Prescription for Supply Chain Visibility

The pharmaceutical supply chain is complex and the ability to track and trace products throughout the healthcare industry’s production and delivery cycles is becoming essential to ensure public safety. But for pharmaceutical manufacturers those capabilities also represent important cost savings opportunities—opportunities they traditionally hadn’t considered until market forces started narrowing their profit margins.

Today’s pharmaceutical industry may not be the model of supply chain efficiency and best practices, but give it just a couple more years. By that time, those pharma companies left standing after healthcare reform, new FDA regulations and global economic forces have had their way with them will be both logistically efficient and technologically savvy. Right now pharmaceutical manufacturers are mapping their way to that future.

“Most pharma supply chain executives would acknowledge that theirs is not the leading industry in terms of advanced practices,” says Wynn Bailey, partner at PricewaterhouseCoopers Management Consulting. “But almost all of our clients in pharmaceutical have transformational initiatives underway in supply chain. There’s a significant move in the industry being facilitated by the Food & Drug Administration (FDA) and other regulators to adopt processes where you build good quality in on the front end instead of inspect bad quality out on the back end. From a patient safety perspective the industry is quite focused.”

Tracking Chain of Custody

No pharma company has had that safety message drummed into it more powerfully than Johnson & Johnson. Its McNeil consumer healthcare unit has been involved in several recalls related to product contamination. Last year MH&L reported on recalls identifying wood pallets as a possible source of product contamination. Bob Douglass, consultant and commodity manager for J&J McNeil, says this has been an important lesson for managing chain-of-custody.

“Contamination did go from pallets to packages,” he says. “The spray used in curing the wood pallets didn’t dissipate entirely. Even if you package your product in a bottle within a corrugated case, when you put it on the pallet and ship it in containers from Puerto Rico, in high temperatures, fumes get into the products and over time it can leach from the bottle into the finished product.”

J&J McNeil now makes sure the wood pallets in its supply chain are heat treated and that every supplier in the chain of custody, from the primary to secondary suppliers as well as the raw materials manufacturers, changed their procedures for purchasing pallets.

“We’ve done a great job at J&J of mapping the chain of custody so if I know supplier XYZ down the road I have a database where I can go in and find their eight suppliers,” Douglass adds. “It’s taken us a year to get there but we’re there now.”

The FDA is raising the quality bar significantly for the entire pharmaceutical industry—and not just because of the recent J&J McNeil experience. With thinning profit margins, these companies realize they can no longer do everything themselves.

“Ten or fifteen years ago most large pharmaceutical companies had an entire chemical division, manufacturing the chemicals needed for their products,” Douglass observes. “That vertical integration model is changing dramatically. Companies are looking at their asset base and chopping. They’re typically able to source the identical chemicals, given the appropriate lead times to get them approved, at less than cost. Global sourcing is playing a much bigger role.”

Readying for E-Pedigree

A supply chain’s global reach makes establishing an electronic pedigree for the products traveling through it an important goal—one that many states in the U.S. are taking different routes to reach.

EPCglobal, the electronic data collection standards-making body, ratified an international Pedigree Standard in 2007. It specifies an XML description of the life history of a pharmaceutical product as it travels the supply chain. However, most states don’t go much further than requiring that these data get communicated—whether as text files, PDFs or spreadsheets.

California has gone the furthest in specifying an automated chain of information including advanced track and trace technology using the appropriate communication enablers (bar codes or RFID). The California Board of Pharmacy’s (CBoP) requirements will be phased in between 2015 and 2017, mandating an “interoperable electronic system” that will communicate a transaction from the pharma manufacturer all the way to the dispensing of the “saleable unit” drug product.