The changing face of Pharma Supply Chains: From Global to Local

Overseeing a Pharma supply chain and ensuring efficiency is a complex and all-hands-on-deck kind of job. It begins with the sourcing of raw materials – chemicals and ingredients – used to manufacture the drugs, which then in the manufacturing stage are formulated, put under stringent quality checks, packed, labeled, and shipped to the warehouse or distribution center before they are distributed to healthcare providers, pharmacies, and hospitals.

This entire process requires a keen eye for detail, as managing a pharma supply chain is more than just ensuring product quality, facing frequent product recalls and compliance issues, or overseeing temperature-controlled shipments. It is about taking responsibility for people’s lives on your shoulders. 

Any slightest delay can prove to be catastrophic, as it can either worsen a patient’s health or even take their life. 

A Pharma supply chain also carries the responsibility for preventing counterfeiting and diversion by making the chain end-to-end visible and traceable. 

Ever since the pandemic highlighted the importance and fragility of the pharma supply chain, pharma companies to address these and other challenges are adopting digital technologies such as blockchain, artificial intelligence, and the Internet of Things (IoT) to enhance transparency, traceability, and efficiency in their supply chains. 

But this is not all. The changing face of the pharma supply chain is not about how or what they are adapting, rather it’s about where. A recent paper titled Pharma Supply Chains of the Future, released by EY highlights that in the wake of geopolitical instability (Russia-Ukraine and China-Taiwan, for example) – and ongoing post-pandemic supply shocks – pharma companies are now moving away from globalization, and towards regional hubs. 

Those connected to the pharma chain including the supply chain managers, policymakers, or vendors – must never lose sight of the ultimate goal of giving the patients the right drug at the right time. By establishing regional hubs this goal can be better accomplished as it helps deliver greater levels of flexibility and resilience.

The report said, while the industry can expect to see some moves toward localization, these moves are likely to be combined with other new approaches. 

The implication of localization can depend on the steps of the supply chain that are considered. The process in the simplest way could mean companies ensuring local stockpiles of finished goods inventory.

The different steps of the pharma manufacturing process entail different levels of investment to localize: “A pharma company could relatively easily localize secondary like:

  1. Packaging: They could build a local Good Manufacturing Practice(GMP)-approved, licensed site, or outsource the same to a local contract development and manufacturing organization.”

(GMP describes the minimum standard a medicine manufacturer must meet in their production processes.)

  1. Infrastructure: To receive and store the primary packaged product from the previous stages of the supply chain infrastructure would be required. Carrying out the on-site secondary packaging would need basic additional raw materials, such as cardboard, adhesives, and printer cartridges, plus manual labor supplied locally, and the presence of a quality organization and maintenance team. 

However, if the companies look to localize in the earlier stages of the manufacturing process, the complexities will rise with increased needs for complex raw materials, skilled labor, and higher capital outlay to build sites for higher-technology manufacturing, as API (Active Pharmaceutical Ingredient) manufacturing is a biologically active component of a drug product, which need a careful assessment and handling. 

Is Localization of API Manufacturing a Good Idea? 

As per the paper, while localization of API manufacturing can help reap far greater agility, it will lack the other important supply chain metrics, such as reliability, time to innovate, risk exposure, and efficiency.

However, if one focuses on the lower-cost, lower-complexity option of localizing finished goods rather than the manufacturing process itself, it will likely improve the reliability of product supply because more of the product would be locally stockpiled for distribution. But one cant say that it will enhance any other prospect of resilience significantly. Therefore, it is crucial to assess the merits of localization in practice, relative to any alternative options (procurement clearing house or joint warehouses, multiple sourcing of raw materials, or shortening regulatory processing timelines) that exist for bolstering pharma supply resilience. 

Thus, to build resilience and deliver consumers their sought outcomes, working collaboratively and cooperatively with the stakeholders will be the key to success for any pharma company. 

LATEST NEWS