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The COVID-19 pandemic has raised several questions about the safety of the pharmaceutical materials supply chain. Is onshoring the answer?
The supply of safe and effective medicines is crucial for the patients that rely on them. Drug shortages are an ongoing problem that regulators and industry work to address on a continuous basis. Drug shortages may arise from a variety of situations, including a lack of sufficient supply of APIs, raw materials, and excipients. And the reasons for material shortages can range from quality control issues at a particular facility to the complications caused by global crises, such as the COVID-19 pandemic.
For pharmaceutical companies, the COVID-19 pandemic has stressed the need to enhance supply chains, according to Ilan Avni, vice-president, business development at Wavelength Pharmaceuticals, a developer and manufacturer of APIs. “This includes prioritizing suppliers with a spotless regulatory compliance track record and uncompromising quality culture, who are continuously investing in improving and strengthening their own supply chain to assure uninterrupted supply,” says Avni. He recommends having at least two qualified suppliers from different geographical areas and having a sufficient amount of key raw materials in house.
To keep the supply of pharmaceutical materials safe, Andrew Badrot, CEO of C2 PHARMA, an API manufacturer, believes that global quality standards should be strengthened, and regulatory audits of foreign facilities should be performed without prior notice. “Still, mandates would need to be in place to avoid preferential treatment to local industry. For example, the recent announcement from China’s National Medical Products Administration (NMPA) suspending the import of Bristol Myers Squibb’s blockbuster drug Abraxane opened the door to two local Chinese manufacturers to fill the gap” (1), says Badrot.
In the short term, Sebastian Tomlin, logistics manager at Charles River, a contract research and development firm, says that time and investment in supply chain management and logistics operations are needed to expedite the movement of materials during this crisis. “Oftentimes there are multiple routes that can be considered from a transportation perspective, that are sometimes overlooked. It is even more critical to ensure the accuracy of documentation the first time around, so as not to jeopardize a time slot in an operation that may have reduced capacity,” he says.
Badrot stresses that pharma manufacturers and suppliers should have plans in place to ensure a healthy supply of ingredients so they are prepared for a crisis, should one happen. “It should not take an extreme event, such as this pandemic, to make this a priority,” says Badrot. In response to the COVID-19 pandemic, he says, being prepared and choosing good suppliers are becoming popular topics for pharma companies. “Reliability and redundancy of supply have become more than simple buzz words in procurement departments, and good suppliers of ingredients will be prioritized over less reliable ones,” Badrot explains. “By far, a cradle-to-grave supply chain with local starting materials, ingredients, and excipients for essential drug production will help to support resilient supply chains by removing the reliance on imports and driving new investments in green chemistry and Pharma 4.0 efforts.”
What can pharmaceutical companies do to ensure they have a sufficient supply of APIs and raw materials to meet their production demands? Maintaining a high safety stock of critical APIs and other materials is imperative, says Vincent Colicchio, vice-president and Head–Supply Chain and External Manufacturing for North America Generics at Dr. Reddy’s Laboratories. “Many pharma manufacturers and contract manufacturers maintain only two to three months of API supplies and other critical materials on hand.They need to consider increasing the inventory levels to four to six months. Even though the investment is higher, the ability to meet customer requirements is critical during any supply chain disruption. This will provide companies with a competitive advantage and allow the business to continue,” says Colicchio.
Having a stringent process for qualifying material suppliers is also important, according to Hamilton Lenox, senior vice-president, business development at LGM Pharma, an API sourcing and supply chain management company. “Ideally, to qualify manufacturers, you’d include an in-person visit or audit,” he says. Lenox also recommends having a dual-sourcing strategy for APIs and excipients. “If practical, we recommend having a second and third source identified and qualified; in the event something happened to your first one or two suppliers, you’re never left with just a single source.”
Understanding the supplier’s supply chain and looking for potential problems are key to de-risking the supply chain, says Lenox. “For example, if all your API suppliers are sourcing key raw materials from a single source or a single country or region, this is a risk. Diversification of the supply chain is critical. Another step is evaluating the safety stock of your suppliers; some maintain three to six months, while others order only on an as-needed basis; in a single-supplier situation with a disruption, even three to six months safety stock may not be enough. Check your suppliers’ safety stock system to ensure it meets your needs,” he says.
Lenox also recommends preparing for changes in demand by looking for flexibility in the commercial supply agreement. “If a single finished-dose supplier regularly runs at 90% capacity, maybe they can’t handle a surge, while one at 75% may have a short-term buffer to carry through a spike in demand,” he says.
Sponsor companies should take a long-term view when purchasing key starting materials (KSMs) and APIs sourced from countries such as China to be sure production can be sustained over months, says Colicchio. He suggests companies purchase additional volumes of key APIs in advance. “Taking a longer-term view of at least six months for key APIs will allow companies to remain competitive instead of staying with three months of supply of key APIs, for example,” Colicchio states.
Tomlin stresses that pharmaceutical companies must have more robust plans in place to establish supply alternatives. “It is important here to consider the depth of a sponsor company’s supplier network, and to look more closely at alternate procurement options for materials. This should take into consideration the normal lead time from order to availability, but also the geographical location of the origin as transportation and export/import regulatory compliance can have a negative impact on timelines for availability, particularly during unforeseen circumstances (such as the COVID-19 pandemic),” says Tomlin.
Broadening sourcing options and sourcing in different geographical areas reduces the risk of delayed materials, says Tomlin. “Reviewing a supplier’s disaster recovery plan in detail can help assess the level of risk associated with a supply chain.” Tomlin also states, “I think that having predetermined alternate options for sourcing in different geographical locations, and a plan to implement them, can help reduce the risk associated with supply from a single geographical location.”
Shailesh Vengurlekar, senior vice-president, quality and regulatory affairs at LGM Pharma, stresses not to get caught up in cost. “We evaluate what we call the Four Rs: Reputation, Resources, Reliability, and Regulatory History. Supply chain partners are business decisions and cannot be driven only by cost because lowest cost doesn’t factor in hidden costs,” Vengurlekar says.
The COVID-19 pandemic has forced the industry to work in new ways, including performing virtual audits and inspections of facilities and materials suppliers. But how effective are these tasks when done virtually? “Virtual inspections can be useful as a supplement but can only be an intermittent or temporary measure. In no way can they replace physical inspections, nor should they become a regular occurrence. The reason is that there is no way for a virtual inspection to ensure/validate compliance to GMP if they are used for a prolonged period or as a stand-alone effort,” says Badrot.
Colicchio warns that identifying compliance problems is difficult with virtual-only inspections and missed problems could lead to supply disruptions. “Much can remain hidden, and virtual inspections will likely not be able to see all potential production, warehousing, and facility issues and gaps at the site.This could lead to an inadequate inspection of an API producer that in turn could lead to quality problems with the API in a finished drug product.The API and finished drug product suppliers are critical nodes in the supply chain,” he says.
While virtual inspections may work for already qualified suppliers, Vengurlekar says that when it comes to choosing new suppliers, virtual inspections may impede the process. “In-person inspections let you walk around the facility, see how it’s maintained, check its water source and environmental monitoring. You can see the equipment to evaluate for potential cross contamination, and check lab spaces, storage, and warehousing. You cannot get that picture with a virtual inspection. That said, virtual inspections are suitable for previously qualified vendors. If you’ve already been there, a virtual visit is appropriate as someone explains a new process, since you’re just sharing documents and reviewing data. But for an initial process or facility inspection, you should rely on in-person inspection,” he says.
The testing of APIs and raw materials is crucial for ensuring that pharmaceutical products are safe and effective. And establishing incoming testing control protocols is necessary to be GMP-compliant, says Badrot. “Each company is required to have its own incoming testing control protocols to be GMP-compliant, and this level of testing will be fully integrated into the manufacturer’s quality control processes. When we receive incoming raw materials, everything is tested and documented according to our DMFs [drug master files] and CEPs [certificates of suitability]. In some cases where we see the need for extra traceability, we will work to develop and validate our own analytical methods to increase accuracy and reliability of our tests,” he says.
Tomlin states that materials testing is dependent on the project and the customer. “From an import/export regulatory perspective, documentation required varies widely dependent upon the nature and final use of the material being imported. From a US viewpoint, for example, there are considerations to be made from a US Customs perspective, but also other regulatory agencies such as the United States Department of Agriculture (USDA), Centers for Disease Control and Prevention (CDC), FDA, and US Fish and Wildlife Service (FWS),” he says.
LGM Pharma has separate procedures for qualified suppliers and new suppliers. The company requires a certificate of analysis (CoA), all shipping documents, and the material safety data sheets from suppliers that have already been audited and qualified, according to Lenox.“With a new supplier or with any concerns, we advise our clients to do the release testing themselves. It can be very dependent on the product and the nature of the relationship with the vendor—their reputation, reliability, qualification status,” he says.
“If LGM Pharma had a lab to conduct testing, in addition to obtaining the CoA, I’d want to perform two tests—an identification test and an assay or potency test. These are valuable as part of testing received materials,” adds Vengurlekar.
The pharmaceutical industry’s reliance on offshore API and raw materials manufacturers has been a topic of interest for several years, especially when incidents such as the heparin contamination in 2008 cause injury and deaths to patients (2). And complications arising from the COVID-19 pandemic have once again put the idea of moving the manufacturing of pharmaceutical ingredients from foreign to domestic facilities.
In the United States, calls for bringing pharmaceutical ingredient manufacturing onshore have increased recently from some political circles. In May 2020, the Biomedical Advanced Research and Development Authority (BARDA), part of the US Department of Health and Human Services, awarded a contract to the newly-formed Phlow Corp. to produce pharmaceutical components and critical drug products in the US (3); other measures by the federal government to move production onshore have been met with mixed responses (4).
While the use of foreign API and raw materials suppliers creates concerns about quality and drug shortages during global crises, the dependence on foreign suppliers has potentially hurt the US pharmaceutical industry from a business perspective, as well, according to Lenox. “There is a strategic argument to be made that we in the US have collectively weakened our supply chain position. Most generic production, particularly of APIs, has moved offshore, putting us at risk. If COVID-19, and the potential for geopolitical disruption such as a trade war with China, has taught us anything, it’s that we cannot be entirely dependent on an overseas supply chain. And we are. Even generic drug and API production in India is dependent on Chinese raw materials and key intermediate supply. We need to move in the direction of reshoring a portion of the pharmaceutical supply chain. But it’s not going to happen overnight. Our domestic pharma business model cannot support it, as China and India have efficient models that keep costs low because they aren’t accountable to the same legal, insurance, and other impacts. Chinese industry also enjoys the support of its government,” he says.
So, how would moving raw material manufacturing onshore impact the supply chain? Having domestic manufacturing of materials and APIs would eliminate the reliance on imports and stabilize the supply chain, says Badrot. He warns it will increase costs, “but quality will also improve and most importantly, so will reliability and availability of supply in times of crisis. Everything has a cost, and that [is] one well worth paying for.”
Is moving production of materials onshore feasible? Colicchio warns that onshoring will increase costs and it would take time to build or modify production facilities in the US to fulfill demand. “The cost of onshoring finished drug products will increase at least 30–40% when including production of APIs and KSMs from US-based production facilities. The onshoring of API and KSM production presents several issues including: high capital costs to build an API manufacturing facility with sufficient long-term capacity for global supply; long lead times for permit approvals; the higher labor cost to produce APIs in the US versus China and India; and the higher capital investment for abatement systems to minimize environmental problems associated with API production,” says Colicchio.
There would also be some cost savings, according to LGM Pharma’s Vengurlekar. “China captured the US market by providing low cost. It could provide drug product manufacturing at less than half the cost of domestic production. But what Big Pharma didn’t anticipate, or even ignored, as it moved much of the supply chain to China and India, was issues with quality and intellectual property. They also didn’t consider potential hidden costs, such as the cost of monitoring overseas production. It’s a net positive to reduce our reliance on overseas production,” says Vengurlekar.
Badrot stresses that while price and quality are two factors that industry will take into consideration when discussing the move to onshore materials manufacturing, those factors are not enough to change how things are currently done. Government mandates will be necessary to create significant change, he believes.
“Comprehensive policies and government funded initiatives are needed to encourage the implementation of innovative and flexible manufacturing assets (which already exist) that will allow countries to quickly establish sustainable and independent manufacturing supply chains for essential APIs and drug products,” Badrot says. “At the same time, establishing economical barriers to imports, whether in the form of preferred access regulations, mandates for domestic supply, financial grants, or import duties would further these efforts. The approach could be similar to the mandates the defense industry has for using locally made components and domestic manufacturing. And though some argue this is too difficult or costly to implement, it is in fact the only responsible way forward for governments to establish effective policies that protect their citizens when the next pandemic hits.”
Lenox agrees that government intervention might be necessary to promote moving pharmaceutical material production onshore. “We believe government incentives of some form are needed to get companies to reshore production, more so of APIs and raw materials than finished dose forms,” he says.
“The US must recover from its loss of small-scale manufacturing. The US should encourage this manufacturing industry to flourish here, to bring back one-product manufacturers or those that do a handful of products really well,” says Vengurlekar.
The safety of the pharmaceutical supply chain is of utmost importance during “normal” times; the COVID-19 pandemic has illuminated potential pitfalls of the pharma industry’s heavy reliance on a global supply chain for critical ingredients and drug products. Increasing domestic production of APIs and other pharmaceutical materials is an option for boosting the supply and ensuring the quality of these materials. However, such a transition has a long timeline.
But what can be done in the meantime? Colicchio says another option is increasing the safety stock of these materials. “The way to accomplish this is to increase the amount of the national stockpile and require any manufacturer working with the government to carry at least six months of finished drug products in the US distribution centers.It is important to also conduct stability studies to extend the shelf life of the drug products to increase the expiration dating when maintaining higher safety stocks. This will yield a positive impact on the supply chain,” he says.
Susan Haigney is managing editor at Pharmaceutical Technology.
Volume 44, Number 8
When referring to this article, please cite it as S. Haigney, "Ensuring a Safe and Robust Supply of Pharma Materials," Pharmaceutical Technology 44 (8) 2020.