventory.Outputs are generated at three levels, eachcontributing to more informed risk mitigation: Industry-wide: Informing institutional actionahead of disruptive events; Commercial Supply Chain: prioritising mitigationactions based on system-wide potential impacts; Clinical Supply Chain: Inventory and wastereduction implications from the adoption ofJust-in-time production.
Predicting Disruption ThroughIncident Data AnalysisIn the last decade the global pharmaceutical market has faced criticalshortages of certain types of drugs, reaching crisis point in 2011. The numberof new drug shortages reported annually is on the rise again, prompting thestudy of historical datasets to identify which disruption events and supplychain characteristics are most likely to trigger shortages.Data Gathering and AnalysisThe study considered the following datasets: Internal company data: collected from supplychain risk experts. Industry wide data: Public domain data fromUS and EU regulators, which describe: Alimentary tract and Metabolism wasthe most frequently disrupted ATCTherapeutic Area. By dosage form, injectable drugs were themost troublesome across the same twodatasets, reflecting the greater challengesassociated with sterile manufacturing (seechart opposite).Most frequent root causes. Most influential product and processcharacteristics. The analysis focussed on two industry incidentdatasets (US FDA Product Shortages and USEnforcement Reports) concluding that:Non-compliance events.Additional evidence from the US FDA Inspectionresults and EMA GMP Non-Compliance reportsillustrates the influence of geographic location offacilities on poor inspection outcomes, in particular,China and India are the two countries most likelyto have adverse results (see map below).Courtesy of IntersysAcross both internal and industry datasets,there are some attributed root causes that mostfrequently occur, namely demand variability andquality issues. Within quality issues, most are dueto inadequate procedures, or poor adherenceto them.FDA Drug Inspections resulting in OAI (adverse FDA inspections) from 2008 -2017, normalised by #inspectionsColour coding represents; Order of Likelihood; 8%, 6.5-7.999%, 6-6.499%, 5-5.999%, 5%)The disruption that follows an adverse inspectionoutcome should not be underestimated.Disruptions are often significant as companiesattempt to resolve issues, in order to avoid theultimate sanction of regulatory shutdown.Beyond the contextual factors outlined above,analysis of events preceding drug shortagesyielded further insights on the operationaltriggers contributing to drug shortages.These triggers are set out on the next page.UNDERSTANDING RISK IN PHARMACEUTICAL SUPPLY CHAINS 5
Key Triggers for Drug ShortagesFor drugs reported as in shortage or discontinued by the FDA as of August2018, further analysis identified linkages to preceding interruption eventsimpacting the relevant companies.Events such as Warning Letters, Recalls,Import Alerts, Certificate Withdrawals andadverse Inspection Results were considered,up to 4 years prior to the interruption. Thisrepresents an upper bound on the time it takesto impact the market (due to long cycle times,lengthy remediation plans and significant safetystock holdings).The most frequent ‘triggering event’ was anadverse FDA inspection (OAI) which preceded69% of individual shortages; 73% if ProductDiscontinuations are excluded. This resultreflects company responses to an adverseinspection result: typically, a company will initiateremediation works which will at worst interruptproduction over months/years, or at best, divertscarce resources from normal productionactivities, potentially impacting quality.% of FDA Drug Shortages & FDA Enforcement Reports(Recalls) by Dosage Form (Top 10)Courtesy of IntersysOf the 33 parent companies reportingshortages, 19 experienced major networkinterruptions which resulted in manufacturingstoppages or prolonged slowdowns. Downtimeat each impacted plant often triggered multipledrug shortages.Product discontinuations also appear to beinfluenced by drug pricing. Many ‘hard tomake’, sterile generics have low, set prices.With increasing costs and relatively lowmargins in the generics sector, license holdersoften withdraw from the market, increasingthe fragility of the supply base.6 UNDERSTANDING RISK IN PHARMACEUTICAL SUPPLY CHAINSIn conclusion: drug supply disruptions aretriggered by a wide variety of complex, ofteninterdependent events. However, if a companythat manufactures injectable drugs in an alreadyconstrained marketplace, receives an adverseinspection report, then that manufacturer shouldbe flagged as ‘at risk’ and shortages could beexpected to follow.These insights have been used to supportrisk categorisation and consolidation, withan updated risk assessment tool for incidentmonitoring being developed through Intersys(available at onitor)
Identifying Risk InterdependenciesDefining a sector-wide pharmaceutical supply chainrisk classificationThis activity sought to categorise and prioritise a generic set of riskswithin pharmaceutical supply chains, and then to understand possibleinterdependencies between them. The proposed approach is describedin details in Settanni et al (2018) – see academic references at the endof this documentRisk assessment within the industry typicallyfocuses on a specific event within a complexmanufacturing supply chain. However, mitigationstrategies should consider multiple events that,in combination, may result in significant supplyfailures. These interdependencies may bedifficult to quantify, and are rarely consideredby risk professionals.One of the outputs of this activity was an agreed,sector-wide view on risk in pharmaceuticalsupply chains. Risks were identified throughextensive industry-academic workshopdiscussions, leading to the identification ofan initial set of 121 risks through the supplychain. These were grouped according to 27root causes.The chosen experts represented a typicalend-to-end pharmaceutical supply chain,coming from businesses involved in primaryand secondary manufacturing, distribution andretail pharmacy, as well as risk consultancy.Understanding interdependencies between risks:A Gamification approachIn a follow-up step, supply chain risk expertswere asked to identify which risks may influenceother risks, and what is the magnitude of suchlinkages. Addressing these questions gave adeep understanding of possible interactionsbetween risk events.The direct influence ofeach risk item on anyother item is relatedSwipe LeftA mobile applicationdesigned to elicitknowledge from riskmanagement expertsSwipe RightTo facilitate a user-friendly interrogation of riskinterdependencies, a gamification app (picturedleft) was developed so that risk experts couldevaluate the potential 539 links arising from the74 risks items identified.Expert engagement through the gamificationapp for the assessment of risk interdependenciesproduced a network visualisation of riskinterdependencies (picture overleaf), and theassociated network analytics.UNDERSTANDING RISK IN PHARMACEUTICAL SUPPLY CHAINS 7
Risk network visualisation: a) overall interdependencies between risks (the strongerthe relationship, the darker the arc); b) Detail on sub-network centred on a specific risksA:B:The interactive visualisation tool allowedthe experts to further examine specific risksof interest and highlight those most directlylinked to them. Analytics were deployed tocompute how risk propagates throughoutthe network, as any risks may in depend,or exert an influence on any other.The analysis yielded a concise “two-by-two”categorisation of the 74 risks (graphicallyplotted below):I. Upper-Left: Influential risks.II. Upper-Right: Unstable risks, both influentialand dependent.III. Lower-Right: Dependent risks.IV. Lower-Left: Mostly autonomous risks.Risks categorisation plots. Those included in the upper-right quadrant can be unstableand difficult to predict, whilst risks in the bottom-left and can be safely discarded8 UNDERSTANDING RISK IN PHARMACEUTICAL SUPPLY CHAINS
Evaluating risks and benefitsin Just-In-Time clinical supplyInventory in pharmaceutical supply chainsConflicting objectives are not uncommon in managing inventoriesin pharmaceutical supply chains: excess stock could improve service;however holding inventory is costly, and may eventually result inwrite-offs and disposal of unused medicines.Project ReMediES has explored a range ofmanufacturing technologies targeting inventoryreduction whilst improving service to patients.Within the risk strand, activities were carriedout to examine trade-offs between serviceimprovement and holding inventory. A casestudy in Clinical Trial Supply Chain (CTSC)delivering investigation medicinal productswas considered to test different replenishmentmodels. These challenges are of course notunique to the CTSC, and can apply to futurecommercial supply chains, particularly due toincreased personalisation; more responsivesupply requirements; and potentially moredistributed manufacturing footprints.Unlike the analyses presented in the previoussection, looking at inventory dynamics requiredmore detailed, quantitative data. Technicaldetails are provided in Settanni and Srai (2018)– see academic references at the end of thisdocument.The “JIT pharmacy” conceptA commonly held view is that high availabilityin multiple locations globally is only achievedat the expense of efficiency. In current CTSCsettings, it is not uncommon that less than halfof manufactured investigational medicineproducts are likely to be used by clinics.In particular, expected performance levelsin terms of inventory emerge from dynamicinteraction between the demand and supplybased factors over time. The following factorswere included:– Geographically dispersed demand signals:This provides a strong motivation for exploringautomation and industrial digitalisationtechnologies. An innovative ‘just-in-time’pharmacy concept was tested in a simulationenvironment, comparing the performance of ahypothetical CTSC that featured this technologyintervention, to that of a conventional CTSC. Theintroduction of just-in-time principles, enabled bynew manufacturing technologies, challengescommonly held views on the relationshipbetween holding inventory, and attaining highservice levels.-How the clinical study design develops,-Recurrence of clinic visits,-Quantity of medicine dispersed.– Manufacturing capabilities:– Cycle times,– Inspection outcomes,– Replenishment/reorder policies.Simulating with different assumptions oninventory stock levels and logistics policiesprovides sensitivity analysis and revised policyholding strategies at the various stock holdingpoints. JIT technology interventions,demonstrated potential to produce stock nearon-demand, with potential reductions in unusedinventory of between 67% to over 80% in theparticular case considered here.UNDERSTANDING RISK IN PHARMACEUTICAL SUPPLY CHAINS 9
Concluding remarkson pharmaceuticalsupply chain riskThe work led by the Centre for International Manufacturing incollaboration with Intersys and other industry partners, providesa multi-disciplinary view on the nature of risk in pharmaceuticalsupply chains: from the statistical analysis of supply disruptionevents, to risk interdependencies across the end-to-end supplychain, through to the evaluation of new technology interventionsin terms of inventory, waste and service levels.Analysing mitigation strategies is crucial toinform supplier selection, order allocation,facility locations, inventory levels and overallcoordination across the supply chain. Insightsfrom this research will inform future supply chainresilience strategies in medicines manufacturing.Unlike previous research, pharmaceutical supplychain risk was approached from multiple levelsof analysis – macro (whole sector), meso(individual supply chains), and micro (unitoperations technology. Risks were not consideredin isolation, rather, they were characterised andprioritised based on possible interrelationshipsbetween them. Supply network design toolswere deployed to evaluate novel technologyinterventions that challenge commonplacetrade-offs between economic efficiency andmedicines overage in CTSC, as well as futurecommercial supply chains.11 UNDERSTANDING RISK IN PHARMACEUTICAL SUPPLY CHAINSAs with other strands within ReMediES, thisactivity has benefited from successful precompetitive collaboration between industryand academia. Building on unprecedentedengagement with supply chain risk experts,and “real-world” data, this research contributesto making an impact on industry practice, byproviding novel approaches and tools to supportpharmaceutical supply chain risk analysis.
Centre for International Manufacturing (CIM)CIM is a research centre at the Institute for Manufacturingfocusing on strategic and operations management researchin close collaboration with industrial partners. The Centrehas developed a strong industrial–policymaking–academiccommunity and provides expertise and support in the areaof international manufacturing and global value networks,with particular focus on capability development and strategicnetwork design. It provides briefings on globalisation andinternational manufacturing for industry and government.Institute for Manufacturing (IfM)The IfM is part of the University of Cambridge’s Departmentof Engineering. It brings together expertise in management,technology and policy to address the full spectrum of issueswhich can help industry and governments create sustainableeconomic growth.Academic referencesBadman, C. and Srai, J.S. (2018), ReMediES: Collaborativeresearch in action.Available at https//:remediesproject.com/Settanni, Ettore; Srai, Jagjit Singh; Kumar, Mukesh (2018):“Identifying risk interdependencies in pharmaceutical supplychains through gamification-enabled structural modelling”.In : Proceedings of the 49th Annual Meeting of the DecisionSciences Institute.Chicago, IL, 17-19 November, pp. 731–745.Settanni, E. and Srai, J.S. (2018),“Combining field data analysis and simulation to evaluatean alternative Just-In-Time clinical trial supply strategy”,In : Proceedings of the 22nd Cambridge InternationalManufacturing Symposium, Cambridge, UK, 27-28 TANDING RISK IN PHARMACEUTICAL SUPPLY CHAINS 12
- The "JIT pharmacy" concept 9 Concluding remarks on pharmaceutical supply chain risk 11 - Academic references 12 Understanding risk in pharmaceutical . the management of pharmaceutical supply risk. There are multiple challenges involved in the supply of pharmaceuticals. Some of these include quality and availability of key .
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