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Pharmaceutical Industry Supply Chain Management
Pharmaceutical Industry Supply Chain Management
Pharmaceutical Industry Supply Chain Management
The value chain describes how the addition of knowledge to a specific molecule through transformational processes of R&D, pre-clinical, clinical trial, manufacture, marketing and sales activities generates commercial value to a pharma/biotech company The supply chain refers to the activities involved with planning, sourcing, manufacturing and distributing your products as it does for any other company
There is also a clinical supply chain which addresses sourcing and provision of materials to clinical trail investigators Its still Source, Make and Distribute with Plan at the head of each major supply chain domain
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Regulation!!
Class 2 pharmaceuticals must carry unique identifiers at the item level Chain of custody tracking from manufacturer to distributors and point-of-use (pedigree requirements) CRM doesnt focus on the patient (yet)
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Are the materials provided by our suppliers safe? Are the products manufactured by our company safe? Are all the products being manufactured reaching the distributors? Are any of our products being adulterated or counterfeited?
The supply chain begins with the material supplied for product manufacture
Key ingredients need to be covered by Supply Agreements
Price, Source, Quantity, Quality, Delivery Defined Specification Control, Change Control, Complain Resolution
Quality Agreements Pre-purchase Usability Tests Toxicity Requirements Know where starter materials are manufactured Know who tests it and how 4
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Biologic suppliers
Chemicals Farm products (plants, eggs, animals, animal by-products) Laboratory animals Growth media, cell cultures Pathogens Proteins Test organisms Equipment Computers, software Databases (e.g., target molecules, DNA sequences) Clinical trial supplies Clinical trial subject population information
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Non-biologic suppliers
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Reduced supplier management issues Facilitates relationship-building Risk of supply issues in the event of
Supplier raw materials disruption Supplier production issues Supplier delivery issues
Multi-source materials
Improved pricing and competition Minimizes risk of supplier issues Higher vendor management costs
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Need to coordinate delivery of supplies to sites that are actively recruiting and enrolling patients
Flexibility Speed of delivery Consideration of special packaging and handling requirements (e.g., cold shipping)
Clinical supply teams typically use the performance of older trials to understand how much material is required in a new study and to determine their supply chain requirements
Variability in the number of patients enrolled, number of investigators, geographic distribution of trials will create larger variability in inventory and distribution of drug kits
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How many different types of drug kits are needed? Local depots vs. centralized supply Need for import licenses for specific countries can delay shipments from central depots to local depots Some study centers may need to recruit patients very quickly and begin trials within a day or a week while others may require months Randomization of medication administration may trigger resupply at variable intervals, requiring safety stock
Supply logistics
Subject enrollment
Medication management
Monte-Carlo simulation being used to optimize supply chain for large (1,000 patient) studies
Judicious use of contract manufacturing (e.g., packaging) Joint planning between product launch team and SCM team at least 1 year before NDA submission to FDA
Cross-functional development, marketing, clinical, SCM and regulatory teams for each product
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Secondary wholesalers
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Retailer
Model 2
Manufacturer
Wholesaler
Model 3
Manufacturer Other Sources of Drugs (foreign, private mfrs) Retailer
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A complex, organized crime activity with multiple distributed players secondary wholesalers a principal mechanism The World Health Organization estimates that 5-10% of all pharmaceuticals are counterfeit
35% in Third-World countries
U.S. Customs and Canadian Border Patrol inspected 1,153 shipments of drugs into the U.S.
88% contained unapproved, counterfeit or harmful goods
More than 200,000 bottles of counterfeit Lipitor have been found in the U.S. in the past 3 years The total economic impact is estimated at $1 billion - $12 billion Low risk of being caught or punished
Source: FDA Consumer Magazine, March-April 2005
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Least common Made with same ingredients, formulas and packaging but not by the same manufacturer High-quality packaging and labeling; very convincing appearance Little or no active ingredients Drugs rejected for quality reasons by the manufacturer Authentic drugs that have passed their expiration dates Distributed by foreign sources
Look-alikes:
Rejects:
Re-labels:
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Cost $270/bottle
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Pedigrees track product flow from regulated entity to regulated entity Major concerns are how (electronic or otherwise) and cost
20%
Pharmaceutical Manufacturer
1,500 (Top 30 = 80%)
80%
Distributors
100 (Top 3 = 85%) 2-3% Simplified US Pharmaceutical Supply Chain
Providers
100,000+
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Some states are not waiting for a national solution Florida has enacted a Pharmaceutical Pedigree Papers law that goes into full effect in 2006 A paper pedigree must be maintained through the entire supply chain back to the manufacturer Eleven states are using the Florida statute as the template for proposed legislation Required information includes: product identity, lot number, quantity and distribution or pharmacy licensure for each change of possession Estimates on the distribution side alone indicate that pick efficiency will be reduced by 85% A paper solution will be very costly to the industry
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Prescription drugs account for 30% of the U.S drug abuse problem 6.2 million people over 12 years of age (2002) Common methods of diversion
Theft of drugs from the manufacturing plant Theft of drugs in transit from plants to distributors Theft of drugs from distributors warehouses Call-ins of fake prescriptions to pharmacies Forged prescriptions, doctor shopping Health care professionals (doctors, nurses, hospitals, pharmacists) Vicodin, Lortab, Lorcet, Norco, Tylenol #3, Diazepam, Xanax, Stadol (NS), Valium, Phenergan with codein, Tussionex, OxyContin, Ultram, Ultracet, Soma
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Source: Task Force on Drug Diversion Through Institutional Outlets, Council of State Governments
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Thefts of pharmaceuticals from pharmacies, manufacturers, distributors, manufacturers and importers/exporters in dosage units; 2000 - 2003
Drug 2000 2001 2002 2003
Codeine
Dilaudid
Lorcet Lortab
Ritalin Valium
Total
Source: National Drug Intelligence Center
2,379,389
3,197,766
2,095,835
2,753,928
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Manufacturers are not required to, and often do not, verify that a pharmacy is actually servicing the population they claim to be servicing in order to receive a discount Closed door pharmacies (since they do not service walk-in patients), resell discounted pharmaceuticals at a significant profit to secondary source wholesalers who resell them at a significant profit to other secondary source wholesalers, or even to primary wholesalers, who purchase them for less than they can purchase the products from the manufacturers Experts have estimated that between 50% and 80% of closed door pharmacies are participating in these diversion schemes Inconsistent state laws prohibiting this practice, and Federal regulations have a loophole that defines medical entity in ways that allow this Federal requirement that a drug pedigree be established and RFID may address much of this form of diversion along with strengthened Federal and state laws limiting resale of products by closed-door pharmacies
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Automated replenishment of pharmaceuticals driven by utilization Just-in-time inventory An end-to-end automated process for pharmaceutical procurement
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Pharmacy
Rx Data Summary
Orders
Distributor DC
CIM
Source: Cardinal Health
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Often turn to secondary distribution channels when manufacturers or major distributors cannot supply critical drugs when needed
Drugs often stockpiled by secondary distributors for economic reasons Drug markups can be 500 1,000% during shortages (e.g., a vial of flu vaccine purchased by a wholesaler for $23.65 was resold to an end-user for $147 in 2003)
Temperature-sensitive products, when diverted, are often not kept at the appropriate temperatures Retailers attribute 48 percent of pharmaceutical inventory loss to employee theft Emerging requirements for secondary distributors to provide a drug pedigree that can be tracked back to the original source (manufacturer)
Clear chain of custody Cost of maintaining custodial information will fall on manufacturers
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