Vulnerabilities in the Global Supply Chain

Four main issues and how to safeguard your customers, the public and your brand from disaster


The global pharmaceutical supply chain is one of the most complex there is, as you may guess when looking at what the World Health Organization (WHO) says is a $300 billion a year—and rising—industry. The regulatory issues alone can be overwhelming. Security and supplier visibility also are vital.

“I think the major driver is that it’s very much a global supply chain,” says Don Hsieh, the director of commercial and industrial marketing for Tyco Integrated Security. “40 percent of finished drugs and 80 percent of active ingredients are imported. When you have a global supply chain, and a lot of different suppliers and distribution centers, the number of vulnerabilities is extensive.”

There is, of course, patient risk, but also brand-name and business risk. Following the 1982 Tylenol poisoning case that killed seven people in the Chicago area, it took years and millions of dollars to regain public trust and market share—even though the company had nothing to do with the incident.

 

The Issues

The industry, he points out, faces four sets of issues: intentional adulteration, cargo theft, counterfeit drugs and diversion.

  • “Intentional adulteration is usually for economic gain,” Hsieh says. “A few years ago, another product was substituted into Heparin [a commonly used anti-coagulant] and caused multiple deaths. Intentional adulteration is unique in pharma.” The U.S. Food and Drug Administration (USDA) reported that at least 81 deaths were believed to be linked to the incident from a raw Heparin ingredient imported from China, and that they also received 785 reports of serious injuries associated with the drug’s use.
  • “Cargo theft is another thing that affects pharma uniquely,” Hsieh points out. “In general, if you lose a product, you lose revenue, but in pharma, because it’s only tracked at the lot level, not shelf-keeping unit (SKU), if there’s a theft, the whole batch has to be destroyed. A couple of years ago, an Astellas driver’s truck was hijacked while he was taking a shower. The truck’s contents were a $10 million loss, but the total loss was actually $50 million just due to one cargo theft.” (Work is being done to trace contents down to the individual packing level. It requires some government and industry cooperation. Nothing is finalized yet.)
  • Even if counterfeiting drugs is done only for profit motives, the danger to health is real and serious. In an October operation in southern Africa, Interpol seized almost 100 tons of illicit and counterfeit medicines. More than 900 officers from five countries—Angola, Malawi, Swaziland, Tanzania and Zambia—took part in about 550 raids and inspections in marketplaces, pharmacies and clinics, along with illicit care centers and outlets in 30 cities and border points. The counterfeit medicines were estimated to be worth $3.5 million.
  • “Diversion is simply changing where the product is intended to go,” Hsieh explains. “Instead of going to one market, it’s sent to another. It may or may not do harm to health, but it’s not where it’s supposed to be. There was a major issue with Avastin in which counterfeit Turkish drugs were sold into the U.S.”

The National Association of Boards of Pharmacy (NABP) estimates that 1 to 2 percent of drugs in North America are fraudulent. Worldwide drug counterfeiting generated an estimated $75 billion in 2010, according to the Center for Medicine in the Public Interest. The NABP says that the composition of fraudulent drugs ranges from crude mixtures of glue, chalk and sugar to nearly exact chemical replicas of complex pharmaceuticals (see sidebar).

 

The Solutions

As pointed out, the spectrum of issues is wide and deep. The Pharmaceutical Security Institute tracks about 2,000 incidents a year. As with any business, Hsieh says, the first step is a risk assessment of your suppliers.

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