Insights and Perspectives from the IFPMA and IFPW “Shaping a Sound Supply Chain Ecosystem” Panel Discussion at the 2016 Global Health Forum, 21 April 2016.
Moderated by Sukana Virji, News Editor, Scrip Intelligence and featuring panelists: John Kallend, Sr. Vice President, Director of Manufacturer Relations and Services, Walgreens Boots Alliance and representing The International Federation of Pharmaceutical Wholesalers; Cheryl Watson, Associate Director, Bristol Myers Squibb; Christoph Hambye, Head of Logistics Division, International Committee of the Red Cross; and, Hitesh Hurkchand, World Health Organization
It is difficult to imagine a more challenging logistics environment than that of the pharmaceutical supply chain. Whether you examine the upstream or downstream supply chain process, each component is plagued with issues and challenges ranging from the manufacture of product and efforts to maintain medicinal integrity and efficacy, to the delivery of the product, whether it is to high functioning developed nations or war-torn and poverty-stricken countries around the globe.
Cheryl Watson of Bristol Myers Squibb likened the manufacturing process to that of “baking a cake,” with the key differences being the intense focus on maintaining a very high standard of product quality while dealing with an every-increasing morass of policy and regulatory oversight from what seems like an endless number of government agencies. Because of the important consideration of product expiries, it is becoming frequently more difficult to keep on hand sufficient stockpiles of drugs while maintaining product efficacy. Oftentimes, approval processes can take up to three to five years, so it is a true balancing act that is placed squarely on the shoulders of the manufacturers. Add to this the particular challenge of disruptions in the manufacturing process and sourcing of raw materials. The outcome is less than appealing, to say the least.
Downstream from the manufacturer, the pharmaceutical wholesale industry is responsible for “delivering the cake” to hospitals, wholesalers and distributors, retailers, and even direct delivery to the patient. John Kallend of Walgreens Boots Alliance stated that 70%-80% of product volume goes to wholesalers and distributors, and 20%-30% is delivered to hospitals, retailers and other outlets. Keep in mind that pharmaceutical wholesalers typically must stock 10,000 to 20,000 different SKU’s so retail deliveries are usually made two or three times daily by the wholesaler, which present additional challenges on how orders are even placed.
Issues within the supply chain are exacerbated when medicines are delivered throughout the world, particularly in underserved and poverty-stricken areas. Hitesh Hurkchand of WHO was emphatic in pointing out the significance and importance of ensuring that products are distributed efficiently and equitably to all countries, including those who are less developed. Member states and countries need to realize that these supply chain challenges are frequently plight and evidence-based. We witness significant medicine shortages across the globe, including essential medicines as well as abandoned essential medicines. The WHO’s role is to not only increase awareness about this issue, but to advocate policy changes which will hopefully evolve into progress and evolution of the entire process. Separately, the WHO is working to ensure that procurement and supply chain investment from the international development and supply chain communities are managed in a qualitative and productive fashion. While their focus has been on upstream policy work, there has been significant focus on downstream country work as well. The WHO collaborates with 14 different agencies, with the goal being patient access to these vital drugs. This focus includes information systems, distribution, transportation and human resources for supply chain management. It is particularly challenging to guarantee coordination of investments given the ongoing issues in the management of these areas.
Christoph Hambye of the International Committee of the Red Cross (ICRC) emphasized that his organization is perhaps most impacted by these ongoing supply chain problems since their work encompasses the most fragile and complex environments. These issues are punctuated by an ongoing lack of manpower, often in war torn regions, areas plagued by disaster, and poverty stricken countries. ICRC represents “boots on the ground” and their role is impacted not only by the upstream supply chain, but the downstream as well. Part of their mission is to ensure that those who are less fortunate are not forgotten, a noble and necessary cause to be sure.
The Challenges…
Clearly the pharmaceutical supply chain is in desperate need of improvement. It begins with the manufacturer and continues all the way through the downstream process to patient end point. Some of the most significant challenges include manufacturing disruptions (including sourcing of raw materials and disruptions in the manufacturing line), a fragmented supply chain, and increasing competition due to the number of wholesalers in the process. Ms. Watson was notably frustrated at the increasing amount of government/agency oversight and how it affects the ability of the manufacturers to distribute product in a timely manner to those in need.
But it is not all bad news and steps are being taken to streamline processes and fill in gaps. An example of how these challenges have been met is demonstrated through Pfizer’s appointment of a single wholesaler in the UK – in this case Walgreens Boots Alliance. Because of these efforts, there was an overall improvement with 97%-98% product availability. More than 80% of pharmaceutical product in the UK is now supplied to a single wholesaler, perhaps two or three at the most. Sadly, this process has not been replicated in other countries due to ongoing regulatory issues. Mr. Kallend emphasized the importance of placing the patient at the center, and noted that the pharmaceutical industry has a public service obligation to ensure that this happens.
Mr. Hambye focused on two particularly troublesome challenges, one being the issue of end to end visibility and transparency from the downstream perspective of the supply chain. There is a continuing lack of data to keep the supply chain informed through information systems (both paper-based and electronic) including track and trace. This often is the culmination of limited incentives within individual countries to develop a thoughtful strategy to meet these challenges. There is a basic lack of understanding in countries regarding consumption and policies are not well-understood, nor are they clearly written or adopted.
Leadership in the supply chain also continues to be one of WHO’s overriding challenges. There are mixed reactions and responses, particularly when it comes to taking ownership of supply chain intervention in developing countries. Many countries are recipients of foreign aid which creates dependencies and adds fragmentation, inhibiting a clear consensus. The good news is it’s not all “gloom and doom.” There is progress in these areas and with reinforcement it will continue to evolve into positive outcomes.
One of ICRC’s challenges is the increased shortages within the industry. Shrinkage in raw materials continues to impact the global market and is a particular sensitivity in ICRC’s environment. Also, due to increased mergers and acquisitions, manufacturing in certain parts of the world has been significantly decreased and in some cases is completely absent. When you cross borders or look at in-country quality agreements, there is an overwhelming increase in paperwork and bureaucracy due to an over-abundance of precaution, especially if the destination is a fragile environment. In these situations, no one wants to take the risk and responsibility. In normal environments, needs can be more accurately forecasted but for the under-served, impoverished and less fortunate, the question of what will be needed and when/where it will be needed becomes much more difficult to determine. These fragile areas offer no incentive to the manufacturers to “set up shop” in order to increase availability. It is essential that these issues are addressed and managed throughout the entire pharmaceutical community.
Mr. Kallend pointed out that IFPW, in partnership with the GAVI Alliance, is making a concerted effort to assist in the supply chain process. The goal is to improve the downstream supply chain process through the training of in-country personnel so that this knowledge can be shared and implemented.
Ms. Watson also emphasized that manufacturers are trying to be more diverse in order to meet this challenge, including dual sourcing of things such as raw materials although this is not always possible due to regulatory issues.
Another key issue is pricing pressure, particularly in the generics arena. In some countries, wholesalers are forced to implement a surcharge just to cover the cost discrepancy. Production and distribution can oftentimes be more than the actual cost of the drug. It is imperative that fair pricing and public health requirements are met, both in the developed and undeveloped world.
Solutions…
It was agreed among the panel participants that greater collaboration and communication were vital in order to ensure the success of the entire supply chain. While there is no “one size fits all” solution, getting the relevant parties to participate in constructive conversation would be an excellent beginning. This may, however, require some commercial restrictions to be lifted.
It was also noted that better country notification systems would help to manage shortages. This will necessitate better transparency between all stakeholders. “What are the problems and what are the solutions to manage risk” takes on new importance. There are examples of systems in some countries that are working and that the WHO advocates. Much can be learned from these examples. It is also important to find “middle ground” when it comes to drugs that may not be profitable, but are urgently needed on a global basis. This is from an upstream point of view. Downstream there is convergence in trying to align investments in order to optimize supply chain performance. There is far to go regarding this point, but over the last 5-10 years there has been significant improvement.
Through increased collaboration, communication and transparency, there can be significant progress in access to medicines, alternative funding, and way to create incentive for parties such as the manufacturing industry. This will help to provide medicines to those that are less fortunate and less influential in undesirable areas.
Focus is also needed in finding better ways to manage precaution while maintaining the efficacy of certain drugs. There are times when it is nearly impossible to guarantee product quality and aspects such as cold chain supply and transportation, particularly in areas such as sub-Saharan Africa. It requires improved R&D from the manufacturers and could perhaps be helped by a working group specifically focused on ways to meet these R&D challenges. A more flexible regulatory framework so new technologies can be embraced would make a world of difference, along with faster adoptions of changes.
Industry has and continues to step up to increase the quality of the drug supply, and has made it a priority to protect the patient. It is not an issue of quality, but more a question of organization and optimization of the entire supply chain.
To view the panel discussion in its entirety, please visit https://www.youtube.com/watch?v=4_C-4-a0Vyo&feature=youtu.be. More information can also be found on IFPMA’s website at http://www.ifpma.org/events-2/shaping-a-sound-supply-chain-ecosystem/.