The pharmaceutical industry was rattled last month when it was reported that several batches of heparin manufactured and marketed by Baxter Healthcare in the US, and Rotexmedica in Germany, may have caused a large number of adverse effects, including several deaths. By press time, a possible source of contamination had been identified but not confirmed, and the root of the problem had yet to be determined. However, speculation regarding the US case was focused on the source of the API — a company called Changzhou SPL in Changzhou (China), partly owned by Scientific Protein Laboratories LLC (Waunakee, WI, USA), which had supplied the heparin to Baxter.

Jim Miller

The heparin incidents are an example of what can and will happen as pharmaceutical supply chains become longer and more complex. Pharmaceutical companies are not only geographically farther from their suppliers, they are transactionally farther as well, as they increasingly depend on their primary suppliers to source intermediates and other inputs used to manufacture the ingredients they are ultimately purchasing. This is a far cry from just a few years ago when vertically integrated pharmaceutical companies controlled much more of the supply chain, and manufactured most APIs and late-stage intermediates in-house.

The learning curve for complex sourcing relationships has been a long one in most industries. Companies that have sought to outsource more of the value chain have almost invariably found that their internal systems are not up to the task, and that they must have greater involvement with their suppliers to effectively integrate them into their supply chain. One example is Boeing, which recently had to delay delivery of its new 787 Dreamliner aircraft because it failed to effectively integrate its suppliers into its scheduling and engineering systems, and the suppliers had been unable to deliver their components on time and in sufficient quantities. When the automobile companies began seriously outsourcing more than 10 years ago, they found they had to invest in training their suppliers in continuous improvement and quality control practices before their standards could be met.

Globalization of supply chains is creating new political, logistical and scientific challenges for the pharmaceutical industry. Establishing effective regulatory inspection programmes of foreign manufacturing operations, for example, will require agreements with foreign governments to allow EMEA and FDA to exercise some oversight authority over manufacturers in their countries. This will be especially challenging in countries such as China, where there isn't the history of mutual recognition and cooperation that there is between European governments and the US.

The risks involved in these complex global supply chains will also lead to more analytical testing to ensure ingredient and product quality. This will become a major opportunity for contract analytical labs, particularly the worldwide laboratory networks run by companies such as SGS (Switzerland) and Intertek (UK), which already have extensive consumer testing operations and dozens of facilities around the world.

Spanning the globe

One of the ways in which CROs and CMOs are helping pharmaceutical companies manage their complex supply chains is by establishing truly global operating networks. These global strategies are being driven by a number of considerations, but two, especially, stand out:

• A desire to balance the cost advantages of conducting manufacturing and labour-intensive discovery operations in Asia and Eastern Europe, against the operational and market necessity of being near the customer during developmental stages.
• The need to follow clients, particularly the major pharmaceutical companies, as they establish R&D operations in non-Western countries and expand their sales and marketing activities there.