Pharma Supply Chains (Part 1): A problem of focus versus avarice?

Posted by on Oct 11, 2011 | Comments Off on Pharma Supply Chains (Part 1): A problem of focus versus avarice?

A report from PricewaterhouseCoopers (PwC) entitled “Supplying The Future: Which Path Will You Take?”, believes that the pharmaceutical supply chain will not be able to cope with new products as it is inefficient and underused. The reason for this conclusion is that PwC believe pharmaceutical companies are too focused on developing new products and regulatory issues while their manufacturing capability and supply chain is being overlooked.

from February 24th, 2011 About.com article “Pharmaceutical Supply Chain Issues” by Martin Murray

It is an interesting paradigm in which the effort to balance innovation and the introduction of newer drugs and treatments centering on illnesses such as Parkinson’s, could have such a significant impact on a pharmaceutical company’s supply chain so as to effect it’s current offerings.

After all, and if I follow the development and launch cycle of a new product in the high tech sector as described to me by a friend who works in this area for Cisco, an impact on existing product lines seems unlikely as such development usually takes place in relative isolation in relation to existing lines. Therefore the suggestion that the recently reported shortages of existing drugs that are essential to treating diseases such as cancer due to innovation and medical breakthroughs seems remote. Or is it?

To start, innovation in the medical profession is an ongoing and complicated process in which expected breakthroughs offer the promises for longer and healthier lives. In fact in my December 31st, 2010 segment with healthcare expert and author of the book Navigating The Healthcare Maze Jeff Knott, we reviewed the years most promising top ten medical breakthroughs and their expected impact on the industry.

What was most interesting is that unlike a Cisco which doesn’t have to contend with the same regulatory compliances that say a Johnson & Johnson does, the stakes of innovation in the pharmaceutical industry seem to be much higher and riskier than other industries which by and large do appear to operate in relative world of self-determination in which consequences for a product miss are delivered by the end user as opposed to a regulatory body such as the FDA.

Although I am certain that from the standpoint of having to stand before a congressional hearing as a result of an accelerator problem with their cars Toyota executives would beg to differ as it relates to this assertion.

Automotive industry exceptions aside, in which grievous infractions – anyone remember the Pinto’s gas tank that exploded on impact – generated a resounding outcry from the public, no other industry seems to be shackled or scrutinized in terms of new product launches to the same degree as the pharmaceutical industry. Based on both the civil and criminal convictions of late within the sector, whether or not such scrutiny is justified is a discussion for another day. For today, the real question is whether or not reports such as the one offered by Price Waterhouse Coopers points to an indigenous supply chain problem relating to new products and its effects on delivering existing drugs in the face of a decline in demand or, a demand that fails to generate the necessary revenues to warrant further production. In short, and if not directly, do the normal and expected challenges associated with a new product introduction actually have a direct impact on existing product lines or, is it merely a convenient excuse for the drug companies to drop offerings that are no longer generating the required revenues . . . even if said cessation has a negative impact on the public?

Click to access PwC Report

This of course is the moral divide that separates the pharmaceutical industry from all others, in that a Cisco is unlikely to garner the same widespread general public outcry for discontinuing a router that say a Schering Canada Inc. is for the lack of availability for its Caelyx drug, which is used to treat ovarian and other types of cancer.

It is also the point at which we come to the proverbial fork in the road as to the reason or reasons behind the shortages.

If you ascribe to the government’s take on why there are interruptions in the supply of such vital yet decreasingly profitable drugs, they are as pointed out in the August 18th, 2011 Globe & Mail article, due to an increased concentration of drug manufacturers. In essence, declining competition brought about by mergers and acquisitions such as was the case with Schering Canada’s parent Schering-Plough who, in a US$41 billion deal merged with competitor Merck in November 2009, are the reasons behind diminished capacity and availability as opposed to the reasons cited in the PwC Report.

Even though the PwC report focuses its attention on the development and launch of new products and the resulting logistical challenges in the here and now, pharmaceutical companies have been in the business for some time and as such the failure to reference supply chain problems with the launch of previous products and how those were addressed so as to enable drug companies to generate the profits they have for so very many years, represents a big hole in the firm’s research.

In short, and as is the case with the ongoing evolution in the product development process, manufacturing techniques and distribution management that has through the ages impacted business as a whole, being singularly focused on the introduction of new products fails to establish an historic trend through which one could identify the real reasons behind the recent shortages. Or to put it another way, and if one is to believe that improvements in current or future supply chain processes can also be applied (at least in principle) to existing offerings, the issues of product shortages and a changing global supply landscape are not mutually exclusive and therefore must be viewed through a collective versus isolated lens.

The real impact of drug shortages

It is within this context or view that I will in Part 3 of the series, examine more closely the four potential supply chain options highlighted in the PwC report, two of which are directed towards companies whose focus is on specialist therapies and treatment for orphan diseases and, the remaining two options for companies focused on mass market medicines.

Next Installment: Pharma Supply Chains (Part 2): The cornerstones for improved delivery!

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