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THE KEYS TO ADDRESSING PHARMA SUPPLY CHAIN CHALLENGES – ESG, DIVERSIFICATION & GLOBAL HARMONIZATION
Since 2022, the global population of > 8 billion human beings have been consuming our natural renewal resources faster and faster, currently at a rate which is twice as much as our planet generates per year. Even commodities such as steel and wood are becoming scarce, as different industries and countries compete for the limited supply. We are also now experiencing the dramatic and often fatal effects of global warming on all continents.

 

Over the past 30 years, although the global economy has proven that collaboration and innovative technology can solve many problems, as was in the case of Hydrochlorofluorocarbons (HCFCs) becoming a greener alternative to the damaging effects of CFCs, the recent pandemic demonstrated how quickly those improvements can be undermined due to supply chain disruptions such as lock downs, transportation restrictions, and political conflicts. Through this process we have been forced to shine a collective light on the economic responsibilities connecting global warming, the need to consume fewer resources, and shifting supply chains.

 

Since all these events profoundly affect the pharmaceutical industry as well, we asked 23 CDMO panelists what they consider to be the greatest challenges in maintaining Pharma supply chain continuity. Among the responses, we identified common themes such as the increasing requirements for sustainability, the need for diversification of suppliers and regions, and the additional costs associated with them both as the major fields to be addressed for the Pharma supply chain of the future.

ENVIRONMENTAL, SOCIAL & CORPORATE GOVERNANCE (ESG) REQUIREMENT
The globalization of the world economy has made it very transparent that we all live on the same planet, where environmental pollution and global warming do not stop at national borders. Therefore, governments worldwide have implemented high standards for Environmental, Social, and corporate Governance (ESG) across all industries, including Pharma. Big Pharma companies expect that all companies in the supply chain adhere to the same principles, including their CDMO suppliers. As a result, Europe and the United States initiated several legislative activities from the Task Force on Climate-related Financial Disclosures (TCFD) and the Modern Slavery Act to the incoming US SEC Climate-Risk Disclosures rules.

 

Ingrid Vande Velde from PCSI points out that investors prefer companies that comply with ESG standards, since non-compliance can represent serious long-term business risks. However, all countries and companies involved in the global pharmaceutical industry should harmonize and develop these standards jointly. Otherwise, economics might drive pharmaceutical production to countries with laxer regulation and control by the authorities, as Paolo Tubertini from Olon Group comments, leading to further concentration of the production capacities in certain regions with lower standards.

Many panelists see the reduction of their carbon footprint as one of the major aspects of ESG. Most CDMOs have already joined an existing initiative such as Science-Based Targets initiative (SBTi) or EcoVadis. Some companies are developing their own programs. In general, ESG initiatives occur on different levels: 1) They start with energy efficiency projects in the existing plants to reduce energy consumption; 2) They switch to renewable energy sources by installing, for example, photovoltaic panels at the sites; 3) They explore and implement new, more energy-efficient technologies such as Flow Chemistry; and 4) They work with their suppliers to reduce the carbon footprint of the incoming goods.

 

The first two activities can be implemented quickly with limited investment and clear payback times. The latter two are more challenging, as they also affect the regulatory filing that increases cost and timelines. Many panelists mention the different requirements of the authorities for regulatory changes as a real obstacle for the fast implementation of improved processes or new starting materials. Specifically, greater regulatory scrutiny increases the hurdles for new material qualification, as Stefan Randl of Evonik points out. Herve Bedrou, from Piramal Pharma Solutions, hopes that the regulatory systems can be globally harmonized, leading to convergent international standards and mutual acceptance of data for regulatory filing.

 

To enforce the new ESG standards, the need for audits will increase. However, since some companies say they are already at the limit of hosting customer and authority audits, Jim Fries of Rx-360 proposes going for joint audits or licensing audit reports by globally accepted auditing companies.

 

DIVERSIFICATION OF SUPPLIERS & REGIONS
In the past few years, we saw different events that disrupted the pharmaceutical supply chain in unprecedented ways - shutdowns of facilities in China due to environmental problems, the blockage of the Suez channel, Covid-19, and the war in the Ukraine were completely unpredictable factors affecting the pharmaceutical industry as a whole. They not only led to problems and delays in pharmaceutical production, but also shortages of crucial, life-saving medicines, where some countries went so far as to restrict the export of medicines, which only compounded the situation. It’s safe to say we all hope governments will prepare better for such events in the future through closer collaboration and more sound science-based decision making, which takes into account that pandemics and the expected effects of global warming such as flooding, storms, and droughts will occur more often.

 

Many companies act now by applying a multitude of approaches, depending on their expertise and position in the market. This includes diversifying their supplier region, stocking of critical raw materials, and identifying alternate reagent sources, as Michael W. Pennington of AmbioPharm comments. Procos (Chiara Rigotti and Paolo Paisoni) focuses on developing close relationships with carefully chosen preferred suppliers and having several backups for key raw materials in different regions.
Ed Roullard from Actylis, points out that a proper risk mitigation and thorough analysis of the supply chain is key for success. The back-up supply chain must be truly independent, and must not go back to the same intermediate suppliers.
Some companies like Uquita India (Kishore Reddy) consider backward integration and using closer suppliers as a good strategy to make the supply chain more resilient.

 

Anming Liu, WuXi STA, explains that insourcing could be an opportunity to open new business fields, such as WuXi STA did by developing its own amidite manufacturing capability for their oligo customers, which resulted in them now offering more than 300 types of catalog amidite products to the market.

 

Europe noticed the painful dependency on India and China for certain medicines during the Covid pandemic. Several panelists mentioned the governmental tender systems in Europe and the US with the sole focus on price as one cause for the concentration of the generics in India and China.

 

Many countries announced aims to strengthen their pharmaceutical industry, and Chris Neasham, Almac science, thinks that the manufacturing is shifting back to the west. France, for instance, initiated large programs. However, Elizabeth Stampa, President of Medicines for Europe, noticed that beyond these big announcements, so far the initiatives only received minimum support in most European countries. We will see if the European governments have a sincere and sustainable intention to support more robust and diversified pharma supply chains, and to also consider other aspects such as such as sustainability and supply chain security in their public tender systems for medicinal products.

Several panelists, including Matthieu Gobillot, Seqens, expect that India’s chemical industry will benefit from the situation, as there is a clear support by the government and a large pool of exquisite talents. However, Chiara Rigotti and Paolo Paisoni, of Procos point out that China will remain more competitive for certain raw materials, due to their lower environmental standards. Both India and China remain big players in the pharmaceutical industry.

 

INCREASING COSTS & INFLATION
Due to the financial pressures during Covid, coupled with increased energy prices, we now observe a worldwide inflation, which is very pronounced in the EU. Actions to mitigate the supply chain risk and implement ESG principles also increase the production cost in the long-term. Stefan Randl, Evonik Health Care, thinks that the backward integration of regulatory starting materials helps to stay competitive, while ensuring quality and supply security. Dr. Shijie Zhang, Dr. Jack Chen, and Celine Chen say Pharmablock is focusing on upgrading their chemistry - e.g. flow chemistry, micro-packed bad hydrogenation and bio catalysis - in order to reduce carbon footprint, while keeping the cost low.

Kenneth N. Drew, Flamma, comments that for generics, it is very difficult to transfer the additional cost from supply chain disruptions to customers, as in many cases the prices were negotiated before the crisis for very long-term contracts. Andrea Sentimenti of Bormioli points out that where the margins were low before inflation, the increase of energy and raw material cost has caused a dramatic erosion of margins for the generic market. Therefore, authorities should transform the system of public tenders so that buying decisions are not only made on price, but also consider supply security, social and environmental impacts (Ana Marti, Medichem).

 

Since innovative pharmaceutical companies are more open to accepting higher prices, the chances are better that a part of the inflation and ESG costs will be jointly covered by the CDMOs and their customers. Nevertheless, CDMOs remain under strong pressure to reduce cost and optimize their supply chain.

 

CONCLUSION
The Pharma industry faces big challenges, not the least of which is that we compete with different industries for the same limited resources. We must fight global warming and deal with its effect, all this in uncertain geo-political situations. As paradigms shift, we probably all agree with Timothy Woodcock of CordenPharma that “the biggest challenge is to adapt our mindset - the way we think and what we will accept - in Supply Chains of tomorrow.”

 

Pharmaceutical companies apply different approaches to cope with the future challenges - including Artificial Intelligence and block chain technology – that can help to make the supply chain more predictable and resilient.

Changing production processes are currently a lengthy and costly endeavour due to the filing of the regulatory changes to different authorities. The health care authorities could further support the transformation of the industry by implementing globally-harmonized procedures for changes and mutually accepted data.

 

Governments play the most decisive role in the transformation of the Pharma industry, as they can set the proper incentives by implementing the appropriate legislation. These incentives should reward companies that have implemented measures for environmental protection and CO2 reduction, as well as high ethical standards. The legislation must be globally harmonized; otherwise, companies complying with the higher ethical and environmental standards will be at a continual disadvantage against those that do not have obey the same strict standards. Here, it is crucial that governments and authorities demonstrate their willingness to collaborate openly and peacefully to solve the problems which not only affect the supply of life-saving medications for patients, but also the future of our global community and planet.

 

 

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MAGGIE SAYKALI
Director, EFCG

 

The current state of affairs
For the last three decades, the European pharmaceutical supply chain has been increasingly offshoring the production of some of its most widely used medicines to Asia. Nowadays, taking into account key raw materials and intermediates, this dependency is critical as the EU relies for 74% (1) on other world regions for the manufacturing of its APIs. This worrying decline is exacerbated by the offshoring to these regions of key technologies and processes.

 

The global production share of EU-produced APIs tumbled down from 53% in 2000 to 25% in 2020, causing Europe’s dependency on other regions for its APIs, of which 56% currently originate from India and China (2). Many critical APIs are no longer produced in Europe as illustrated by the striking example of Metoprolol, used for high blood pressure. Formerly produced in the EU, it is currently produced mainly in China and India as 16 EU sites have stopped producing it. Similarly, Gabapentin, a treatment for epilepsy, now comes mainly from India after 10 EU producers stopped its production. These are just two examples of the many molecules for which Europe is dependent on other regions, putting at risk the security of supply to patients.

 

The perils of this model have been clearly demonstrated during the initial stages of the Covid-19 pandemic, when China was hit by its first wave: some of its production plants ground to a halt, restricting the quantity of medicines available for Europe. The successive crises that Europe went through since 2020 further highlighted the vulnerability of the EU pharma supply chain and the need for a clear strategy to strengthen its autonomy.

 

European API producers are currently faced with a double challenge: securing critical raw materials and producing at competitive cost. They have been hit by a doubling of their utility bills in 2022 compared to 2019 and severe price increases for their essential raw materials (3), with some of these reaching 150% up to 300%. Meanwhile, other world regions were not affected by the same increases and their API manufacturers continue to benefit from a production cost advantage linked to economies of scale, a lower cost of labour, lower regulatory and environmental standards and lighter administrative burdens.

 

Tensions in the supply chain are once again aggravated by the current wave of Covid in China that is crippling production units of precursors, intermediates and APIs. Other issues further contribute to disrupt the smooth supply of everyday essential medicines in Europe: the increase in demand from internal markets in Asia, combined with the unexpectedly high seasonal demand for some medicines such as antibiotics, and the lure of more attractively-priced markets, all negatively impact the supply chain. Several EU member states are currently dealing with drug shortages such as antibiotics, antiepileptics, pain killers and cancer drugs and as much as 500 medicines are currently reported missing from pharmacy shelves and hospitals.

 

Turning the tide
APIs are the key components of pharmaceuticals and a strong European API industrial capacity must be at the centre of the EU’s plan for the strategic autonomy of its pharmaceutical supply chain.

 

Financial, policy and administrative support mechanisms are necessary to bolster API production in Europe and to drive relocation of critical supply chains. To be successful, proposed measures must be pan-European and address vulnerabilities at every point of the supply chain.

EFCG recommends a set of essential measures to achieve a strong, innovative, globally competitive and sustainable EU-based pharmaceutical supply chain.

 

1. Investments
The EU must support investments that stimulate the construction or modernisation of production facilities and cutting-edge manufacturing technologies. API production involves bespoke technology and dedicated production lines with investments ranging from €50 to 180 million per infrastructure and a completion time frame of three to six years. A framework for API investments in Europe would accelerate the relocation of existing production and prevent the extinction of current activities.

 

2. Support for competitive pricing
EU Public funding schemes should be available to foster a competitive environment as well as the hiring and training of staff in the skills needed for high-quality API production.

3. Environmental protection
Financial incentives for expenditure on environmentally-friendly manufacturing will encourage and accelerate investments in Europe and facilitate the EU’s plan for a Green Transition. The EU should also ensure that all world regions cooperate to minimise the environmental impact of the production of pharmaceuticals.

 

4. Lighter and faster administrative procedures
Administrative procedures should include fast-tracking the approval for sustainable processing technologies such as innovative and environmentally-friendly synthesis routes and the digitalisation of regulatory processes.

 

5. Levelling the playing field
Authorities in reimbursement and procurement policy should move towards non-price related criteria, such as backward integration of raw materials and intermediates, process innovation and social and environmental factors to reward the production of APIs in Europe. They should recognise that the continuous price pressure on mature molecules have their limitations and that price erosion should not go beyond the point where production is no longer sustainable or financially viable. Pricing of mature drugs should be adapted to reflect their industrial, environmental and social benefits and their role in maintaining security of supply and improving access to medicines.

The time for action is now
In the past three years, our industry relentlessly strove to alert EU authorities and inform them of the need to address the situation head-on. We provided several sets of solid data to document the root causes of the supply tensions and shortages that are affecting Europe and put forward several practical recommendations to reverse the trend. However, time is now quickly running out and the EU authorities must urgently move forward and implement the necessary measures. Only then can we turn the tide and ensure that Europe can depend on a robust, innovative, sustainable and forward-looking API industry that will guarantee citizens a safe, reliable and available access to their needed medicines.

References and notes

1. https://bit.ly/IQVIA-EFCG-2000
2. Source: APIs facts & figures infographic : - https://efcg.cefic.org/wp-content/uploads/2022/11/EFCG-2_Aug-APIs-FactsFigures-1.pdf
3. EFCG: aggregated members responses

 

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ELIZABETH STAMPA
President of Medicines for Europe

 

Pharma supply chains face significant challenges and are looking for innovative solutions and incentives to deal with rising costs

 

What are in your view the biggest upcoming challenges in supply chain? 
The Pharma supply chain is confronted with very diverse challenges at the same time: high inflation rates which affect solvents and key starting materials for the Active Pharmaceutical Ingredients (API) manufacturers to the increased cost of these APIs for the Pharma producers, increased salaries, higher prices of services to the industry,… Besides inflation, the increase in energy prices is also adding more difficulties, as the cost has doubled in the best-case scenario, and in some countries, the risk of rationalization is high due to the dependency on certain supply countries. Transport costs and availability have now stabilized, however, there has been a significant increase in prices compared to pre-pandemic months.
 
Which strategies do you consider as suitable to mitigate the risks in supply chain management? E.g. re-shoring, back integration, diversifications of suppliers and regions? What are the benefits and risks? 
During the worst pandemic months there were many talks about increasing European autonomy and bringing back production to Europe. However, so far this initiative has had minimum support from the authorities and without incentives, it is unlikely there will be partners willing to bring back production to Europe. In certain cases, like for some specific key starting materials, the European environmental regulations do not allow these products to be produced in the European territory, or the investment to counter-balance the environmental impact is simply too high to be done at a private level. It would be not realistic to talk about re-shoring of every pharma component we bring from outside Europe, however, having some internal production of certain essential APIs or pharmaceuticals would be highly desirable: one of the biggest challenges, in this case, would be to define what is considered “essential”. There is already a high degree of diversification, as most pharma producers tend to favor having more than one supplier of API, excipient, or components, and API producers use more than one qualified source for their intermediates or key starting materials (KSM). And back integration would, as mentioned earlier, not be possible for environmental or cost reasons.
 
What initiatives or programs do you consider as appropriate to improve the robustness and resilience of your supply chains in the current environment of increasing political uncertainty and transportation problems due to lockdowns and closed borders? Do you expect to transfer some of the cost to your customers? What initiatives or programs have you initiated in the past 6 months? 
Most individual players have opted to include and validate a variety of suppliers to increase the robustness of their supply chains. In fact, in India a specific incentive line was developed to increase production of intermediates and KSM for the API industry. Seeing this, similar instruments would be also desirable for the European producers. Relating the transfer of increased costs to customers, this is extremely difficult as in most European countries prices of medicines are fixed at commercial launch and never reviewed after that. This reality affects even stronger the off-patent industry, as most of the generic and biosimilars are subject to tender procurement initiatives in different countries, and prices spiral downwards once the tender system is in place: while it is certainly an effective short-term cost containment measure, it does not cover the long-term consequences of products being discontinued due to extremely low prices (both APIs and finished dosage forms) and then sourced outside Europe, increasing again the dependency of products produced in foreign countries.
 
How could / should governments support the reorganization of the chemical and pharmaceutical industry to help improve the supply security? What technologies should they support?
Governments should support two critical aspects: the first would be adopting procurement strategies based not only on price but also on quality aspects (i.e. recall track record, official inspections quality observations,…), environmentally friendly production systems, or pricing review schemes (i.e. linkage to inflation). The second would be incentives for the local European industry, to preserve the current manufacturing capacities, the European R&D and innovation, and the employment the chemical and pharma industry provide and strengthen the adoption of greener technologies and capabilities for a positive environmental impact.
 
How would you suggest implementing the Regulatory system and making it more homogeneous?
The first and more urgent request would be to harmonize and digitalize the Regulatory system within Europe. After so many years the requests still vary among the different regulatory bodies and processes to file and obtain approval of variation are burdensome and lengthy both for the industry and the regulators.

 

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INGRID VANDE VELDE
Chair of the Pharmaceutical Supply Chain Initiative (PSCI)

 

An evolving legislative landscape moving towards responsible supply chain management
Incoming legislative and regulatory requirements and the move towards decarbonization. At the Pharmaceutical Supply Chain Initiative (PSCI), our 70+ pharma and healthcare company members came together to develop the PSCI Principles for Responsible Supply Chain Management as a voluntary framework to help set a common approach for the supply chain. Over the past few years, we’ve seen a huge surge of activity in the legislative space from the Taskforce for Climate-related Disclosure (TCFD) requirements to the Modern Slavery Act, as well as the incoming SEC Guidelines on Climate Risk Disclosures in the United States. In the supply chain space, the incoming German Supply Chain Act has significantly accelerated companies’ attention and work in this space and will have significant impacts going forward around data collection, due diligence, and risk.

 

On the environmental side, we know that the pathway to decarbonizing the supply chain is a huge undertaking, with many companies having made net zero pledges over the next 10 to 15 years. Reaching net zero across the global pharma supply chain from packaging to chemicals, distribution, and end of life usage is a hugely complex challenge and cannot be done in isolation. This will require true industry-level collaboration and we at the PSCI are pleased to be providing our members with the space to develop common approaches and share best practice.

 

That’s why we created a specialized team focused on supply chain-based (Scope 3) carbon emissions. Their focus is on establishing common approaches and guidance around data & reporting, evaluation & analysis, and partnerships. Their goal is to work towards a common industry approach to the measurement, management, and reduction of supply chain-based emissions.

 

For sustainability on the whole, we know that suppliers themselves are interested in evolving their own practices and see the value in collaborative and peer-based learning. In addition to supporting suppliers via our Maturity Model for responsible supply chain management, we are also looking at recognizing those suppliers who engage with us so both they and their current and potential customers can see they are taking active steps to manage their sites, facilities, and activities responsibly. We will also be listening to our members and those suppliers who engage with us on what specific sustainability challenges they want to work on tackling collectively, whether coming from the German Supply Chain Act, the EU Corporate Sustainability Due Diligence Directive, or the increased interest from the investor community in Environmental, Social, and Governance (ESG) issues.

 

We believe that supporting suppliers to understand and evolve their own practices is the most sustainable way to mitigate risk. The PSCI began as a way to develop a common audit framework across the pharmaceutical industry and has evolved to provide ongoing learning and development content to help suppliers improve their practices over time. Our Capability Building program provides suppliers with resources across the five PSCI Principle areas—Ethics, Human Rights & Labor, Health & Safety, Environment, and Management Systems—and our Maturity Model allows suppliers to understand the maturity level of their practices, coupled with practical examples of how they can evolve. Responsible supply chain management is a job that is shared up and down the value chain and a holistic approach will better help mitigate risk for everyone.

 

In the near future we will be offering a digital Supplier Self-Assessment Questionnaire as part of our Shared Audit Platform. This will enable suppliers who are undergoing a PSCI Audit to more easily prepare in advance of the audit and share their information digitally. Sharing audits has significant benefits for suppliers and customers in terms of time and cost, and we’re always working to improve our software tools on the platform to support our members and their suppliers in this space. We are also working digitizing our Maturity Model learning curriculum via a suite of tools designed to empower suppliers to take charge of their self-guided learning against the PSCI Principles.

 

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JIM FRIES
CEO, Rx-360

 

Pharmaceutical Supply Chain Integrity: 2023 and Beyond
As we look towards pharma supply chain integrity arena in 2023, the challenges may look the same but the heightened awareness and need for improved diligence is as high as it has ever been. Integrity of the pharmaceutical supply chain has numerous levers that add to its security. Primarily being the audit model that is chosen by regulators and pharmaceutical manufacturers worldwide.

We have entered into an environment where the high standard of quality has grown…and for good reason, we all want to keep patients safe. That standard however has left many pharmaceutical service providers with limited days to host audits at their site, as well as afford the overhead that comes with those audits. The pressures to maintain our quality goals are immense. This mindset or model doesn’t even take into account, post audit observation/CAPA’s.

Those are a whole other discussion, as to where they fit in this patient safety pathway, and the stressors associated with them.

 

Sometimes we just have to remind ourselves…”its all about keeping that patient safe”.
Pharmaceutical auditing has taken on many lives over the years. The one model that consistently helps the industry is that of the Joint Audit Program®. Industry has adopted this model as a way of combining resources and thus limiting burden when it comes to an onsite audit. Audit sponsors confidentially combining resources to complete an audit allows for manufacturers to share the costs and the service provider (auditee) to reduce overhead and bandwidth.

 

Another piece of this model involves the licensing of audit reports. Again, through this model, pharmaceutical manufacturers and their services providers can reduce costs while maintaining quality, through accessing a report that has already been completed. That information in an existing report allows for the industry to maintain the supply chain integrity they seek.

 

Why then is there a heighted awareness around quality and supply chain integrity? As we transition away from the pandemic that enveloped us for 3 years everyone is taking those extra steps to make sure that measures taken during the pandemic to maintain security, are re-validated and conformed. Where maybe an audit was traditionally done every 2-3 years, we are now seeing instances where some service providers are being placed on a short term one-year cycle, simply to start a new quality baseline. Short term challenges will lead to a long-term upside for patient safety and supply chain integrity.

 

The audit models will continue to evolve over the next few years. Remote models will become more efficient, onsite audits will become less burdensome through joint programs, and patients will be protected for the foreseeable future. We are all in this together, patient safety is the end game and that should be our never-ending motto.

 

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ED ROULLARD
Senior Vice President of Marketing & Operations, Actylis

 

Resetting the Supply Chain: Stabilizing Demand, Inventory, and Lead Times
We, as an industry/economy, currently have a number of concerns and challenges related to the supply chain including a potential recession, inflation and the rising cost of capital – with potential impacts on top line revenues, future margins and additional inventory risk. In this environment, it is reasonable to ask if manufacturers would be willing to secure supply by holding inventory or will they choose to manage working capital to the point of stockout? And what happens if inflation is followed by deflation – will we be caught out with high priced inventory?

 

As we look towards the future of the supply chain, we should be prepared for a reset that stabilizes demand, inventory and lead times. We expect considerable efforts on risk assessment over the next 2-3 years to mitigate the risks in supply chain management. Once completed, supplier diversity will be at/near the top of most risk mitigation approaches. In the short term, organizations may carry more inventory. Geographical diversity is the likely second step – and we suspect this will take the form of near and “ally” shoring. Onshoring will be the slowest to implement as costs, regulations, available resources etc. will take time to work through. Resourcing away from cost centric suppliers will add to product costs, but will be offset with improved lead times, less in-transit inventory and reduced obsolescence.

 

Improving the resilience of supply chains in the midst of increasing political uncertainty and transportation issues
When Thomas Freidman wrote ‘The World is Flat’, he spoke of level playing fields, and economic interdependence. To some extent this interdependence has been weaponized as geopolitical struggles continue. The Ukraine/Russian war has shut down pipelines, rail lines, nearly stopped wheat shipments to Africa, and removed Russia from the Swift payment system. We are concerned that geo-political risk is not waning, but instead is increasing. Supply chain risk assessments will need to take into account these geopolitical risks, and sourcing models will need to change to consider the degree of friendliness and political risk between trading partners.

 

Following the path of production over decades, there is always a migratory shift towards cheaper labor, land and available natural resources. China, for example, is placing large bets in Africa. Others see Southeast Asia as an opportunity. Others see movement closer to North America (eg. Mexico). In the short term, we expect India to rise as they are less impacted by onerous tariffs (like China), and are on the receiving end of cheap Russian oil. As such, India may be the most likely to benefit in the short term. India has a considerable talent and labor pool and less of a language barrier, making it ripe for short-term acceleration. However, sustainable growth in India will require infrastructure investment and development. It is hard not to see China as the net loser as organizations seek to diversify their supply lines away from sole and geopolitically suspect sources. In the medium term (5-10 years), supply chains will move from the global scale model employed in the past to sourcing spread across multiple suppliers, countries, and geographies.

 

How Governments Can Support Supply Security
It may sound overly simplistic, but the identification of high-risk feedstock and starter materials is a first step for government and organizations to help secure future supply. One could argue that the pharma industry would benefit from an expansion of strategic reserves of critical starter materials and pharmaceutical end products – beyond the current anti-virals and antibiotics – but this might be over thinking on our part. Seemingly, not a month goes by without some geopolitical morass or global warming impact being realized. In this climate, it is prudent to stop referring to these events as “Black Swans” and instead see the persistence and pervasiveness of risk.
 
Although day-to-day operations with administrators at the various regulatory agencies tend to be very structured, with little room for flexibility or creativity, we have come to recognize certain shortcomings of federal agencies. If we look at the manner in which the pandemic was managed and reported to the public by both the CDC and FDA, we have to conclude that politics plays a huge role in decisions that are made at the top. These regulatory bodies should to have a real level of insulation against the politics and agendas of the party that is in power. Additionally, global consistency of regulations would be a game changer. Not only will this make universal formulations easier to implement, and simplify the supply chain, but it will also provide safer and more sustainable products to the end consumer.

 

Managing Requirements for Sustainability, Security, and Quality
We, at Actylis, have taken several concrete steps towards introducing and maintaining sustainability. We have recently appointed Varun Rao as head of sustainability to help us provide the greenest solutions to our customer base. By producing locally, we provide our customers with a shorter carbon trail for our products. More importantly, we have taken on meaningful internal projects that reduce our carbon footprint – a recent network optimization project in North America saved over two million transit miles – a one third reduction in our freight movements with huge impacts on carbon emissions. We will continue to seek out ways to push the needle greener.

 

Actylis’ aggressive acquisition program means that there is a great deal of harmonization in process, particularly with our Enterprise Resource Planning (ERP) to produce one experience for customers. We have implemented several best practice solutions to both prevent a cyber-security incident and ensure minimal disruption if an incident were to occur. Beyond that, there are many solutions implemented or in process to ensure optimum flexibility and agility for our customers. These include MasterControl to enhance quality assurance support and alignment, the implementation of several website features to aid customers improvements, and enhancements to other platforms such as HRIS, DRP, demand planning, ELN, CRM, and supplier management.

 

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CHRIS NEASHAM1, THOMAS S. MOODY2
1. Global Procurement Manager, Almac Sciences
2. VP Technology Development and Commercialisation, Arran Chemical Company, Almac Sciences

 

Supply chain management – What is the new norm?
When addressing supply chain management (SCM) challenges, diversification and dual sourcing of key raw materials are prevalent and essential to supporting and de-risking ongoing commercial manufactures and new product development.

 

Increases in energy, transport and labour costs, less reliance on Asia, and an increased and acute awareness of our environmental impact and CSR means our supply chains need to ensure that materials are made using the best available technology. The use of technology is essential to streamlining processes, increasing yields, lowering environmental impacts and making the manufacture in the West more cost-competitive.

 

Another challenge lies within an organisation’s structure. A disorganised internal approach to SCM will undoubtedly cause serious problems. For the last three years, supply chains have been broken or constrained by substantial geopolitical or macroeconomic pressures borne directly from events such as, Brexit, COVID-19, the war in Ukraine and the subsequent energy crisis and logistics issues that these events have caused. These challenges have helped Almac hone our skills and decision-making processes within the supply chain functions. Organisations can deal with volatile supply chains and potential future events with a combined armoury of meticulous and improved planning, stringent forecasting and enhanced scheduling techniques. This is our new norm at Almac. The biggest challenge for all of us is ensuring that we continue to develop our internal structures and processes, use best available technology and be malleable and creative in thought.

 

Mitigating challenges
To mitigate these challenges, organisations can gain control of earlier steps of their advanced chemical intermediates. This allows better control of product quality and de-risks supply chain from single-sourced material manufacture. Having developed the technology to make the materials from simpler building blocks, companies can then widen the supply chain to many vendors. What this typically means is the deployment of technology (flow chemistry, biocatalysis, crystallisation, etc.) to allow processes to be sited in western assets with raw materials being available from many more companies thereby lowering the risk of supply.
Demand planning is important to meet the business need. Reshoring, nearshoring, JIT and many other popular risk mitigation mechanisms will usually still fail unless organisations have planned their purchasing needs well in advance. Time management is critical.
It is also important to build relationships with trusted manufactures where they can deploy capacity for manufacture freeing up internal assets or allowing organisations to back integrate early steps into chemical manufacture to simpler building blocks.

 

Supply chain robustness and resilience
Organisations need to control costs of materials; however, this has been extremely difficult in the last year. Organisations must complete product maintenance on existing processes, including process intensification, to minimise increased pass-through costs onto their customers.
Prof Tom Moody VP Technology Development and Commercialisation noted that “Product maintenance is very important to maximise yields, minimise impurity build and maximise process intensity resulting in lower manufacturing costs. At Almac, technology such as biocatalysis, flow chemistry and reactive crystallisation is deployed to ensure processes are the best they can be and the most economic.”
Organisations should also focus on developing data and forecasting accuracy around scheduling, material requirements and demand planning. It may not always be possible to deliver every material for the exact time it is required, but if planned adequately the risk of delays can be mitigated.
It is also important to foster strong relationships with clients so that when pricing a sizeable proportion of work, the materials for each project can be costed at the current market rate, this minimises surprises to the client in relation to changing prices.

 

External influences
Manufacturing is shifting back to the West to reduce dependency on Asia. However, there will always be a reliance on Asian supply for simple building blocks and reagents. Re-shoring can de-risk supply chain by developing technology to convert simple materials into advanced products. China can then be used for the supply of base raw materials from multiple vendors.
Radioactive Carbon-14 which is used in every new API entering Phase III trials for ADME studies, has endured significant supply challenges due the geopolitical issues in Russia/Ukraine. The single-sourced nature of this raw material has added additional strains on supply chains. In this instance, organisations are following developments from emerging sources in Canada however timelines are more than 3 years away. Moody added “This material is currently in supply crisis, with all stocks being managed very carefully.”

 

The benefit of Indian manufacturing is well-documented; however, legislation is tightening on safety, waste management and environmental controls, resulting in increased costs. One constant challenge is shipment and transit times which creates issues that need to be managed, but India has many excellent companies which are used for primary or dual sourcing for the West.

 

How could Government intervention help?
A good starting point for government influence would be a consistent approach to live import and export data to provide visibility on manufactured items and commercial information. High quality data is required so companies can get closer to the base manufacturers (not just suppliers or traders). A global trade platform of material movements which is regulated centrally by a nominated impartial body could also generate countless benefits. Many European manufacturers would insist on a stronger focus on the legislation supporting REACH to other jurisdictions and more effective environmental controls enforced. Currently the EU is not operating on a level playing field, and our competitors will often have much less stringent labour policies, emissions, waste and environmental targets which greatly reduces the compliance aspect of their total cost of goods contribution and allows them to be much more price competitive.

 

Innovation advancements
The introduction of blockchain processes to improve supply chain transparency, security and traceability when dealing in global payments and markets will be prevalent in the next decade. As well as helping to improve the transparency in supply chains, blockchain has the potential to increase a business’ profitability by reducing current administrational costs. This technology is evolving rapidly in the background within many organisations.
The industry needs to tighten-up on the volumes of waste produced; we need to valorise our waste into new products where appropriate. The current pharma approach to materials which are “out-of-date” or left over as excess during a one-time manufacturing campaign needs reviewed. Currently there is no effective trading option or marketplace to reuse or repurpose surplus or expired materials, the volume of waste which could have a “second” life in another industry or at another manufacturer is huge and a mechanism to reuse this material would generate huge cost and environmental dividends.

 

Looking forward – Almac’s approach to sustainability
The Almac Group has pledged to become net zero by 2045 and has also committed to reduce its Scope One and Scope Two emissions by 50% by 2030. Almac recently announced this in their 2022 Corporate Social Responsibility report, which highlights our ongoing commitment to our people, the planet, and the communities in which we operate.

 

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Michael W. Pennington1, Denise Karounos2
1.Chief Scientific Officer, AmbioPharm
2. Sr. Marketing Manager, AmbioPharm

 

Overcoming Supply Chain Challenges in Peptide Manufacturing

 

What are in your view the biggest upcoming challenges in supply chain?
The ongoing and prolonged COVID-19 pandemic has exposed numerous challenges in the supply chain. Uncertainty in timing, frequency, and length of partial or full shutdowns has increased timelines for supply procurement. In addition, concentration of key raw materials in single regions has the potential to be problematic and requires careful planning of procurement. Accurate analysis of future needs is critical in determining future raw materials requirements for planning and ability to procure in advance and cost average.

 

Possible risk mitigation efforts include diversifying supplier regions, planning for and stocking critical raw materials, and identifying alternate reagent sources. Stocking raw materials requires careful planning and financial commitment, which carries risk in the event that planning is inaccurate or inadequate. At the current time, many alternate sources are cost-prohibitive or lack supply or quality. Having a good ERP with real-time data is important in tracking inventories with ability to have traceability, quality, and sustainability details readily available for decision-making.

 

How could / should governments support the reorganization of the chemical and pharmaceutical industry to help improve the supply security? What technologies should they support?
Unfortunately for some raw materials, such as amino acids for peptide synthesis, supply has been narrowed down to one or two geographic regions. Until alternate sources become available, at reasonably competitive pricing, the aforementioned obstacles can slow down the supply of end product for all peptide manufacturers.

 

An analysis of key raw materials and supply regions should be done to determine whether stockpiling or reshoring should be considered.  Governments could be supportive of building cost-efficient raw material supply in different regions, to avoid supply disruptions.  Favorable status (ex: tax breaks or subsidies) could help bring amino acid production back into US or EU production, which may alleviate supply strains.

What innovation outside of chemical and pharmaceutical manufacturing could become a game changer for pharma supply chain management?
Transportation is a key component of the supply chain. More sustainable transport would be a game changer as well as improvements in process in key ports of entry is needed, as backlogs were problematic for many industries across the world.

 

Another useful area of innovation of the supply chain would be in having improved real-time data across the global supply chain as well as using AI for predictive modeling.

 

What action do you have planned to manage the increasing requirements for sustainability and reduction of carbon footprint in your supply chain?
In terms of improving our sustainability, we have been taking a look at our processes to find areas where we can improve. Our model of sourcing and using raw materials close to the origin reduces our carbon footprint greatly. Since great reagent excesses are typically needed in peptide synthesis, we transport only lower quantity crude and final product over larger distances, reducing the CO2 generated from transport.

 

Additional considerations include implementing solvent recycling, considering atom economy in process development, and using reduced and “greener” solvents. The adoption of more efficient isolation strategies, such as precipitation and spray-drying, offers another sustainability improvement. In addition, newer technologies, such as microwave synthesis, offer equipment with reduced energy and solvent usage.

 

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FRANÇOISE DURAND-RIVOIRE1, NATHALIE FOLTRAN2
1. Global Head of ESG, Axplora
2. Purchasing Director, CDMO BU, Axplora

 

Agility to meet supply chain challenges in pharma

 

Capacity and agility to provide business continuity and supply chain security
Recent events have highlighted the vulnerability of pharmaceutical supply chains to the evolving needs of healthcare systems. In the ‘new normal’, the fast-changing environment in which we operate, demand can change suddenly, due to geopolitical uncertainties, market shortages and price increases of both energy & raw materials.

 

As a result, one of the biggest challenges in the pharma industry is to anticipate and mitigate supply risks to ensure the continuity of services to our pharmaceutical customers, to support them as they endeavour to secure their drug supply chains for patients, all over the world.
As a leading manufacturing player in the field of APIs, Axplora offers its customers, whether through CDMO services or generic products, the capacity and agility to provide business continuity and supply chain security.

 

Diversification of supplier portfolios
CDMOs need to be structurally agile to overcome the risks associated with the global situation. The re-shoring of some activities, coupled with double-sourcing, are responses to mitigate risks and react to changes.

 

The diversification of supplier portfolios, through a dual sourcing strategy, both in Asia and locally (either in Europe or in the US), may help avoid over-dependence and reduce risk. Nonetheless, our ability to reinforce sustainable partnerships with a focused pool of reliable and agile suppliers capable of serving needs and of meeting OTIF performance, is critical to our business. These existing strong partnerships must be maintained and consolidated for the benefit of the pharmaceutical business.

 

Risks may also be mitigated through back integration and synergies found in companies having a geographically diverse manufacturing footprint, which may be the result of a merger & acquisition. This reinforces the capacities and technologies offered, and as result may offer the possibility to internalize the manufacture of intermediates, thereby reducing the number of players involved and reinforcing business continuity.

 

In essence, this is Axplora’s strategy, created from the merger of Novasep, Farmabios and PharmaZell. Our group now offers a wider range of CDMO services and API products and is developing and expanding its in-house expertise across all of its sites in Europe and India for the benefit of customers.

 

Importance of improving the robustness and resilience of our supply chain
To facilitate the improvement of supply chain robustness, the anticipation of customer needs, an accurate planning, the identification and mapping of potential risks & the implementation of back-up strategies are all key.

 

Established sourcing partners should be regularly assessed, based on two essential criteria: their capacity to supply and deliver current and future needs in a timely manner - which means addressing the variability of the demand - and, at the same time, their commitment to SHE and to social & compliance practices.

 

Given the increase in risk and complexity of pharmaceutical supply chain networks in recent years, it was important for us to improve the robustness and resilience of our supply chain. One key initiative launched was to conduct a supply chain risk management exercise, particularly from our Asian sources, focusing on risk identification, assessment, mitigation and monitoring.

 

In parallel, strong and continuous communication with our partners provided us with the necessary data to anticipate needs and orders, and to look for alternatives or back-up solutions. We worked to strengthen our internal organisation to be able to review our processes and systems and, last year, we upgraded our forecasting tools.

 

By leveraging our worldwide footprint, with 2 manufacturing sites in India, operating at Western standards, Axplora is close to the Asian market and can gather information directly, and react with more responsiveness.

 

Robustness is about understanding the risks of our business, then minimizing them, while taking care of our planet.

 

Energy saving initiatives and renewable energy plans
Sustainability and the reduction of carbon footprint are at the heart of Axplora’s ESG approach. We are driven by the ambition to be a responsible company.

 

At our sites, energy saving initiatives and renewable energy plans are underway. These actions are in favour of the climate and form part of our ‘Carbon Net Zero path’ program, which will guide all our actions to achieve carbon neutrality. Most of our sites are already Ecovadis certified, demonstrating our willingness to be an active and transparent player in change.

 

We are also tackling waste and water reduction through a specific improvement plan, implementing PMI (Process Mass Intensity) reduction objectives for our process development groups. This involves adding a specific assessment when it comes to developing new processes in our laboratories, and deploying our sustainable supplier management system to ensure that our partners meet our commitments to sustainable and responsible manufacturing.

Finally, Axplora is also working on diversity and inclusion: we ensure that women are represented in the company at all levels. We also invest in promoting healthcare programs and creating infrastructure to the local community schools under Promoting Education Scheme.

 

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LUIS SOLERA
CEO, Bioiberica

 

How is the pharmaceutical supply chain evolving?
Supply chains are fundamental for the efficient delivery of important healthcare solutions and lifesaving pharmaceuticals to people globally. So what do you do when your supply chain is disrupted? This was the reality for many pharmaceutical companies during the COVID-19 pandemic – the impact of which continues to ripple through the industry today as businesses seek to repair and strengthen the vulnerabilities that were exposed at the time.

 

Following the initial shock, manufacturers continue to face a fresh wave of challenges and pressures, from persistent uncertainty to skyrocketing demand for products. There is little room for error and failure to adapt moving forward could result in loss of revenue, reputation and most alarmingly, patient lives.

 

With this in mind, what steps can businesses across the supply chain take to handle unavoidable disruptions?

 

The pillars of supply chain success
Transparency, collaboration, openness and integrity are at the core of mitigating any potential risks in supply chain management. But having the right structure in place to begin with is critical. An integrated supply chain model enables comprehensive control across operations – from the sourcing of raw materials to the final API development. Incorporating a robust setup with special processes and protocols in place like this, plus a dedicated team of specialists, ensures maximum traceability, quality and safety of pharmaceutical ingredients from start to finish.

 

This is especially important when working with biologically-derived ingredients, as we do at Bioiberica. Thanks to our global vertically-integrated supply chain model, we were in a much stronger position than most during the COVID-19 pandemic.
 
Key initiatives to build resilience
The pharma industry has learnt a lot from COVID-19 and how to mitigate any future risks to supply – a significant learning was not to rely on one single supplier. Two key strategies that companies will likely implement going forward to support better resilience are building a robust network of trusted suppliers and introducing geographical diversification into their business operations. Harnessing the combined power of multiple partners and utilising production plants strategically located in countries around the world are some of the most effective ways to ensure supply security – especially when local disruptions arise, and risk occurs.

 

Flexibility is key here. Take biologically-derived APIs as an example – to develop such ingredients, large volumes of starting material are required to obtain the target molecule. The solution? Bioiberica sources from countries worldwide, while also maintaining strict, traceable and quality-based supply chain models.

 

Collaboration powers agility
Supply chains can be extremely dynamic with multiple stakeholders joining or exiting the process at different points. That’s why teamwork is key. Communication facilitates better business and more agile supply chain processes by providing visibility of events up – and/or downstream – ultimately streamlining overall operations and ensuring on-time delivery. Strong alliances equally inspire knowledge sharing and offer a support network if challenges or disruptions occur.

 

Bioiberica regularly partners with research centres, businesses in the industry and global regulatory agencies to develop analysis techniques that support the characterisation of its active ingredients and ensure they’re compliant with the latest regulations. Unlike chemical substances, which have a consistent and characterisable chemical structure regardless of how they are manufactured, biological-derived actives are more susceptible to variability due to their natural origin – thus need to be assessed closely.

Game-changing technologies
Technology is constantly evolving – especially in the pharma world. Initiatives that could revolutionise the pharma supply chain include artificial intelligence for control towers and inventory monitoring. A smarter control tower, for example, could provide end-to-end visibility across the entire supply chain; enabling organisations to better understand, prioritise and resolve critical issues in real time, predict disruptions, reduce or eliminate manual processes and limit material waste. Ultimately, this will lead to improved resilience, should unplanned supply chain disruptions occur.

 

The Internet of Things (IoT) supports logistics management too. From material tracking to providing data on inventory location and status, it helps reduce errors in the supply chain and increases the productivity of pharmaceuticals.

 

Finally, many researchers are turning to blockchain technology to strengthen pharmaceutical operations. Blockchain solutions are a way to transmit data through drug supply networks, enable authenticity verification and guarantee secure transactions. Making data sharing and visibility of a product’s journey possible – from production line to patient – without a third party, blockchain makes global supply chains more traceable and efficient.

 

Empowering sustainable operations
Looking beyond the more imminent challenges, climate change is one of the greatest threats to the security of the global pharmaceutical supply chain – especially the production and shipping of life-changing pharmaceutical products. The industry’s heavy reliance on natural resources for product development and production, combined with complex supply chains with large carbon footprints, makes it one of the biggest contributors to global emissions. The global pharma industry accounts for almost one quarter (23%) of global water usage (1). With this in mind, the market is morally obligated to adapt its processes and operations; to power a greener future via waste reduction and safeguard the raw materials it needs to protect patient health.
However, as the industry explores new, more sustainable ways to manufacture pharmaceutical ingredients – using less water and energy or improving efficiencies – there exists the potential of changing the quality of the final product. It therefore takes time and a great deal of confidence to make the switch from one process to another – especially for an already-established drug product.

 

Bioiberica’s operations follow a circular economy approach – a concept based on principles from natural ecosystems, where nothing is wasted. For example, Bioiberica currently powers 100% of its activity using electricity from renewable resources. By taking by-products from the food industry and turning them into valuable ingredients for use in pharmaceuticals, the company is working towards creating a sustainable future not just for its own business, but for its customers too and – most importantly – people and the planet.

 

REFERENCES AND NOTES

1. Pharmaphorum: https://pharmaphorum.com/views-and-analysis/pharmas-climate-change-vulnerability-and-opportunity/

 

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ANDREA SENTIMENTI
Marketing & Innovation Director, Bormioli Pharma

 

Our keywords for the pharma packaging future: flexibility, innovation and sustainability
Our supply chain has been facing several challenges: in the last few years, we had to deal with unpredictable events such as the pandemic and raw material shortages. Now, and for the coming future, we have to manage serious issues due to high volatility of prices of commodities, such as energy and raw materials. This is a challenge that we are well aware of and that we are addressing by seeking the best solution with suppliers. Needless to say, energy supply and cost is another major question that we are facing.

 

In such an uncertain context, we have always kept in mind the responsibility we have as part of the drug supply chain, an extremely important sector having an impact on the health of billions of people worldwide.

 

Improving our capability to cope with unexpected and complicated situations means contributing to ensure the resilience of the whole supply chain and also in the most difficult times we proved to be able to do this. The credit goes to the capability to be flexible and reactive, making existing processes evolve, reinforcing co-partnerships with key customers and suppliers and promoting effective innovation.

In particular, packaging can be a game changer, in two different ways: using existing packaging solutions to re-imagine the way existing drug formulations are delivered, promoting patient centricity; and turning packaging into an information hub in order to fight counterfeiting and supporting digital healthcare transformation.

 

As for the first case, we provide, for example, dual-chamber solutions that can be applied to parenteral drugs. In particular, dual-chamber solutions allow the active excipient to be lyophilised in one chamber and the solvent in the other one. This ensures better preservation of the excipient, which, as it is not immediately dissolved in the solvent, does not need to be transported at low temperatures, consequently avoiding cold chain constraints and enabling a simpler logistics to handle and transport the drug.

 

A first example of this application is Plug, an integrated system to reconstitute parenteral drugs in one single packaging.
As for the second case, we created some solutions in order to transform the functionality of packaging from a simple container into a storage that allows information to be tracked, collected and made available. We are doing this, for example, with a connected Smart Cap, which is connected with an app and working as information hub, and our track&trace solutions, such as Trax, a laser marking technology to fully trace the pack along the whole supply chain, and anti-counterfeiting measures such as an holographic sign that can be read at different levels.

 

At CPHI fair, on November, we showcased our prototypes for traceability, including a new system consisting of a bottle and capsule, which involves the insertion of an NFC electronic card inside the capsule, this way allowing it to be fully traced along the whole supply chain. 
Another essential pillar which inspires and leads our supply chain evolution is sustainability.

 

Overall, we are conscious of the impact of our activities, and that is why we have defined an organisation-wide ESG approach, which has manifested itself in the publication of our first Sustainability Report according to ESG criteria, a document that sets medium and long-term improvement objectives in line with our mission: “Making health a positive practice, accessible to everyone, kind to the planet”.

Our commitment to sustainability is concrete and our strategy is based on 4 areas of action:

 

1. the product offer;
2. a solid and transparent governance model;
3. the optimization of industrial processes for a more targeted resource saving and a lower impact on ecosystems;
4. the protection of the health and safety of Group people and the enhancement of diversity and talent.

 

Within this framework, we have set important goals for the future, such as using sustainable raw materials for 50% of our production by 2025, an objective we are getting closer to year after year. As of today, our product offer already includes a dedicated range of low environmental impact solutions (1) already available on industrial scale and which have been split with 3 different sustainability strategies. The first one is looking towards regeneration of raw materials, with glass and plastic packaging recycled from certified external waste collection. The second one gathers all the plastic solutions generated from renewable sources, such as bioplastics, biodegradable and compostable plastics. The third one is composed by solutions manufactured with infinitely reusable materials, such as glass and advanced polymer products, able to capture part of carbon emissions generated in the manufacturing phase. 

 

In this framework, we also support the importance of carrying out LCA studies, especially at the whole supply chain level. We are aware of our impact and that we are only one part of the supply chain. I hope that the whole supply chain can take more account of LCA studies so that we can achieve results whose impacts we can evaluate.

 

Other important goals are the reduction of water and CO2 consumption by 30% by 2030 compared to the 2021 baseline and the closure the gender pay gap by 2028.

 

In addition, we have set by 2026 the assessment of 90% of our suppliers on the international rating platform EcoVadis, which measures the performance of the sustainability management system of suppliers, necessary to ensure a full alignment with the Group’s high standards of responsibility.

This is a crucial point for us and for our strategy: we are committed to stimulate the entire supply chain towards a common transition and progress, so that it could be able to face the actual challenges and the upcoming ones.

 

References and notes

1. EcoPositive - a brand new label gathering all the sustainable packaging solutions manufactured by the company

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TIMOTHY WOODCOCK
Global Procurement Director, CordenPharma International

 

Paradigm shift in supply chain necessitates a new way of operational thinking

 

Upcoming challenges in supply chain
Clearly one of the biggest challenges is to adapt our mindset, the way we think, and what we can accept in Supply Chains of tomorrow. For example, we manage the availability & extended lead times for many products, and still have no guarantees that delivery will be made on time. We have come from the pre-Covid era where money could buy everything, and on-time delivery for a price was guaranteed as per the contract, to now, where raw materials and staff availability is limited and unpredictable. These critical factors are often completely out of our control, regardless of contracts in place. So there has been paradigm shift in supply chain which necessitates a new way of operational thinking.

 

In addition, decisions and commitments now need to be made at even earlier time points to simply ensure that there is no pause or delay in production schedules. So in turn, the customers also need to change their mindset with regards to budgeting and reservations.

 

Strategies to mitigate risks in supply chain management
Diversification of suppliers and regions is a reasonable strategy. Specifically, dual sourcing is a must today, but it is vital to dig even further into the supply chain to ensure that the origins from the two sources are not the same. Leading CDMOs like CordenPharma build a “switching opportunity” into their operational execution plan that can provide security within a technology platform - this gives customers peace of mind. But this comes with a price tag, and of course, customers in the Clinical Development space still have very tight purse strings.

 

Another option, back to the mindset shift, is starting to accept the risk. In the current climate, with so many unknowns, lockdowns from one day to the next, we simply need to start getting comfortable with this risk.

 

Improving the robustness and resilience of CDMO supply chains
At CordenPharma we follow an ongoing evaluation of key programs to ensure that we have reliable sources across different geographies. Of course, this needs alignment and buy-in from the customer, given the potential updates to regulatory filings and other costs. The shift over the past years has taught us that it does not matter if it is a Regulatory Starting Material, or a basic packaging material - we need to ensure that we have an alternative that can be immediately implemented to improve the resilience in our supply chains.

 

How CDMOs rise above shifting geo footprints within the industry
The footprint of Asian chemical and pharmaceutical manufacturers has been changing over the last years regardless, but the rate of change has certainly been accelerated by the latest World events. Locations in the EU and US have been rapidly acquired by Asian companies looking to establish themselves with a viable location in the West that displays a sense of security and reliability to their partners. Nevertheless, new facilities and expansions are still ongoing in Asia and Europe respectively, showing that there is still opportunity for CDMOs to grow. But it’s not just the amount of manufacturing – it’s also the type of manufacturing required that is changing and becoming more complex. At CordenPharma, capacity expansion and technology implementation are both key to maintaining a dominance in niche technologies with end-to-end services, such as we see with Lipids Excipients, LNP Formulation and Sterile Injectables in xRNA drug development. There’s no great benefit in being part of a tactical shift, focused on capacity alone. A CDMO needs to have a technology advantage, with complex modalities on offer.

 

The role of governments in improving supply chain security
Governments need to play a role in helping to isolate parts of the market from price surges driven by different industries. Take for example the lithium market – there are some drugs that use lithium as part of the formulation – the price has exploded recently, driven by the popularity and greenness of the Electric Vehicle market, which is supported by Governments with subsidies and rebates for EV use and production. But, before the Governments complain to the Pharma industry about high prices of lithium-based drugs, they need to address the cause and effect of their actions in the EV market.

 

The need for immediate action towards sustainability and reduction of carbon footprint
CordenPharma has joined the Science Based Targets initiative (SBTi) (1), which clearly demonstrates our commitment to setting visible targets for Carbon footprint reduction. Across the globe, there has been a lot of activity since the US kicked off a “Net Zero Government Initiative,” and many countries have already joined it. Switzerland also announced that certain companies will be obliged to report publicly on climate issues in 2024 (based on 2023 financial year events), so it is imperative that CordenPharma and other companies in the Pharma industry take action to set commitments towards a low-carbon global economy.

 

References and notes

1. https://www.cordenpharma.com/cordenpharma-joins-science-based-targets-initiative-to-set-greenhouse-gas-emission-reduction-targets

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B VIVEK
Executive Vice President – Global Head of Supply /Planning /
Demand and Delivery -PSAI, Dr. Reddy’s Laboratories

 

Being prepared for what’s next and a shared purpose of serving patients whatever it takes
The global events in the last two years have challenged the supply chains and offered the opportunity to think differently. We must be proactive to expect the unexpected to ensure that external events don’t impact our manufacturing and supply plans. From a company perspective, we started to de-risk our supply chain some years ago by backward integrating key starting materials and establishing a strategic sourcing network with alternate vendors (e.g. to China) and local raw material suppliers in India. The pandemic and uncertain times also brought us closer to our customers. De-risking supply chain disruptions start with long-term planning and making evidence-based estimations of demands. To improve the service level during the challenging times of potential disruption, we are proactively engaging with our customers on the forecast to align our manufacturing plans and work on scientifically managed target stock levels to ensure shipments are on time and in full (OTIF). A forecast over the next 6-8 months allows us not only to hold the necessary manufacturing slot and raw material stocks, but also to better club together different shipments and select the most cost-effective logistic route – an aspect that helps absorb the rise in logistic costs. In addition, we also identified the most critical products, where we keep a safety stock of raw materials and use statistical tools to estimate the demand and be able to plan ahead. We started on our digital journey around five years ago when we implemented our customer service platform, which provides customers with real-time updates on their orders. Digital tools also help us to be closer to our customers and to understand customers’ needs better, regardless of their location. Thanks to our manufacturing assets throughout India, Mexico and the UK for our APIs and in India and the US for our formulations, we continue to mitigate geographical risks.

 

Speaking about de-risking supply chains, sustainability becomes increasingly important. It’s reflected in an increased focus on ESG as companies realize that factors such as the environment, social and governance are important risk factors for their business and, ultimately a reliable supply to patients. At Dr. Reddy’s we started our sustainability journey almost two decades ago and today have a focus on all aspects of ESG. Other strong and important drivers are the industry associations such as the PSCI (Pharmaceutical Supply Chain Initiative) or the AMR (antimicrobial resistance) Industry Alliance, where the industry is coming together to set self-regulating standards. Initiatives that we will see more and more reflected in legislation.

As an industry, we have a moral and ethical responsibility to serve patients, which we should put above and beyond. Bringing good health to patients also means that we need to keep the environment healthy which they live in. This brings in the environmental aspects. Human rights, good governance, and ethical aspects are important aspects to de-risk the supply chains. We need to address it along the whole value chain. I also believe that companies need to transform to minimize their environmental footprint and benefit society. Industry 4.0 technologies offer great potential to increase productivity and shorten lead times while saving energy and resources. As an example, our largest manufacturing facility in Bachupally, Hyderabad, was able to apply Industry 4.0 technologies to impact productivity (30 % reduction in production lead time), sustainability (41 % reduction in energy consumption), and supply chain resilience through digitalization and automation. Its operational efficiency has also been recognized by the WEF (Word Economic Forum) which included the site to the global lighthouse factory network.

 

We learned from the past, that we need to continue to anticipate the unexpected to be prepared for what’s next, but besides all the challenges, we also have reasons to be very optimistic. The pandemic and the global challenges have showed us that patient focus and a commitment to bringing good health to patients are strong drivers for innovative approaches to ensure a reliable supply. When we look at our portfolio selection, de-risking the supply chain through backward integration or strategic sourcing partnerships are now an integral part of the decision-making process, which will greatly help to ensure we deliver on our promise to bring good health.

 

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STEFAN RANDL
Head of Drug Substance, Evonik Health Care

 

Ensuring robust and resilient supply chains in the face of uncertainty
In the past three decades, pharmaceutical companies have embraced outsourcing in all parts of the world. As a result, the global pharma supply chain has become highly interconnected with significant dependencies on certain countries with a focus on driving down costs. The arrival of the COVID-19 pandemic put stress on supply chains and highlighted disadvantages to the global setup of the current system. These disadvantages will form the foundation of upcoming supply challenges for companies in the years and decades to come. More positively, the pressing need for sustainable supply chains in the pharma industry will provide a breadth of opportunities for those companies that are highly differentiated and innovative.

 

Current and future supply chain challenges
Reducing dependency on single sources is a major challenge that many pharmaceutical companies have and will continue to work on. By de-risking or minimizing regional concerns paired with near-shoring parts of the supply chain to the Western world, companies aim to create a more consistent and reliable supply chain. This approach inevitably leads to a redistribution of assets, while managing regulatory requirements, taking significant effort and time.

Another factor that is driving the trend for near-shoring supply is incentives and tariffs implemented by Western governments. The U.S. government participates in both, and is particularly active in supporting domestic manufacturing. The Biden Administration, for example, announced the investment of US$40 million to expand the role of biomanufacturing for active pharmaceutical ingredients, antibiotics and their key starting materials. The U.S. Government is partnering with Evonik in an investment totaling US$220 million to build a new lipid production facility, and therefore support pandemic preparedness and the next generation of RNA therapeutics.

 

A major challenge for the supply chain has been inflation, which is increasing prices and leads to ripples in supply chains. In some cases, unanticipated disruption to production is possible as companies adjust to meet higher prices. A risk of a recession exacerbates the situation and in case inflation continues in the mid- to long-term, they lead to supply instability and difficulties in accurately pricing products.

 

Mitigating supply chain risks through a dual sourcing strategy
To overcome upcoming challenges and mitigate risks, it is crucial to plan and act rapidly. For all critical raw materials, Evonik Health Care implements a dual sourcing strategy in geographically independent regions wherever possible. This helps us to ensure predictable supply and stabilize pricing for raw materials which is essential for us to remain competitive.

 

The Evonik Health Care business also has a continuing program to review the supply networks for all critical raw materials sourced from China. This involves investigating alternative regional sources including India. For contract manufacturing projects which require sourcing of raw materials new to Evonik, key factors for success include rapidly identifying qualified suppliers, auditability, sustainability, regional diversity and competitive pricing. This in turn is shared with our end clients for transparency and alignment.
Another important approach is to look for new opportunities for backward integration. One example is the production of Regulatory Starting Materials (RSMs) which are – due to increasing complexity – often the value driver of an API. Backward integrating RSMs allows us to remain competitive, typically integrating underutilized capacity, while ensuring quality and supply security. This too is a de-risking lever to be exercised.

 

Recently, customers have been actively seeking out western-sourced products. As many smaller biotech or virtual pharma companies have no manufacturing capabilities, they often rely on external partners, such as CDMOs, for the GMP steps of their processes. Increasingly, these companies are trending toward providers in the West for reduced risk, as well as ease of communication. Our experience is that innovative pharmaceutical companies are willing to accept a premium price for Western supply.

 

Sustainability as a game changer in supply chain management
Sustainability, which Evonik prioritizes, will be a game changer for pharma supply chain management. This is the case for all of Evonik and especially for our highly innovative Health Care business. Sustainability aspects are becoming increasingly important to gain the trust and support of customers, investors, and regulatory bodies. These aspects include green chemistry, a low carbon footprint, recycling strategies and avoiding hazardous chemistry.

 

At Evonik Health Care, we are fully committed to reducing our carbon footprint and are actively working on initiatives for reducing our scope 1, 2 and 3 emissions. Further, we are committed to the global Science Based Target Initiative (SBTi). To achieve our ambitious targets of being carbon neutralin scope 1 and 2 emissions by 2030, we have established internal programs and extensive collaborations with our customers and suppliers.
One example focuses on transport. We are communicating with leading partners to find solutions that reduce the carbon footprint on transport, for example, by using alternative energy sources for road, rail and ocean transport. Through joint workshops with various leaders in logistics, automotive and railway engineering, we have been discussing how we can best apply current and future technologies to reduce carbon emissions when transporting our goods. In 2022, Evonik launched a transport emission dashboard which quantifies our transport-based carbon footprint down to the individual movement of product from an Evonik site to a customer. This dashboard also helps identify improvement opportunities across the whole company and tracks the effectiveness of measures implemented. It will also be an important means of communication with our customers and suppliers because their input and support is crucial to help us improve.

 

In 2022, several of our chemical divisions started a global training program for supply chain professionals that focuses on sustainability. Besides options and case studies on more sustainable raw materials, the training covers packaging materials, transportation and improved value chain planning.

 

Considerations for the supply chain going forward
In the coming 10 years, there will be further progress and discussions about the sustainability of chemical processes from pharma companies and CDMOs. Only highly differentiated and highly innovative companies with a breadth of technologies will be in the position to meet the future sustainability requirements of the pharmaceutical industry. Evonik has already achieved a strong track record for sustainability in the past few years by transforming our product portfolio and production processes. This includes more biodegradable products, biobased raw materials, and implementation of greener chemistries. We are also moving to green electricity to replace natural gas and are implementing energy efficiency measures at all our sites. All these initiatives will help us meet our goal of making Evonik carbon neutral in scope 1, 2 and 3 emissions by 2050. 

 

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KENNETH N. DREW
VP Flamma USA, FLAMMA

 

The cost of doing business today….it is a challenge for the Pharma industry
Over the past several years, our world has changed significantly. Nobody was prepared for a pandemic regardless of what they say today. The fallout from the pandemic is still playing out with supply chain shortages and nations struggling to deal with the aftermath across many industries. The unprovoked invasion of Ukraine by Russia has provided a ripple effect that now has carried over to CDMOs in the pharma marketplace.

 

The rise of inflation has caused great pain across the globe specifically in Europe and North America. It is very easy to see that everything costs more today. For example, the cost of natural gas and electricity have risen dramatically over the past few years. Depending on where you look for your data, energy costs have increased anywhere from 3X to 10X when compared to 2020.

 

This has a trickle-down effect to most everything. Specifically, those CDMOs that produce APIs have been hit hard. Recent reviews of pricing models that were put into place 2-4 years ago for quoting purposes are now being shown to be off by huge amounts. Many pharmaceutical drugs made today come from very sophisticated starting materials that can often take 10-20 steps to make. Since the starting materials are so sophisticated, the lead times for many APIs is often more than 12 months.

 

What many CDMOs are finding is that proposals given in 2018 to 2021 are completely out of touch with the real costs of today’s manufacturing. For example, a PO placed in late 2020 for material due in 2022 may barely cover the cost of the material leaving the CDMO to figure out how they can continue to survive when they are making a material with no margin.

 

The supply chain issues also caused a rise for basic raw materials and solvents. Take the cost of solvents and the impact to manufacturing costs. The cost of THF has risen significantly since 2020. These basic raw materials and solvents impact the cost greatly.

 

Some larger CDMOs that produce a variety of products for the general market instituted a significant price increase (up to 40%). Other CDMOs have drilled down and are having those difficult conversations with customers to address the issue.

 

In speaking with industry contacts, I have learned that some customers have decided that POs that have been placed cannot be changed and thus the CDMO must possibly make a very difficult choice- raise prices for the next proposal significantly and potentially risk losing the business OR stop making the material in order to not lose money.

 

Imaginative ideas are being floated about but there is no easy answer. Some companies have tried instituting an energy surcharge of 10% atop their invoices for existing POs. This is not exactly being well received by the innovator companies as they do not want to decrease their margins on their existing drugs and they cannot raise pricing on these drugs due to agreements already in place. It is a difficult position for all.

In the generic marketplace where price is everything, it is almost impossible to raise prices since margins are already very small thus any surcharge will be rejected. This has put everyone in an untenable situation.

Is there a solution?
It is important for an innovator company to have a trusted, reliable supply chain. Jeopardizing the loss of a manufacturing partner is not good for any of the parties involved. It is important that the CDMOs are able to reinvest into itself. This allows the CDMO to bring forth new technologies, increase capacities, purchase new equipment, update existing equipment, hire more skilled workers and much more. While the current situation will likely pass or stabilize to a new level of cost, there must be some understanding that something must be done to find an acceptable solution for both parties.

 

For example, Flamma made the decision to acquire the Bulciago, Italy facility to not only greatly expand its capacity but to also provide an internal backup for its Honkai site based in China. If China decides to seize Taiwan, the entire pharma industry would be thrown into disarray. Flamma’s strategy will allow them to move projects and/or products out of China to Italy thus providing a safety net for customers with minimal disruption to their supply chain. Innovator companies and CDMOs are looking at their options with such geo-political uncertainty.

 

Do you recall the iodine shortage back in 2011? When the nuclear accident at the Fukushima nuclear power plant took place in Japan thanks to an earthquake that triggered a tsunami, there was suddenly shortage of iodine. This caused a spike in iodine pricing and raw materials that contained iodine became expensive and challenging to source. Companies worked together to find a reasonable solution to address the cost increase and when things settled down, the pricing returned to normal.

 

The topic of rising costs has been a conversation for much of 2022. It is expected that agreements will likely become much more complex. It would not be surprising to see some sort of index that will be referenced in order to protect both parties from these sorts of price fluctuations.

 

With that said, I am confident that the spirit of cooperation and understanding will allow all parties to find mutually agreeable and beneficial solutions. Let us hope that the current inflationary and geo-political climate subsides and we all can focus on what the pharma industry provides- new and innovative drugs to help patients in need.

 

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ANA MARTI
General Counsel, Medichem

 

What are in your view the biggest upcoming challenges in supply chain?
Pharmaceutical supply chains have become in the last few decades global and complex. Although the pharma supply chain is global, many companies’ source critical products (raw materials, intermediates and APIs) from a single region, putting them at risk of shortages during crisis, especially in terms of APIs.

 

Which strategies do you consider as suitable to mitigate the risks in supply chain management? E.g. re-shoring, back integration, diversifications of suppliers and regions? What are the benefits and risks?
Diversification is key to reduce exposure to single sources but specifically if we partner with suppliers having a low risk profile – and I refer, for example, to use criteria to assess reliability such as supplier’s compliance track record, but also to its environmental status, or in a more holistic way, its ESG status. It is important to devote efforts to building strong supply partnerships that make a more resilient supply chain for our products.
 
What initiatives or programs do you consider as appropriate to improve the robustness and resilience of your supply chains in the current environment of increasing political uncertainty and transportation problems due to lockdowns and closed borders? Do you expect to transfer some of the cost to your customers? What initiatives or programs have you initiated in the past 6 months?
Increased focus on localization (vs. globalization) of supply chain emphasizing on regional European supply whenever possible. The financial cost associated with improving the robustness and resilience of the supply chains cannot realistically be transferred on to customers if the European authorities or the EU member states do not take it into account in their policies or in their pricing and reimbursement decisions for medicines and public tenders. Governments and regulators need to show in an effective way that they are willing to help to ensure the security of the pharmaceutical supply chain, as they have proclaimed in the 2020 pharmaceutical strategy for Europe.
 
How will the risks due to political situations, transportation obstacles and production issues influence the regional distribution of chemical and pharmaceutical manufacturers? Will be there a shift between Europe, India and China? Which additional countries could rise as new key players?
In times of pandemic or geopolitical tensions, it matters where the factories are. During the pandemic we have realized how much manufacturing muscle we have in the EU and what are our dependencies. API suppliers have seen what is happening upstream in the supply chain, which is China’s dominance in pharmaceutical raw materials – so securing the supply chain is the issue that dominates all business decisions.

India is moving fast, thanks to money received from the government and investing in research. Will this change the balance between the different key players?
China is also supporting companies via the Made in China 2025 initiative, with a significant role of the state in providing an overall framework, utilizing financial and fiscal tools, and supporting the creation of manufacturing innovation centers.  The initiative is innovation-driven, emphasize quality over quantity, aims green development and optimize the structure of Chinese industry.
 
How could / should governments support the reorganization of the chemical and pharmaceutical industry to help improve the supply security? What technologies should they support?
The financial impact associated with addressing the supply chain and environmental challenges cannot be ignored either by the European Union in their policies or by member states in their pricing and reimbursement decisions. The API sector alone needs massive investment in R&D to develop production processes, as well in quality, environment and safety, to get safer and cleaner technologies. In this context, a more effective dialogue between industry and the EU institutions and national governments is required. Both the EU and national governments must accelerate the support to EU investments in the production of raw materials, APIs and medicines with reforms and policy changes that secure a competitive and resilient manufacture in Europe.

 

How would you suggest to implement the Regulatory system and make it more homogeneous?
If the EU pharmaceutical legislation wants to address the long-standing weaknesses of the pharmaceutical system, the legislation has to support the pharmaceutical industry with a stable, flexible and agile regulatory framework, reducing bureaucracy and timing of evaluation to guarantee that all patients have timely access to medicines.

 

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PAOLO TUBERTINI
CEO, OLON GROUP

 

Projects that can revolutionize the supply chain of many industries
The biggest upcoming challenges in supply chain is represented by the actual zero COVID policy in China which is for sure pushing big challenges on the supply chain. Capability of having compounds and materials from China on time, as expected by business requirements, is under a question mark. This is the biggest challenge also for 2023.
Alongside, there is the impact of inflation, that can impact negatively not only suppliers but also the entire supply chain, for long term agreement for which establishing the sustainable and competitive terms is very challenging.

 

To mitigate the risks in supply chain management we are working hard, and we expect to strengthen the back integration especially with certain facilities of our global manufacturing network. The sites located in Spain and in India are those where we are investing a lot to have back integration for specific supply chains.

 

We are very active in terms of diversification of suppliers, with a project we’ve been working on since years that now allows us to be very positioned in facing the covid pandemic and the Ukraine crisis. We have been able to always maintain active the supply chain even if in some cases we suffered from inflation. Also, regarding geographical localization, we have a clear view to diversify as much as we can each specific compound that we use along our supply chain to diversify the region where they come from. This results in being more reliable and robust.

 

We are not in the position to absorb all the cost that are massively increasing. Nevertheless, we are managing the cost increase with multiple initiatives. For example, to reduce energy consumption, we’ve launched a long-term program to progressively install renewable energy systems in the facilities of our global manufacturing network.
Over 2022, we’ve been carrying on investments in 4 (Settimo Torinese, Mahad, Capua, Rodano) out of the 11 Olon sites, where we are installing advanced solar panel systems to generate renewable energy.
In particular in Rodano, one of our most strategic sites further than HQ base, we’ve just successfully implemented the installation and the system is actually running.
The new system will be producing 550.00kwh/ year of renewable energy. It guarantees the total energy need of Olon HQ offices. Solar energy is carbon neutral.
We’ve just allocated a significant investment for the next step ahead in Rodano facility – a new massive solar system that is expected to produce 4200Kw (timeline 2023). Thanks to this investment, 15% of the electric energy used in Rodano facility will be covered by renewable sources by 2023.

 

Political situations, transportation obstacles and production issues influence the regional distribution of chemical and pharmaceutical manufacturers. Anyway, I do not see any new key players. There are some trends in US; a lot of companies are evaluating or doing investments to increase the capacity in the area. Between India and China, I can see a shift driven by a need of diversification to India. India for sure is moving fast and the National Government has identified specific compounds for which they are financing companies. Nevertheless, I see cost increase also in India, due to emerging lack of capacity of the country. India cannot absorb all the production that has been implemented in China over the last decades.

 

I don’t think that the real issue is just technology. The real issue is capacity.
The new technology can be applied to specific need, to specific compound, it can give an important contribution and support, any way the massive lack of capacity in Europe needs to be addressed not only with new technology.
Regarding the issues with agencies, including FDA, I think that it is not only a matter of Agencies taking care of quality and compliance of specific compounds. But also, HSE topics and labor rights need to be implemented in the regulatory system based on where a company is willing to sell products and not on where it manufactures, as it is now.

 

Otherwise, industry will push the system to move the production in those areas where the regulation is less strict or where there is less control from the local Authorities.
It represents a disadvantage for those companies that invest seriously in sustainability and safety.

 

Besides chemicals, how important is the impact on the pharma industry of other resources such as steel, wood, water, gas, oil, equipment, and electronics that become scarce on the market?
Pharma industry is a capital intense industry. Pharma Chemistry industry, as we are, spends most of the investments in the equipment and technology.

 

The issue of lack of resources, as equipment, raw material, electronics, is generating inflation that is jeopardizing the companies’ capability to develop. Along with lack of capacity of which Europe is suffering, it is creating issues in terms of cost that will have a global impact

 

The game changer for pharma supply chain management is AI development. It will have an impact soon on the efficient use of resources and on capability of foreseeing needs and trends.

 

We have in place actions to manage the increasing requirements for sustainability and reduction of carbon footprint in our supply chain. We are implementing an integrated system in which all our suppliers are valued not only on a business scorecard measuring OTIF or competitiveness, we are also introducing a code of conduct to certify the sustainability program that they have in place.

 

The code of conduct binds the signatories to guarantee our same standards in terms of environmental protection, treatment of workers and production safety certifications.

 

All new suppliers must sign the document and ensure our same level of sustainability at 360°. Our corporate guidelines provide that we close the collaboration in case of failure to sign. More than the 70% of our global purchases comes from suppliers that have formally accepted and signed the code of conduct.

 

Actually, we are working with our system that is very well integrated and we are adapting it to make the product traceability easier and increase the effectiveness of our supply chain process management.

 

Olon is engaged in a series of projects that can revolutionize the supply chain of some industries.

With some of our partners we are reinventing supply chains reaching a level of sustainability never achieved before. We are innovating the processes. I can mention, for example, a new process to obtain animal proteins not using animals but through microbial fermentation technologies. Potentially it can have huge impacts on global sustainability in terms of land and water consumption as well as emissions into the atmosphere.

 

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SHIJIE ZHANG1, JACK CHEN2, CELINE CHEN3
1. CTO, PharmaBlock
2. Vice President of CDMO Business, PharmaBlock
3. Senior Director of Marketing, PharmaBlock

 

Technology Innovation-Explore a Unique Solution for Sustainable Supply Chain

 

What are in your view the biggest upcoming challenges in supply chain?
Sustainability has evolved as a prominent consideration in pharmaceutical supply-chain management; pharmaceutical and biotech companies’ sustainability concerns have expanded beyond the reliability of their raw material suppliers to encompass the challenges of carbon emissions, water usage, and waste. As a critical player in the pharmaceutical supply chain, CDMOs should take proactive responsibility and collaborate with pharmaceutical and biotech companies to develop and adhere to their sustainability targets.

 

Which strategies do you consider as suitable to mitigate the risks in supply chain management? E.g. re-shoring, back integration, diversifications of suppliers and regions? What are the benefits and risks?
The risks in recent years are very much geo-politically headlined while less is discussed on traditional risks such as economic and environmental changes. A balanced view is needed. For small molecules, the very long supply chain all the way to basic chemicals and reagents has been firmly rooted in Asia, particularly in China over the past 30 years. The entrepreneurship spirit that has been powering the supply chain changes will continue to support the innovators in the west and the increasing innovators in the east. CDMOs that are capable of back integration to the long supply chain, and having strong chemistry capability to make key intermediates and reagents, are preferred partners to mitigate risks. Global footprints give some of them more levers to transfer key materials and/or manufacturing across borders on behalf of clients. Risks will persist, but solutions are being generated. Trusted and capable partners are the best way to mitigate risks.

 

What initiatives or programs do you consider as appropriate to improve the robustness and resilience of your supply chains in the current environment of increasing political uncertainty and transportation problems due to lockdowns and closed borders? Do you expect to transfer some of the cost to your customers? What initiatives or programs have you initiated in the past 6 months?
Expanding its global footprint is what PharmaBlock has been working on to strengthen the supply chain. We have R&D and production facilities in both China and the United States. In addition to the Process R&D Center in Hatfield, Pennsylvania, our new facility in West Chester, Pennsylvania, will be operated in the coming March to improve clinical API supply capabilities in the United States. We are also seeking chances to expand across Europe.

 

Furthermore, we have been improving continuous business planning and execution across all the research and manufacturing facilities, and developing multiple backup sources for key materials. Even though local pandemic management in China is rigorous, authorities have gained experience in how to better balance emergency management and normal production and operation.

 

Costs are growing due to increased energy, transportation, and raw material costs, but passing the cost on to customers is not a long-term solution. We believe that only by fundamentally upgrading chemistry and low-carbon technologies, including but not limited to continuous flow chemistry, micropacked bed hydrogenation, bio-catalysis, etc., can we drive pharmaceutical manufacturing to be more efficient and ecologically friendly, hence reducing the cost.

 

How could / should governments support the reorganization of the chemical and pharmaceutical industry to help improve the supply security? What technologies should they support?
Continuous flow manufacturing is one of the most efficient solutions to handle green energy challenges and enhance efficiency; combined with automation and digitalization, it will genuinely transform chemical and pharmaceutical production. The ICH guideline has outlined scientific approaches and regulatory considerations specific to the continuous manufacturing of drug substances and drug products. Governments should encourage and push the regional development of this sustainable technology. We have implemented continuous flow chemistry and micropacked bed hydrogenation technologies in both China and the United States, from research to commercial scale.

 

What action do you have planned to manage the increasing requirements for sustainability and reduction of carbon footprint in your supply chain?
We have invested heavily and will continue to invest in multiple fronts to support sustainable economic development and reduce the carbon footprint in our supply chain. In addition to the current continuous manufacturing workshop equipped in PharmaBlock Zhejiang, a new workshop dedicated to flow chemistry is planned and to be built in the next two years that will further reduce energy consumption in manufacturing. PharmaBlock’s Technology Innovation Center” (TIC) has recently added two groups, chemistry and process, in addition to the three original groups, equipment, flow chemistry, and enzyme/catalyst. The mission of TIC is to invent new technologies to improve manufacturing efficiency and reduce environmental burden such as waste generation. The chemistry and the process groups focus on developing new chemistry to greatly improve chemical synthesis efficiency and reduce PMI, rendering manufacturing greener from the origin. Recently PharmaBlock was honored to receive the 2023 CMO Excellence in Green Chemistry Award presented by ACS GCI PR (ACS Green Chemistry Institute Pharmaceutical Roundtable). The award-winning project was for a novel continuous process for producing an intermediate used in the API synthesis of multiple marketed drugs. The work helps achieve 20-fold efficiency in terms of energy consumption, workspace, and workforce, in addition to much lower PMI.

 

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HERVE BERDOU
Chief operating officer, Piramal Pharma Solutions

 

Supply Chain Challenges in the Current Geopolitical Climate
The current global supply chain for the pharmaceutical industry is at risk due to geopolitical situations, transportation obstacles and production issues. The Zero Covid Policy in China, territorial conflicts like the Russia-Ukraine war, and a potential energy crisis that’s facing Europe will lead to short term supply disruptions, inflation, and lower demand. However, in terms of the mid- to long-term outlook, it will give growth momentum to players like India, and they can establish themselves as an alternative to China for raw materials. Developed countries may plan to keep the last steps of their value chain with them while continuing to buy the required raw materials (key chemicals, starting materials, advanced intermediates, APIs) from other countries with an established supply base, such as India. And things are moving fast in India as a result. Thanks to money received from the government and investments in research, India is well positioned to be a strong competitor to China. With all the initiatives put in place by the Indian government and a stable political climate with solid leadership, India is on the right path to become a global production hub, and possibly “the world’s pharmacy.” Reliable supplies, educated and skilled manpower, no language barriers and an established ecosystem give an edge to India.

 

Homogenizing the Regulatory System
The regulatory landscape represents its own set of challenges to the pharma supply chain. It is increasingly complex, with new requirements coming into force. The regulators and policymakers should work collaboratively with the industry globally to reduce the burden of disease on patients by providing innovative, safe, and cost-effective drugs. We all need to have a patient-centric mindset. This is only possible through a homogeneous regulatory system. The homogeneity of regulatory systems globally can be realized by developing convergent systems through mutual acceptance of data and internationally harmonized standards. Organizations like ICH, WHO OECD, USFDA, EMA, MHRA, TGA, Health Canada, PMDA have adopted harmonized standards and guidelines, as well as mutual recognition for GxP inspections, thereby reducing the burden of duplicate data generations. Even though much progress has been made over the decades, there are still regulatory gaps that need to be narrowed by effective implementation and collaborations between regulators. There is need to adopt to new technologies and upgrade the skill sets of the people across all stakeholders (regulators, industry) involved in drug development and approvals process. In many developing nations the regulatory systems are still evolving. WHO, ICH, EMA, USFDA are supporting the national agencies of developing nations by providing training to reviewers and assessors to develop skill sets and expertise. These types of engagements between global regulatory agencies are progressing positively to achieve harmonized process, systems, and strategies. However, additional resources are required to have a transparent, technology driven system. Both regulators and the industry are committed to achieve the vision of ICH to have unified harmonized standards for drug development.
There are areas where the regulators need to focus on creating a homogenous system for the classification of changes. Due to different classifications, the timelines for post approval changes varies. This puts a burden on industry from the compliance perspective. To bridge gaps in the regulatory system it is important for all stakeholders (regulatory, industry) to effectively collaborate and to adopt to new technologies. This will create more convergent environment for achieving a homogenous system globally through harmonization, collaboration, common standards, transparency by sharing the data to support timely, risk based, cost effective solutions to patients. The mutual acceptance and data sharing among regulators in developing nations will help to optimize the resources and thereby avoiding drug shortage.

 

As an organization, Piramal is striving to have uniform processes and systems for quality and regulatory to improve compliance. We are in the process of implementing Regulatory Information Management (RIM) systems to record and track data for compliance purpose. This will help to create a more homogenous system across sites and ensure compliance and support common data sharing across global agencies.

 

Improving Technology to Streamline Bureaucracy
The gap between the pace at which some companies are adopting breakthrough technologies and their understanding by the regulators remains wide. Regulators must establish processes for rapidly advancing technologies and new treatments, since those used for simpler technologies and small molecules may not work well. High performance computing and simulation is a good example of an area where regulators need to make sure their methods match the sophistication and resources of the tools and approaches being adopted by sponsors.

To serve the need for patient centricity and health care demands, industry is trying to speed up access to treatments around the globe. Global regulations and policy therefore also need to evolve rapidly, as often the rigidity and diversity of the current frameworks do not permit sufficiently nimble and swift responses. Innovation is often slowed by the significant bureaucratic hurdles required for obtaining and maintaining licenses worldwide.

More innovation-friendly regulatory policies are required and there should be improved coordination among regulatory agencies. Regulations should be made more flexible and global harmonization will enable essential medicines to reach patients faster. Sponsors should have continuous communication with regulators beginning in some cases before the clinical studies and continuing through approval and life-cycle management.
 
Sustainability and Carbon Footprint Reduction
Environmental, social and corporate governance (ESG) requirements also play a role. On a corporate level, we are committing ourselves to working diligently with our key suppliers to improve our overall ESG levels. For example, we conduct all necessary screening when on-boarding a new vendor by keeping ESG as a key criterion.
Piramal intends to implement measures toward the improvement of emission and energy efficiency and promote efficient usage of fuels. To support this endeavour, we will calculate and regularly monitor our scope 1 and 2 Greenhouse Gas (GHG) emissions, identify opportunities to reduce them by adopting adequate and appropriate measures, increase green cover and contribute towards afforestation efforts. The company further strives to estimate and monitor its scope 3 GHG emissions, and develop plans to address them. Piramal is committed to effectively manage its energy footprint. The company will take appropriate measures to improve energy efficiency, diversify its energy mix, and reduce reliance on fossil fuels. The company strives to augment share of alternate and renewable sources of energy in its energy mix.

 

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CHIARA RIGOTTI1, PAOLO PAISSONI2
1. Purchasing & Sourcing Manager, Procos
2. BD & Innovation Director, Procos

 

SUPPLY CHAIN: A GENERAL OVERVIEW OF THE UPCOMING CHALLENGES
We are living in a very complicated period, as often said a VUCA situation, and I believe that currently the geopolitical uncertainty is one of the biggest challenges all of us are facing.
We are close to a terrible conflict involving European people and the evolution is not easy to forecast. Nevertheless, the subject related to the supply chain is essential to keep alive the medicines availability throughout the world and company like ours is focused to constantly supply active pharmaceutical ingredients causing no shortage.
Another important challenge we faced along all 2022 year is the rising of fuel and energy costs. This item might affect mainly European countries, more than Asian and American ones; however, nobody can be 100% autonomous in our interconnected world and that effect can cause damage to the global supply chain anyway.
What we recently observed in our space is a general price speculation coming from suppliers located in some countries, less involved in that ‘rising’ impact.
Another important challenge we are facing is related to the forecasting accuracy, due to the several uncertainties we were talking above.

 

We believe that a constant and trustworthy communication with suppliers is the best way to mitigate the risk in supply chain, although it is not enough.
Main strategies are focused on creating and maintaining a basket of preferred suppliers for key advance intermediates and relevant raw materials, which are crucial for our key products.
We are continuously working in keeping alive our list of preferred partners, which can support us in a reliable and suitable timeframe, following their evolution (in term of technical capabilities, performance, quality, financial, etc.) in the market and the space we are active. Several tools help us to monitor that activity.
Our opinion and experience tell us that selection of alternate supplier starts from country diversification, that is not only China & India, though these countries remain the most relevant ones.
Back-integration is considered only for specific key products, while re-shoring would deserve more room to be discussed, but it is mainly more an idea than a concrete result by now.

 

Other important things to be taken into consideration are political situations, transportation obstacles and production issues.
It is quite difficult to predict the evolution referring to the political situations by now. We hope not suffering too many crisis and dreadful events in the near future.
Regarding the geographical changes, we believe a partial shift will occur among the main Areas, but less relevant than expected.
We think sourcing ex USA is growing, we have concrete signals from that part of the world.
China has been doing lots of “shopping” especially in EU & USA for the production of late-stage molecules and in Africa for mining of rare and precious metals deals, hence they are still dominant suppliers by far. Finding good relationships with some key providers in that country is a ‘must’ for us.
Summarizing, once again, people make the difference among the companies, more than capabilities and technologies, and building up the right partnership between us and them is the key factor.
We hope China will open its frontier soon, because meetings in person, paying visit there, are much better than any videocall you might arrange.
Moreover, we can’t forget India. As a matter of fact, India is moving fast, thanks to money received from the government and investing in research.
India is a very important country in the Pharma world, and we believe it will be even more in the future.
It is true that Indian government supports investments; however, these incentives mainly led to the flourishing of many small companies (thousands, as we know).
It is also clear that high level of education, expertise and technical skills in India is leading to develop the process internally by CDMOs.
These companies may become more and more relevant in the pharma supply chain business, bringing some challenging competition to the European suppliers.
As anyone knows, price competition and huge capabilities, besides the big number of companies present on the market, are the positive factors.
Quality is the key for getting ahead globally.
On the other side, we think India will not be as competitive as China for some RMs, due to the stricter environmental regulations.
That situation might remain as is for long time, unless some unpredictable changes related to people and working system in China will lead to a different scenario.
We strongly believe that a great and continuous flexibility in the current strategies is necessary to keep alive the pharma supply chain and guarantee the proper quantity of medicines needed all over the world.

 

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MATTHIEU GOBILLOT
Supply chain, Procurement & Customer service Director, Seqens

 

Building a more sustainable and resilient supply chain
The constantly evolving and uncertain geopolitical context has a strong impact on supply chain. With the war in Ukraine, the continued CoVid situation in China, the global inflation in costs and in particular on energy in Europe, the biggest challenge currently is to adapt our operating model to mitigate as much as we can the increasing uncertainties in lead-times and costs. Business continuity and reliability to our customers remains our priority, but the level of risk and cash invested is increasing, and we must share that risk with our customers. However, we believe it is an opportunity to build a more sustainable and resilient supply chain together with our stakeholders.

 

Regarding risk mitigation and variability management, upstream integration and supplier portfolio diversification are key. They allow to reduce uncertainty on lead-times and to keep costs as low as possible. Anyhow costs are still on the rise. Reshoring in Europe needs to enhance innovation in most efficient production processes and to reassess the prices conditions. Most of our customers understand that business continuity and sustainability come with a different price approach that reflects the value created by security of supply and low environmental footprint. In addition, increasing maturity and visibility around procurement, production and sales planning is key. It is the only way to identify cash and costs risks and to work on mitigation plans. Our efforts over the last years, and which are paying now, have been around upskilling our teams on such topics and developing the right tools to support decision making.

 

Another big challenge to successfully maintain quality and security of supply for our customers is the access to a skilled and stable manpower. Since CoVid, the industry has been facing a higher turnover, and in pharma manufacturing, people’s experience is key, especially on the production floor.

 

Of course, the uncertainty and its challenges will influence regional distribution. On one side there is a political will for a more sovereign drug manufacturing in Europe. Large programs were initiated in France for example, and we are taking our part. On the other side the energy crisis in Europe and the lack of political visibility in that field already led some big upstream chemistry players to discontinue or relocate part of their production to Asia. For instance, India is on the rise, with a clear political will combined with high talents. But India also showed that in time of crisis the priority is given to its very large domestic market, which is perfectly understandable. Things are moving and we believe sustainable and resilient production will take advantage from such context over the medium and long term. Capacity to innovate and agility will remain key to adapt to global changes to come.

 

But when talking of supply security, governments and administrations also have their part to do to support reorganization of the chemical and pharmaceutical industry.

 

The CoVid pandemic highlighted the vulnerability of the health systems and accelerated the need for a new and radical strategy to strengthen regional autonomy. The support from governments will take different forms: (i) direct support to innovative, competitive and above all sustainable and environmentally friendly technologies, (ii) financing new critical molecules manufacturing capabilities or (iii) integration of important criteria such as security of supply or respect for the environment into public tender procedures or medicines prices.

 

The regulatory system can also be implemented as it mainly focusses on quality, with homogeneous rules all around the world and capabilities for Health administration to control the minimum quality standards everywhere in the world. But it is not the case for social or environmental aspect. In EU, manufacturing facilities must comply – and it is normal and essential – with strict social and environmental standards which is not the case everywhere. Like for quality, authorities must level the playing field to ensure the so-called “good manufacturing practices” are applied everywhere and not focused only on quality.

 

In addition, we strongly believe that investing in new technologies to lower the environmental footprint of API or intermediates manufacturing is a key success factor to make the pharma supply chain more resilient and sustainable.
But, to enhance such innovation, we should make sure the qualification process of the new units and the administrative burden do not prevent from implementing such technologies. For technologies that can demonstrate a positive impact on environment or on social aspects, administrative procedures must be accelerated and the filing cost must be reduced, keeping of course a focus on product quality. This would be a catalyst for innovation.

 

To conclude, a more resilient and sustainable supply chain must be based on concrete actions and strategies for carbon footprint reduction. For 15 years, Seqens has worked extensively to reduce the energy consumption of its facilities, has invested in new high efficiency processes, and has moved towards low carbon energy on all its facilities. And the results are there: since 2011, the carbon intensity of our products have been reduced by 40%.

 

At the end of 2022, we defined a new CSR strategy and new objectives, which will enable us to challenge ourselves on our CSR performance. To decarbonize our activities, we have an approach based on three levers. The first is to implement energy efficiency projects on our sites. The second lever is to ensure a transition to low-carbon energies, and thus give priority to renewable or recovered energies. The third lever is to innovate to manufacture products with a low carbon footprint. In addition, in 2023, we will define new long-term CO2 emissions reduction targets in line with the SBT (science-based-target) approach.

Our targets will then be aligned with the Paris agreement.

We also have our CSR performance assessed via rating platforms such as Ecovadis or CDP to ensure that we remain a leader in this area. Moreover, we have started to track the CSR performance of our suppliers by monitoring their Ecovadis score and by evaluating their climate performance. In addition, our buyers have been trained in responsible purchasing and their role in the CO2 emissions of our sites and products.

Uncertainty and changes are tough for companies, but they can be seen as opportunities to do better and improve ourselves. Thanks to agility, innovation, and adequate support from administrations, we strive to build a more resilient and sustainable supply chain to be ready to face tomorrow’s challenges.

 

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ARVIND SINGH
Executive Director, Global Supply Chain, SK pharmteco

 

Supply chain challenges and potential solutions in VUCA era

 

What are in your view the biggest upcoming challenges in supply chain?
Pharmaceutical global supply chain failures are measured in lost revenue, reputation, and potentially patient lives. Amidst the backdrop of enduring impact of the COVID-19 pandemic, this presents a unique set of challenges and opportunities for the pharma supply chain.

1. Delivering quality medicines to patients on time and in full - Now more than ever, speed to deliver life altering medicines consistently and reliably is critical in saving patients’ lives. Amidst lingering impact of the COVID-19 pandemic, ensuing economic crisis, ongoing geopolitical conflicts, and trade wars, delivering quality medicines to patients as quickly as possible will continue to be a challenge and top priority for the pharma industry. And the supply chain becomes even more critical in case of cell and gene therapy (CGT) drugs. The personalized nature of the CGT, and the fact that they are ‘living drugs’, means that the supply chain needs to have a lot tighter & precise control in terms of time, temperature, shock, etc. In an autologous CGT drug, a patient’s own tissues are used to manufacture treatments to be reintroduced into the patient. A lost shipment in such case would require the process to start over – however, the patient may not have the luxury of time. There is no room for error!
2. Optimizing supply chain resiliency amidst geopolitical and trade disputes - When we visit a hospital, we expect the drugs to be available for our treatment. A person can’t imagine being told that their cancer treatment has to be delayed for weeks because of the drug shortage! We must figure out a better way to optimize inventory and supply chain resiliency while keeping the cost down. Try doing that with the ongoing geopolitical and trade disputes that causes constant pressure to relocate supply chain for economic & national security issues!
3. Inability to identify potential disruptive events - The COVID-19 pandemic highlighted many of the core problems that pharma supply chain encounters daily. A lot can go wrong just in the last mile transit - from a truck breakdown to a refrigerated container genset malfunction, to human error in handling, to congestion or strike delays - potentially impacting the product quality and hence triggering millions of dollars in losses. The sound measures to identify potential disruptive events and lack of real-time visibility slows response time to spot problems and take corrective measures. Gaining complete end-to-end real time visibility of our supply chain is an important factor to help prevent disruptions or early detection enabling speedy and effective mitigation of supply chain issues.
4. Preventing rise of counterfeit drugs as supply chains grow longer and more opaque Sound strategies and processes for managing counterfeit drugs can save lives. This is especially important given the global nature of the pharma supply chain, that further intensifies the counterfeit risks.
5. Preventing the cyberattacks and securing the information supply chain – With the growing reliance on the cloud, including hybrid, multi-vendor environment across the globe, pharma supply chain systems offer an expanded attack target. And due to pharma industry’s proprietary and capital-intensive knowledge, intentional sabotaging of products and supply chain operations are very tangible threats resulting in not only huge monetary and reputational damage but also choking drug supply, ultimately impacting the lives of many patients.

 

Which strategies do you consider as suitable to mitigate the risks in supply chain management? E.g., re-shoring, back integration, diversifications of suppliers and regions? What are the benefits and risks?
As professor Yossi Sheffi (of MIT CTL) would say, fundamentally, a resilient supply chain can be built based on two broad strategies – building redundancy and building flexibility of supply chain assets and processes. One effective way of achieving this is to ensure you have a diversified, trusted, & strategic supplier bucket that spans across the globe. Be diligent about it to keep the cost down by matching diverse technical & operational requirements with a carefully selected set of qualified vetted suppliers. These suppliers should provide a comprehensive, robust supply chain ecosystem and differentiated technical capabilities to further strengthen your global footprint. And remember, these preferred suppliers are an essential part of your resiliency strategy.

 

There is a caveat! While the economics of a global supply chain brings diversification and might drive better profits when everything works smoothly, the impact to human lives is far greater when it fails. One might face headwinds setting a global supplier network amidst ongoing geopolitical and trade disputes that is putting constant pressure to relocate supply chain locally for economic & national security reasons.

 

A balanced approach including having a mix of global and proximate suppliers, issuing long-term supply contracts, and diversifying the sourcing to ensure redundancy is critical for supply resiliency and business continuity.

 

Additionally, having a robust supply chain risk management program is critical. This allows us to monitor and tackle risks in a structured way. As leaders, we must recognize that risk management is not merely about setting up processes and governance models, but it also entails shifts in culture and mind-sets.

 

What action do you have planned to manage the increasing requirements for sustainability and reduction of carbon footprint in your supply chain?
A good majority of supply chain emissions in pharma are generated by early-stage processes, such as raw material extraction and processing. It is therefore essential for us to work alongside our suppliers to decarbonize supply chains to attain net zero. At SK pharmteco, we are actively enhancing our sustainability program – baselining greenhouse gas emissions, along with developing a high-level roadmap for a sustainability program and reporting framework. Some of the areas we are actively working on -

 

• Process efficiencies (e.g., continuous manufacturing, solvent recycling and reuse)
• Reducing raw material and energy usage
• Switching to renewable power by joining renewable power purchase agreement.
• Opting for clean (EVs / battery-operated) transport
• Integrating sustainability into our supplier partnership model

 

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ANIL KANE1, PHILLIP LOCKHART2
1. Senior director, global technical scientific affairs,
pharma services, Thermo Fisher Scientific
2. Director, procurement, drugs and pharma,
global procurement, Thermo Fisher Scientific

 

Successfully managing risks, improving technologies, and increasing sustainability in pharmaceutical supply chain
Within Pharmaceutical drug substance and drug product manufacturing, we have experienced supply chain disruptions for key raw materials, intermediates, some pharma excipients, customer furnished active pharmaceutical ingredients (APIs), equipment parts and other packaging materials and container closure components. Some of the most significant upcoming challenges in supply chain are:

• Recover inflationary pressures the industry saw during COVID, the Ukraine War effects, and overall inflation
• Ensure security of supply for future demand as markets start to recover
• Achieve real-time visibility of supply chain
• Manage shortages – Labor, materials, intermediates, pharma excipients, packaging materials, components and parts for equipment and machinery

 

Mitigating risks of supply chain management
In mitigating the risks of supply chain management, we consider several strategies, including:

• Multi-sourcing and right sourcing suppliers to mitigate supply and price risk
• Increasing VMI and other supplier inventory programs
• Reevaluating safety stock levels
• Rationalizing part numbers and combining common items

 

While single sourcing of suppliers has typically been attributed to improved cost efficiency, the pandemic laid bare the vulnerabilities it can create for businesses. Relying on a small group of suppliers without supplier diversification can create critical supply chain vulnerability.

 

A larger network of providers across multiple non-environmentally vulnerable geographic regions can improve manufacturing agility, as well as ensure supply chain continuity across times of uncertainty. Strained global supply chain relations over the course of the pandemic highlighted the growing importance of domestic and local manufacture for most countries and has incentivized governments and industry to take action.

 

Reducing the reliance on single-provider sourcing of materials is key to mitigate supply chain risks. However, the identification of multiple vendors and the qualification and risk management of new vendors in terms of reliability is a complex and time-consuming process. In Pharma, we also have to manage regulatory issues. Consideration of material properties of pharma excipients, its equivalency to current materials and the changes to regulatory filings are all important factors.

 

As a contract development, clinical and commercial manufacturing partner of drug substances and drug products to the pharma industry, we at Thermo Fisher are discussing with our customers the challenges of supply chain management. Planning and forecasting is key to procuring materials on time and avoiding any delays in manufacturing.

Greater collaboration and cooperation between pharma companies, its partners and stakeholders will be key to successfully building resilient and sustainable supply chains for the future — and delivering the outcomes sought by patients and by all parties in the ecosystem that serves them. While there exist various possibilities for rethinking supply chains, it’s important to emphasize that there will not be a single or simple path forward.

 

Improving technologies and streamlining bureaucratic burden
For the last couple of years, we’ve seen many benefits of using Artificial Intelligence (AI) within healthcare, from transforming patient diagnoses, helping to make sense of clinical data and to develop new cures. One additional place the technology is really coming to the forefront, is within the contracting space.

 

From a supply chain perspective, AI provides deeper visibility and therefore better arms pharma companies to manage risk. In today’s on-demand age, it’s an easy assumption to make that companies can simply log into a system to see a map of their supply chain and see who they’re working with in the areas most affected by Coronavirus, for example. The reality is quite different. For large companies with different divisions participating in multi-tier supply chains, no matter how many systems they log into, it can be challenging to gain a global view of their supply network.

 

Using AI-powered contract management solutions can enable organizations to quickly find answers to the questions they are asking themselves about their supply chains during the pandemic.

 

Many organizations across the sector are already using AI within their contracting and supply chain management function as a means of quickly extracting contract data and enabling commercial and contract professionals to work more confidently during periods of uncertainty and to respond to the current issues unearthed by Covid-19.

 

Tools to digitalize and improve traceability, sustainability, security and quality
Thermo Fisher Scientific is investing in multiple digital platforms to improve traceability and engagement with suppliers, and to better track and quantify our Scope 3 emissions. We use the globally recognized EcoVadis™ platform to assess and help accelerate improvements in our suppliers’ performance in practices affecting the environment, labor and human rights, ethics, and sustainable procurement, and to monitor compliance with our Supplier Code of Conduct. 

 

Sustainability in the Supply Chain
At Thermo Fisher, we are constantly working with our suppliers to reduce our carbon footprint. In line with our Mission of enabling our customers to make the world healthier, cleaner and safer, Thermo Fisher has committed to reaching net-zero emissions by 2050. Our supply chain is one of our largest sources of emissions, and some of our biggest customers have set new environmental expectations of their suppliers. By 2027, we aim to have 90 percent of our suppliers set climate-related, science-based targets.

 

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ANMING LIU
Vice President of Technical Operation, WuXi STA

 

Securing Pharmaceutical Supply Chain: Showcase of a Global CRDMO’s Initiatives
There have been several disruptions to the global supply chain in recent years, and this is likely to continue in the next couple of years. For example, lockdowns and logistics restrictions have pushed up raw material prices and disrupted the supply chain from time to time, and now the market is still recovering. This struggle is even amplified for some classified materials. Under quantity restrictions, these materials are not only difficult to acquire but also challenging for safe storage.

 

At the start of the pandemic, we have well-developed a Business Continuous Plan (BCP). This initiative consists of two important components – upstream supply management and project delivery assurance. With strategic management and timely communication, BCP ensured over 95% of on-time delivery, even during the peak of the pandemic.

 

For upstream supplies, we have developed a vendor qualification methodology. Vendors are ranked by their quality, supply chain stability, and location – vendors located in dedicated industrial districts are less prone to pandemics and lockdowns. With these criteria, we can quickly switch the supply hub if any disruption occurs. For late stage to commercial projects, which require large-scale manufacturing, we secured at least two material suppliers from different regions to guarantee a reliable supply flow. Another practice that helps us to mitigate risks is to enforce the “50% Policy” – All facilities must keep at least 50% stock for critical materials at all times.
Back-integration is another important way to handle material risks. We have long been establishing many key material manufacturing capabilities in our own platform. Just to give you one example, amidites are an array of modified nucleotides – they are the starting material of oligonucleotide manufacturing. With the overwhelmingly emerging oligonucleotide drug candidates in the pipeline today, amidites are exceptionally scarce in the supply market. WuXi STA developed its own amidite manufacturing capability for our oligo customers, saving time and cost without amidite supply risk. Furthermore, we now offer more than 300 types of catalog amidite products to the market, turning the table of amidite supply struggle around.

 

Technology is another strength for minimizing rare material supply risk. Although early-phase projects require less material, the large scale supply risk at later phases is an important part of our consideration. When we are talking about supply safety, we start with the end in mind – we minimize special material usage by designing alternative routes in early stages. During process development, one of our goals is to replace rare, expensive, or toxic materials with safer, more common ones with route optimization or advanced technologies, such as biocatalysis and flow chemistry.

 

When the supply chain is under threat, it is better to lay up for a rainy day. Ensuring the high-quality supply of our product to global customers is what drives WuXi STA’s expansion in recent years. We now have 17 sites across Asia, Europe, and America. This multi-nodal network grants us robustness against uncertainties. Manufacturing projects are often diverged into two or more sites for dual supply chains, thus eliminating downstream supply disruption.

 

In response to the increasing requirements of sustainability for the CDMO industry, we are also actively applying green initiatives to stay ahead of time. In order to reduce our carbon footprint, we take both “top-down” and “bottom-up” approaches. The “top-down” approach focuses on air emission treatment. “Green solvents” are chosen based on ACS green chemistry institute. Using proper containment equipment is also a common practice. Nevertheless, the most game-changing approaches are the application of process and terminal treatment devices. Local exhaust treatments (LEVs), active carbon absorption scrubbers, and reagent thermal oxidizers (RTOs) are installed in our manufacturing facilities.

 

“Bottom-up” approaches are energy consumption management. On a daily-operation aspect, manufacturing facilities take Energy Efficiency Index (EEI) as a key consideration during procurement, and Process Mass Intensity (PMI) is a key performance indicator. And for long-term energy-saving initiatives, we actively include new green technology in our facilities - Vapor Absorption Refrigeration (VAR) devices are installed to save commercial steam. Solar panels and other green energy are powering our manufacturing.

 

WuXi STA has been recognized globally for its Environment, Sustainability, and Governance (ESG) efforts. Recently, we have received the latest scores from EcoVadis rating, a trusted provider of business sustainability ratings, for active pharmaceutical ingredients (API) R&D and manufacturing from its Changzhou site and for formulation development and manufacturing from its Shanghai Waigaoqiao site and Wuxi city site, respectively. All these sites received scores of 60+ with a “Silver” rating from EcoVadis. This is one of many recognitions of WuXi STA’s ESG efforts.