Preventing Medicine Shortages: Governments are Saying it’s Time for Transparency

Continuing legislative developments in the US and new government strategies in the UK and EU show that pressure for pharma supply chain visibility is growing.

It’s a new year, but the same pressures on pharma supply chains remain – and the increasingly similar responses from governments across the globe.

In the US, momentum continues towards regulation. Last year, Michigan Senator Gary Peters introduced the Mapping America’s Pharmaceutical Supply Act into the US Senate. The Act aims to boost the visibility of the pharma supply chain to identify reliance on foreign manufacturers and “chokepoints” in the supply.

As our guide to MAPS explains, the Act would require the Department of Health and Human Services (HHS) to establish a federal database to map the origin of each drug, including the location of manufacturing facilities and associated inspections and risks, and use this to identify risks to the supply chain and boost resiliency.

The bill is currently working its way through the Senate, having been referred to the Committee on Health, Education, Labor, and Pensions.

A New Legal Boost for Supply Chain Transparency

In the meantime, in January, the US House of Representatives saw its own version of the MAPS Act – again enjoying bilateral support being introduced by the Democrat representative for California Doris Matsui, and Indiana Republican Larry Bucshon. The content is largely the same, with a requirement for the HHS to establish a list of essential drugs and APIs and provide visibility of pharma supply chains.

“The [HHS], in coordination with the heads of other relevant agencies, shall support efforts, including through public-private partnerships, to map the entire United States pharmaceutical supply chain, from inception to distribution,” the bill mandates. The information should then be used to identify supply chain vulnerabilities “and other national security threats”.

As Matsui herself explained: “Recent drug shortages across the nation have made it acutely clear that we need to improve our ability to anticipate, identify, and respond to cracks in the system.

“The lack of end-to-end visibility into every step of our pharmaceutical supply chain means we don’t know the extent of our reliance on foreign agents for key drug ingredients, or how a natural disaster would impact the drug supply. The MAPS Act is a crucial step to provide us with a comprehensive roadmap. By increasing transparency, we can bolster the weaknesses in our supply chain and prevent future public health emergencies.”

Like the Senate bill, the House’s effort is also winning outside praise, with the American Hospital Association (AHA) lending its support.

“The AHA appreciates the efforts of Representatives Matsui and Bucshon to address the chronic and increasing drug shortages hospitals, health systems and patients are facing across the country,” said Lisa Kidder Hrobsky, AHA senior vice president for advocacy and political affairs.

A Wider Move to Supply Chain Resilience

The MAPS Act is not the only way the US legislature and government are taking a more active approach to boosting pharma supply chain resiliency.

As noted previously, another of Senator Peters’ bills is the Rolling Active Pharmaceutical Ingredient and Drug (RAPID) Reserve Act. Also focused on the HHS, it would require the department to contract OECD generic drug manufacturers to build reserves of critical drugs and prioritise domestic producers for federal contracts.

January also saw Florida become the first US state to gain FDA approval to import cheaper drugs from Canada to tackle surging prices in the US. While it’s the result of a law passed more than two decades ago, pressure has grown in recent years to see the freedom used.

President Biden’s executive order in 2021 called on the FDA to work on such import plans.

The FDA approval came despite opposition from the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Partnership for Safe Medicines, which say imports of unapproved drugs from Canada pose a danger to public health.

The FDA, however, said it was committed to working with states on such proposals so long as they “demonstrate the programs would result in significant cost savings to consumers without adding risk of exposure to unsafe or ineffective drugs”.

It’s not just the US, either, however.

A New UK Pharma Supply Chain Strategy

Like the US, the UK continues to suffer frequent supply chain shortages for essential medicines. Far from getting better since the end of the pandemic, they’ve worsened.

According to the British Generic Manufacturers Association, shortages have doubled since the start of 2022. Community Pharmacy England chief executive Janet Morrison said the shortages were unprecedented.

“Pharmacy teams have been struggling to get hold of prescription medicines for many months, but the problem is now worse than ever,” she told The Guardian.

Just a few days later, the government published its new strategy to protect critical imports and supply chains.

“The events of recent years have shown the world that we cannot afford to take for granted the resilience of the global supply chains which we rely on for our critical imports,” the foreword notes. “The COVID-19 pandemic, Russia’s illegal invasion of Ukraine, and disruption to shipping routes have all demonstrated the potential impact of global events on the reliable flow of vital goods.”

Its response is the strategy: The UK’s “first overarching strategy focussing on reliable access to the goods we need now and in the future”.

Among those it considers critical goods are those whose disruption would significantly impact essential services, the economy, national security or “life”, which includes “medicines and delivery of patient care”.

The health sector is also one of those considered as critical national infrastructure.

Promoting UK Supply Chain Transparency

The strategy notes that supply chain resilience is “a shared objective” for both government and suppliers, requiring dialogue between all parties. It also notes a range of measures already in place to promote transparency and resilience.

These include requirements for medicine manufacturers to report shortages to the Department for Health and Social Care (DHSC) and the National Supply Disruption Response established as a central point of contact for healthcare providers that have exhausted other options to maintain supply.

“Supply chain resilience is also an important consideration of awarding contracts to suppliers when procuring medicines and medical products, with a focus on developing available buffer stocks on British soil, such as in the case of generic medicines or high-use clinical consumables,” it adds.

In other sectors, it notes, the government has directly intervened in markets to ensure protection against profound shocks – requiring specific sectors such as defence to maintain stockpiles of critical goods for national security.

That is currently reserved for the most serious case, but the next steps in the government strategy will include a “framework to formalise government approach to supply chain shocks, setting out how government will work with business to ensure a coordinated response”.

EU Efforts for Supply Chain Resilience

What that framework will look like in the end is unclear. Different governments take different approaches, and there is no single solution to supply chain issues. Indeed, individual governments are – as in the US – employing a variety of strategies to keep essential medicines available and affordable.

It’s a similar story in the EU. Its recommendations published last summer to prevent antibiotics shortages included boosting production, monitoring supply and demand and promoting “prudent use” among the public. In December, meanwhile, the European Medicines Agency published its list of 260 critical drugs, including vaccines, painkillers and asthma medicines, which the European medicines regulatory network is to prioritise in EU-wide actions to strengthen their supply chain.

As the Financial Times reports, “proposals could include measures to encourage companies to stockpile products and diversify suppliers, investment incentives for new manufacturing plants in the EU and the introduction of joint procurement protocols as the bloc did with Covid-19 vaccines”.

The First Step Towards Improved Supply Chain Visibility

Whatever and wherever action is taken, however, supply chain transparency is an essential ingredient and a necessary first step.

Whether that comes directly through MAPS-type regulation or indirectly, in response to regulatory demands to identify and address vulnerabilities, will, in the end, make little difference.

It is the pharma businesses who are best placed to identify the criticalities and vulnerabilities that must be addressed to ensure resilience – and it is they who will face irresistible pressure to do so. It’s through technology such as SCAIR®, which helps identify choke points and common dependencies on APIs or manufacturing sources, that they can do so.

We can’t see the future for pharma supply chains, but we can know it’s going to have to be a lot more transparent.

More than Covid: Lessons for Supply Chain Resilience from 2020

Hard Truths from a Pandemic

Pharma and others in the life sciences shouldn’t let the lessons learned from the crisis go to waste. As we emerge on the other side, now is the time for a strategic review of supply chain vulnerabilities. Intersys Risk Director Catherine Geyman, takes stock of the situation.

It’s been an unprecedented year for life sciences. The pressure on both supply and demand as a result of the pandemic was unparalleled in modern times.

As Peter Ballard, Chair of the British Generic Manufacturers Association (BGMA) put it in the organisation’s review: “At the peak of the first wave in the UK, the pandemic derailed all sense of normality. It thrust healthcare and its supply chains into the forefront of public consciousness as the NHS staff struggled to keep pace with patient demand with the resultant knock-on effect to the medical supply chain.”

It was the perfect storm: huge increases in demand which could not have been planned for by the pre-covid supply base; and massive disruption to supply chains as a result of staff absences and government constraints.

In the UK, generic medicines make up more than three-quarters of all prescribed drugs. According to the BGMA, which represents UK-based generics manufacturers and suppliers, demand for some drugs was five to ten times higher than usual. At the same time, an export ban on active pharmaceutical ingredients (APIs) from India – accounting for about half of APIs used by British generic medicines – came in, in March. BGMA members reported a 24% reduction in supply from the country. Companies also saw a decline of over a fifth in finished products from India.

And it wasn’t just the UK, of course. We’ve looked at shortages in the US earlier in the year. There, our analysis showed that, with a few exceptions, shortages were mainly demand-driven, as the virus saw a clamour to get hold of certain anti-virals, anaesthetics and sedatives. Companies reporting new drug shortages in the US rose from 19 in January to 71 by April. Nor was it just a life sciences issues, even if the industry was hard hit. As the Harvard Business Review recently noted, “The supply shock that started in China in February and the demand shock that followed as the global economy shut down exposed vulnerabilities in the production strategies and supply chains of firms just about everywhere.”

With vaccines developed, this might be the beginning of the end for Covid. For those in pharma and the broader life sciences, though, it should just be the beginning of a strategic review of the impacts on their supply chains and what we can do differently in future to minimise disruption.

To quote the BGMA again: “COVID-19 has presented unprecedented challenges, but it would be unforgivable not to learn from those and apply that experience to the future.”

It’s in this spirit that I recently held a webinar on Understanding Risk in Pharmaceutical Supply Chains.

Learning the lessons?

As that webinar underlines, there are two reasons why we need to take this opportunity to look back before going forward. First, because it might be unwise even now to think the challenges the virus presents are at an end. The vaccine roll out will take time in the UK and elsewhere; the Pfizer supply chains themselves are already facing disruptions due to out of specification raw materials. Many still fear a third wave of the virus after Christmas. In other words, there are still plenty of opportunities to surprise and disrupt supply chains.

Even if we have managed to put this crisis behind us, the pandemic has shown what is possible. It could happen again. Businesses must prepare for the next crisis, not the last one.

It doesn’t take a worldwide catastrophe to cause supply chain disruptions, however. Well before this spring, drug shortages were again making themselves felt.

Unsurprisingly, there are several reasons for shortages. In some cases, it is other significant events; it’s worth remembering that before Covid the critical concern for the UK was Brexit, something of which we may shortly be reminded (particularly since buffer stocks put in place for Brexit have been used during the pandemic). US supply lines, meanwhile, have been repeatedly hit in recent years by hurricane activity in the likes of Puerto Rico.

But in addition to these significant disruptions to supply, there are a whole host of other, lower-impact, higher frequency events and risks that, if not managed, can escalate over time and eventually cause supply interruptions. They include failures to meet on-time, in-full (OTIF) targets as a result of delivery delays or batches not released; process variability, quality deviations or unreliable manufacturing or API plants; lower profile supply chain disruptions – the result of critical material shortages, facility damage or transit failures; and, finally, product shortages as a result of recalls or other regulatory intervention.

The majority of these events normally do not reach public scrutiny as they are usually handled and mitigated by having safety stock in place. If problems persist, however, that reserve can be eroded and eventually exhausted, resulting in drug shortages.

The critical point is that Covid did not always cause the weaknesses we’ve seen in supply chains. It often just revealed them.

Long-term fragility

To understand why, and how drug shortages have re-emerged to challenge the industry, it’s necessary to recognise the long-term trends that have increased companies’ exposure to supply chain disruptions. Three related themes are essential.

The first is the accountant’s drive to make supply chains more efficient that has seen businesses cut back on stock and redeploy backup facilities to productive use. Mergers and acquisitions resulting from the same push for efficiency, meanwhile, have reduced the number of suppliers for crucial APIs, eliminating redundancy in the supply chain. This a relatively simple point: By reducing both the range of alternative providers and internal production capability and stock levels, we’ve inevitably reduced the resilience of supply.

The second is again the result of the determination to cut costs: Outsourcing to countries with lower labour costs, which has focussed industry dependencies on fewer API or contract manufacturers. As noted above, this has resulted in businesses heavily dependent on India, and to a lesser extent China for APIs. Disruption in the event of an export ban or similar block on supplies will almost inevitably be felt downstream. Indeed, this issue rapidly came to the fore right from the start of the pandemic.

The industry’s decision to shift API production to Asia has also increased drug supplies’ reliance on jurisdictions with less mature regulatory systems and, hence, potentially lower standards. There is no escaping that the regulatory track record of China and India is demonstrably inferior to that of the UK, Europe or the US.

In the image below, the colour coding shows the frequency of OAIs (Official Action Indicated notices) issued to facilities by the FDA as a percentage of the number of inspections conducted. In the US and Europe, the likelihood of an OAI was usually below five or six per cent (green and light green). In China and India, the rate was more than eight per cent (red).

Source: research by Intersys Ltd as part of the ReMediES project.

That’s a particular issue because while manufacturing of APIs has moved to jurisdictions with arguably lower standards, regulatory requirements have, if anything, moved the other way.

In practice, this can result in disruptions to the supply chain in one of two ways. First, where a compliance failure occurs, the OAI often results in prolonged plant shutdowns for remediation. Second, remediations that result in major changes or new suppliers will take time to be approved by the regulators.

It’s an irony that the regulatory measures in place to protect patients, can count against the patient if something goes wrong in the supply chain and extensive regulatory re-approval is required for the solution to put it right. This is far from being a theoretical risk. An FDA report in 2019 showed that of 163 drugs that went into shortage from 2013 – 2017, 62% followed supply disruption associated with manufacturing or product quality problems. Moreover, there is an interplay between regulatory risks and the other vulnerabilities from long-term trends touched on above. As a result, certain types of drugs are particularly vulnerable to supply chain interruptions.

This is confirmed by both the FDA report and a study led by Intersys with the Institute for Manufacturing at the University of Cambridge, part of a cross-industry collaboration project called ReMediES, which revealed that 69% of product shortages in 2018 followed OAIs issued to the company reporting the shortage. Both studies showed that the drugs most likely to be in shortage were generic injectables, which require rigorous manufacturing processes but do not provide much profit margin as a result of competition. (A BMGA study of 40 originator products to come off patent since 2014, shows sale prices fell by an average of 89%.) Older drugs with a median time since first approval of almost 35 years are also more to be in shortage.

Price competition for older generics makes investment in robust quality management systems difficult. Moreover, in the event of an interruption that causes the drug to become scarce, low prices and regulatory hurdles discourage new market entrants from correcting the situation.

Seeing is believing

There’s one final factor that explains the rising disruption to supply chains, and it’s an important one: The increasingly global nature of life sciences businesses and the complexity of their supply chains has decreased visibility and oversight of them. The result is that both the underlying vulnerabilities and interruptions to supply chains are more difficult to detect and address.

As my presentation outlined, the life sciences supply chain takes in a broad range of other industries. These also vary considerably, depending on whether we consider biologics, traditional pharmaceuticals or medical devices. These bring a range of second-tier suppliers and contract manufacturers into consideration. As a result, life sciences businesses can find themselves exposed to a range of risks to livestock, chemicals or engineered components businesses.

Trying to predict the full range of possible events that could impact these suppliers is arguably impossible. What businesses can do, however, is to identify the most critical suppliers, and determine the value at risk for the critical dependencies of key products.

Understanding where these vulnerabilities lie enables the business to focus on these so that impacts on them are identified and responded to more quickly. Quantifying the value at risk, meanwhile, allows proper evaluation of risk mitigation options through a cost-benefit analysis.

Crucially, neither require you to anticipate what event might cause the disruption – only the vulnerabilities and value at risk. That’s important because it’s what the last year has really shown us: That we need to be ready for anything.

For more on these issues and particularly how SCAIR can help with identifying mapping, quantifying and addressing critical exposures, watch the webinar for free here.

Catherine Geyman, Director, Intersys Risk Ltd

Coronavirus Drug Shortages Highlight Pharma Supply Chain Dependency on China and India

Covid-19 threatens to cripple medicine supply lines bringing China, India dependency into sharp relief

Should pharma be panicking over the Coronavirus and Drug Shortages? Intersys Risk Director Catherine Geyman evaluates the tough choices facing pharma.

The epidemic has raised criticisms of the dependence on overseas supplies for our medicines, in particular active pharmaceutical ingredients (APIs) and generics in the pharma industry. The Economist’s recent piece, for instance, suggested that prior to Covid-19, there was widespread complacency.

“Until about the third week of January, only a few pharmaceutical executives, drug-safety inspectors and dogged China hawks cared that a large share of the world’s supply of antibiotics depends on a handful of Chinese factories,” its article opened, before continuing in similar vein.

Nor is it just industry outsiders. This week, the chairman of India’s Pharmaceuticals Export Promotion Council of India (Pharmexcil) said Europe was panicking following its government’s decision to restrict exports of 26 APIs (mainly to protect domestic supplies): “[W]e control almost 26% of the European formulations in the generic space. So they are panicking,” said Dinesh Dua.

This is unfair, however – at least as far as the pharma industry goes (and for quite a few others). It is not just a “few” executives who have been concerned about the reliance on China and India for APIs. Many European and US pharma supply chain managers have worried about it for years.

Governments, too, have noted the reliance on China with concern. Last year, a hearing of the U.S.-China Economic And Security Review Commission in Congress considered this very issue. Senator James M. Talent provided a concise summary: “According to the Food and Drug Administration, 13.4 percent of U.S. drugs and biologic imports are from China, as well as 39.3 percent of medical device imports, making China one of America's top sources for medical products. These numbers understate significantly the true sourcing of health products in China because China is also the primary supplier of precursors for pharmaceutical companies in other countries such as India which, in turn, are major suppliers of finished product to the United States.”

Strikingly, the hearing also heard that the US considers this a national security issue.

“The growing reliance of the U.S. on foreign sources for critical defence related material is an issue that must be addressed at the national level,” Christopher Priest, Chief of Staff for the Defence Health Agency Operations Directorate, which oversees the medical needs of the US Army, Navy, and Air Force, told the hearing.

Ultimately only time will reveal the true impact of Covid-19 on global pharmaceutical supply. Most well managed biopharma companies will hold significant stocks (months) of API to ensure their patients are protected from this type of unpredictable event. However, there is also a large number of low cost generic drugs that simply do not have the margin to support significant stock holdings, and many companies producing the same generic drug may be dependent on a single source of API in India or China. The global drugs market was already in a precarious position with drug shortages, so this is simply going to exacerbate that situation.

Quantifying the value of stock in terms of continuity of supply and identifying critical supply dependencies are key drivers of interest in tools like SCAIR®. Companies are increasingly urged by their stakeholders to understand and map their dependencies and exposures, precisely because they have been concerned about how vulnerable they are to a disruption.

Probabilities and pandemics

SCAIR®’s approach is to focus on impact rather than probability to ensure the company has taken measures to protect itself against major supply chain interruptions, regardless of their source. It is a more manageable challenge than quantifying likelihoods or assessing probabilities, which is a difficult task.

This is not just because it is hard to predict outcomes (after all, who really knows how far and fast Coronavirus will spread and the impact it will have?). It is also because we often don't understand probabilities and misinterpret risk terminology.

In a recent discussion of Covid-19 and risk perception on Radio 4’s World at One, Cambridge professor and chair of the Winton Centre for Risk and Evidence Communication, David Spiegelhalter made the point that most people don’t understand the term “reasonable worst case scenario”. That is despite it being a key phrase used in contingency planning activities for the Coronavirus and much else. It’s often taken as meaning a likely outcome, rather than as what it is: a catastrophic but credible scenario. A similar misunderstanding could often be detected in reporting around the Yellowhammer Brexit contingency planning.

As one critic of the resulting “hysteria” put it at the time: “It is not a prediction but a worst case scenario, helping the government in its planning to mitigate the risks.”

Even if we understand the terms, though, our brains are not well suited to evaluating probabilities, as another academic on the Radio 4 discussion pointed out. The “probability neglect bias” makes us less focussed on probabilities and more on outcomes, explained Dr Barbara Fasolo from the LSE: it’s the reason we panic over unlikely disasters and also why we bother playing the lottery.

In controlled experiments this bias leads to seemingly irrational behaviour. For example, people do not differentiate between a one percent probability of getting a non-lethal but painful electric shock, and a 99 per cent probability. In fact, they are willing to pay the same amount of money to avoid either set of odds. In real life, as with the Coronavirus, though, the probabilities themselves are massively unclear, which only makes rational judgements harder.

Consequently, impact quantification for scenarios rather than probability assessment is usually more helpful. You can spend an awful lot of time and money trying to work out the likelihood of each major interruption scenario, but that is usually wasted. It is much better to spend resource planning for and remediating the sources of risk that can do the most damage to your supply chains.

Hobson’s choice

However, once the assessment is done, there remains the challenge of the lack of attractive alternatives.

As stated, the dependence on China is not a new concern for pharma. Coronavirus has just brought it into relief. Recently, we’ve had concerns around the potential impact of the US China trade war, for example. More longstanding are concerns about quality – and that applies more so, if anything, to India. An analysis last summer showed that, of the 75 warning letters sent by the US FDA to pharma manufacturers for violating safety or quality standards in the 20 months to August 2019, half were to companies in China or India. For non-compliance notices from the European Medicines Agency, meanwhile, the proportion was almost two thirds (64%).

So why haven’t US and European pharma businesses addressed the risk?

For two related reasons: first, because change is difficult and expensive. Once a company has tuned its process to and validated its use of a certain type of API from a particular source, it is costly to replace and revalidate the source. There is therefore an in built bias to stay with current suppliers.

Second, while change is costly, APIs and generics are cheap. As we’ve noted before, there’s little incentive for new players to enter the market – and certainly not in Western countries where labour is relatively expensive and overheads are high. Moreover, as The Economist piece correctly states, the rest of the world will have lost a lot of its expertise in making APIs, and it’s difficult to start back up. We go back to what the FDA has called a “broken marketplace”, with prices not rising despite shortages and production typically not increasing enough to restore supply to pre-shortage levels.

Pharma has long noted the risks of reliance on Chinese sources, but a cost-risk-benefit analysis has so far always come down in favour of the status quo – because it’s cheap.

One exception to this is Sanofi who recently announced the creation of a France-based offshoot that will produce APIs. We’ll have to wait and see if other businesses will follow suit.

No upside in Covid-19

So, will Coronavirus force pharma to rearrange their supply chains? We shouldn’t bet on it – at least in the short term.

In the long term, the rise of the Chinese middle class and increase in wages means that the future of cheap production in the country is uncertain. And, when it finally looks like it is no longer economical, it may well be that pharma businesses learn from the past and don’t simply look for the next cheap production base.

In the meantime, though, businesses face significant costs and disruption of changing suppliers – and massive uncertainty over how the pandemic will develop and the potential disruption involved. It’s hard to justify the move.

Of course, in a sense this is a similar dilemma to that facing governments around the world as they determine what and how far to go in combatting the spread of the virus. Do too much, and if they succeed they will be said to have over-reacted; too little and they’ll be blamed for the consequences as the virus spreads. It’s a no-win situation. But governments have relatively unlimited resources, and risk only their popularity, which may recover by the next time their public heads to the polls. Pharma businesses don’t have that luxury – a rash move could cost them their competitiveness and ultimately profits.

For the time being then, most will choose to sit tight and wait to see if change is forced upon them. But that doesn’t mean they can’t be ready.

With tools like SCAIR® managers can map their supply chain dependencies and exposures. Soon with functionality we’re adding they’ll even be able to overlay custom events (such pandemic hotspots) to further quantify impacts and scenarios. With this they can see dependencies, loss estimates, vulnerabilities, and the ultimate financial impact of events, so they can be ready to act if the time comes.

If you want to be prepared for the worst, let alone avoid it, it pays to know what the worst might look like.

Catherine Geyman, Director, Intersys Risk Ltd

Regulatory Risks for Pharma in Brexit Uncertainty

The Regulatory Impact of No-Deal Brexit on the Pharmaceutical Sector

In the first of a new series of industry insight articles, Intersys Risk Ltd Director Catherine Geyman, examines the various legal risks to the pharma sector posed by a no-deal Brexit.

Importers, distributors, pharmacists and others face a fast-changing legal environment in the event of no-deal

With Boris Johnson taking the keys to number 10, the prospect of a no-deal Brexit looms large. It is “do or die” when it comes to departing in October, he says, and the risk is probably at its highest since March, before Theresa May first confirmed she would ask for an extension to our departure date.

With that realisation, many of the now well-worn discussions about the risks of disruption to the pharma supply chain are resurfacing. But, as the chances of leaving the EU without a deal grow, new risks are also coming into focus – not least the legal framework in which drug companies operate.

Looming liability for pharma distribution

Of course, it’s long been recognised that the regulatory framework for the UK industry is heavily reliant on more than four decade’s worth of acquis communautaire. As we’ve looked at before, that change will manifest itself physically, with the European Medicines Agency in London relocating to Amsterdam, as the UK ceases to be a member.

More recently, however, we’ve also had some indications of what that may mean in practice – and the changes are far from being simply symbolic.

As this piece by a product liability expert makes clear, for example, it threatens serious consequences for those importing drugs. Distributors importing products (including pharmaceuticals) from the EU and selling them to retailers currently benefit from a level of protection against liability for personal injury due to a product defect: Provided they have conducted due diligence on the supplier and its product, they won’t be held at fault. Rather, it’s likely to be the manufacturer that bears the cost; and within the EU consumers can seek compensation from the manufacturer even where they’re in another country.

That changes if we leave the EU without a deal, however, as the expert explains: “As an importer into the UK, the distributor will be liable to the injured person as if he were the manufacturer.”

Moreover, for injured parties, making a claim against the EU-based manufacturer is likely to become much more complex, and much less likely to succeed after Brexit. This will make the UK importer the more viable and likely target for any consumer seeking compensation.

That’s a significant change, and one for which there’s been little discussion or debate, and for which there is likely to be widespread ignorance in the sector. The advice for importers is relatively simple: “[They] should review their product liability insurance,” writes the expert.

It is, though, just another overhead already hard-pressed businesses will not relish having to take on board.

Serious Shortage Protocols

It’s far from the only change the pharma supply chain faces, either.

This month, for instance, Amendments to the National Health Service (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013 made in June came into effect. These introduce Serious Shortage Protocols (SSPs) into the terms of service for NHS community pharmacies. As the Pharmaceutical Services Negotiating Committee explains, if an SSP is put in place for a product, a retail pharmacy business or a dispensing appliance contractor must consider supplying in accordance with the SSP rather than fulfilling an NHS prescription for that product.

In practice, this means that, to protect supplies of a drug where shortages are an issue, the pharmacy can use the relevant SSP when fulfilling a prescription to dispense less of the drug, give a different strength, or provide an alternative product. Use or otherwise of SSPs could therefore have significant impacts for the supply chain of not only the product for which the SSP applies but also, depending on the terms of the protocol, likely alternatives that the pharmacists may choose.

On the one hand, this provides additional flexibility in the supply chain and should help minimise disruption. On the other, though, the impact is going to be difficult to predict – not least because pharmacists still have discretion as to whether to use the SSP. They only have an obligation to consider it, and if they consider supplying a different product or quantity is unreasonable or inappropriate, they can choose to fulfil the prescription as written.

Preparing for anything

In fact, every part of the supply chain is likely to be affected by the legal changes Brexit will bring. In June the government published guidance on the “written confirmation” that will be required for each shipment of Active Substances manufactured in the UK exported to the European Economic Area in the event of a no-deal exit; and that followed guidance on how to apply for a certificate of pharmaceutical product.

Regulatory resources

All this preparation is encouraging – even if it means there’s a lot to take in and there are resources that can help pharma businesses keep abreast. TOPRA’s site for professionals in healthcare is one useful site, while, in April, the House of Commons library published an overview of the current state of regulations relating to medicines, and how that might change. But one line from the introduction to the that briefing jumps out:

“It is still not known how medicines will be regulated when the UK leaves the EU.”

Unfortunately, three years on from the vote to leave the EU and – possibly just three months before we actually do – that remains true. All pharma businesses across the supply chain can do is, first, keep a watchful eye out for regulatory developments as they become clear; and, second, keep their supply chain risks under constant review as the legal landscape continues to change around them.

Catherine Geyman, Director, Intersys Risk Ltd

When the storm comes

Hurricane Irma once again shows us the importance of mapping supply chain risks for the pharmaceuticals industry.

The storm has passed, but the effects will be felt for months to come. In the Florida Keys up to a quarter of homes in the low-lying islands are reported to have been destroyed. Many in the Caribbean have had it worse.

There will, as always, be lessons for industries, including pharma. Puerto Rico, for example, is a huge centre for pharma manufacturers – the fifth biggest in the world with more than 80 plants. It accounts for about a quarter of the country’s GDP.

The island was actually spared the worst of the hurricane, but still three died, 50,000 were left without water and 600,000 without power. The storm served once again to expose the fragility of the island’s infrastructure. Nor are hurricanes the only recent disruption to hit the island. Only at the start of the summer did it declare its outbreak of the Zika virus over, after it infected more than 40,000.

Weather risk: an unavoidable reality

It’s not just Puerto Rico, of course; Irma brought potential for disruption across the Caribbean, to Florida and on inland. And it’s not just Irma; it followed hard on the heels of hurricane Harvey.

The industry has got better in recent years at dealing with these events, not least because of government encouragement to avoid disruption to medical supplies that can exacerbate the tragedy. One of the untold stories of both hurricanes Harvey and Irma is the shortage of urgently needed medicines; untold, because the problem was largely avoided with some improved planning.

But we’ll be tested again. Yes, hurricane Irma was unusually strong, but we’ve seen storms this powerful – and perhaps more so – before. We’ll see them again. The role of climate change in developing such storms will continue to be debated. What’s unarguable is that pharma – and a wide range of other industries with global supply chains – will always be at risk of exposure.

Preparing in advance for real resilience

Modern technology is a big part of the answer to managing this risk. The information businesses and the public have on a hurricane’s trajectories and strength is unparalleled; they can now track it online in real-time. Combine that with modern software solutions and we can quickly map risks for at-a-glance understanding of exposures.

That’s always useful in directing emergency responses when the storm comes. It’s more useful, though, used to map exposures and build resilience through continuity plans before. The power of Irma may have been a surprise, but storms in the hurricane season are not. Fortunately, we have the tools to weather them well; we just need to make sure we use them.

Could the Impending ‘Solar Max’ be the Next Disaster to Hit Global Supply Chains?

Compared to sudden economic downturns, terrorist attacks, floods, earthquakes, tsunamis and the like, the next potential disaster to hit global supply chains could be pretty left-field. It's all to do with the cyclic behaviour of the sun...

The sun's magnetic field experiences cyclic changes that peak every 11 years (known as the 'Solar Maximum' or 'Solar Max'). This is when the sun is at its most active and when severe space weather events can occur. The next Solar Max peak periods are due in 2011/12 and are predicted to be the most intense for 50 years.

The strongest solar activity was recorded in1957-8, when the world was on the verge of a technical revolution, having just catapulted Sputnik into space. Back then the US experienced a radio blackout that cut it off from the rest of the world, and voltages in electrical telegraph circuits exceeded 320 volts in Newfoundland. On that basis, the impact of the stronger activity that is predicted for 2012 is almost incomprehensible.

During a Solar Max, violent solar flares (atomic explosions) blast out from the sun at high velocity. Emissions from the flares (charged particles that form an ash cloud) produce intense bursts of radio noise that can disrupt GPS satellite navigation. Aircraft navigation systems can be particularly affected. And with the impending Solar Max having the potential to completely drown out GPS signals, the commercial aviation industry is understandably worried.

GPS is also used for emergency rescues and to synchronise power grids and mobile phone networks. Electrical disturbance and damage to power grids (caused by solar activity) can also result in closures of businesses, schools, hospitals, government buildings, etc. as well as disrupting countless domestic homes.

Returning to commercial aviation, although planes can fly without GPS, power outages can force air traffic controllers to increase the distance between aircraft, and to slow take-offs and landings, causing (massively expensive) flight delays.

Who would have thought that an ash cloud could create so much havoc!

The good news is that the potential threat of a Solar Max can be effectively risk managed. For any Risk Management/DR Specialist worth their salt, a Solar Max represents the ultimate challenge, in fact. A risk management expert will thrive on advising and guiding business infrastructure managers on the best 'solar flare-proof' steps to take, such as the implementation of:

A back-up generator supply - to ensure critical systems can be powered
Financial exposure/loss minimisation strategies - data system and software back-up plans to maintain uninterrupted customer-related operations (customer-facing operations, customer-service provision, etc.)
Uninterrupted communication systems - for communication between management and staff, staff and customers...

These (and other safeguards) could mean the difference between a company continuing to trade as normally as possible during a Solar Max, or even going out of business altogether.

For any company, having a tailored contingent business-interruption plan in place well before the Solar Max is prudent. But understanding how resilient your global supply chains are to potentially catastrophic scenarios is paramount. With the next Solar Max drawing closer by the day, it’s essential for infrastructure managers to ACT NOW!

Sources:
http://www.universetoday.com/14645/2012-no-killer-solar-flare/
http://www.newscientist.com/article/dn10189-solar-flares-will-disrupt-gps-in-2011.html
http://www.mekabay.com/infosecmgmt/solarmax.pdf
http://www.solarstorms.org/SRefStorms.html

Severe Weather Tests Supply Chain Contingency Planning

There certainly is a spectrum of views on the UK’s ability to plan for and react to extreme weather events. These range from the average man on the street complaining that the UK will always grind to a halt after only 1 cm of snow, to the opinion that we are learning from previous cold weather experience and beginning to become more resilient as a nation.

The recent performance of BAA and Northern Ireland Water suggest that the contingency plans of some infrastructure organisations have not accounted for extreme disruption scenarios. However, there may be some small glimmer of light at the end of the tunnel in the form of a review of the local authorities’ response to this year’s cold snap. This complementary report indicates that the local authorities have learnt lessons from the previous two winters.

Can any differences in performance between local authorities and infrastructure organisations be attributed to the difference in mandatory contingency planning requirements for first responders (governmental bodies, the NHS) and second responders (utility companies)?

Or is it more to do with the level of scrutiny following the disruption during the previous two winters (reported to cost the UK economy £1bn), which resulted in the Winter Resilience Review (final findings published Oct 2010)?

Either way, UK Plc appears to have applied some sound supply chain risk management principles in order to improve their local response efforts to the December snowfalls, namely:

- Alternative sourcing options. By exercising ‘contingency’ contracts, farmers and their tractors were quickly mobilised with their snow ploughs to clear the highways.

- Increased buffer stock. Following the well-publicised shortage of gritting salt last year, the government has taken decisive action to increase the national salt stock pile and then make local authorities pay through the nose if their own stocks are inadequate and they need more in a hurry.

As with most supply chain contingency planning, it’s all about justifying the investment in the solution by quantifying the potential impact of the threat.