What is the MAPS Act? A Guide to the Mapping America’s Pharmaceutical Supply Act

In a muddle over MAPS? Read our brief introduction to the pharma supply chain visibility legislation currently making its way through the US Senate.

Pressure for government action to bolster the resilience of pharma supply chains has been building in the US for some time.

Among Joe Biden’s first actions as US President, a little more than a month after coming to power in January 2021, was Executive Order 14017. It aimed to “strengthen the resilience of America’s supply chains”.

Pharmaceuticals were a key focus.

That led to the 100-day supply chain review in June that year and, subsequently, the Department of Health and Human Services (HHS) Essential Medicines Supply Chain and Manufacturing Resilience Assessment the following May.

Background – The Road to the First Pharma Supply Chain Bill

But while the executive continues to cajole the industry, other branches of government are pushing forward their plans. In the legislature, Michigan Senator Gary Peters has long taken an interest in pharma shortages and the supply chain issues that often underpin them.

In August 2019, as Ranking Member of the Senate Homeland Security and Governmental Affairs Committee, Peters wrote to the FDA expressing concern over ongoing drug shortages – at the time, the highest in almost five years.

“Drug shortages are creating devastating health and economic consequences for patients, hospitals, and consumers. For patients, the impact on care is significant, as shortages cause delays when receiving emergency medications, undergoing medical procedures, and obtaining needed prescription drugs,” he warned.

That led to a report later in the year on “skyrocketing prescription drug prices and drug shortages”. It noted many of the now familiar issues around drug supply chain resilience, such as the reliance on China and India for active pharmaceutical ingredients. Rising prices and the shortages that often prompted them weren’t just a public health issue, Peters maintained, but a “national security crisis”.

By this year, and in the aftermath of the pandemic, the senator’s focus on supply chain vulnerabilities had intensified. A new report in March showed that “[D]rug shortages, as well as a lack of transparency into our pharmaceutical supply chains, present an ongoing national security risk and have made it harder for health care professionals to treat patients.”

The report found that between 2021 and 2022, new drug shortages increased by nearly 30 per cent. It also found that over 90 per cent of generic injectable drugs used to treat serious injuries or illnesses in the US relied on critical materials from China and India, and nearly 90 per cent of generic API manufacturing sites were located overseas.

Supply Chain Visibility as a Critical Issue

According to the report, tackling vulnerabilities was complicated by a lack of visibility in the supply chain.

“Neither the federal government nor industry has end-to-end visibility of the pharmaceutical supply chain – from the key starting materials, APIs, finished dosage and various other manufacturers that are ‘upstream’ – to the ‘downstream’ suppliers, which include purchasers and providers. This lack of transparency limits the federal government’s ability to proactively identify and address drug shortages,” the report notes.

It continues: “Although some generic drugs appear to have multiple and diverse drug suppliers, they in fact may rely on the same API source or manufacturer. As a result, the universe of actual suppliers for a particular drug may be much smaller than it appears, increasing the risk of shortage if that API source or manufacturer withdraws supply. The FDA is currently unable to assess the percentage of life-supporting and life-sustaining medications that have fewer than three manufacturers or rely on only one API supplier because the FDA does not have a list of life-supporting and life-sustaining drugs.”

Following the report’s release, Peters convened a full Homeland Security and Governmental Affairs Committee hearing  to discuss its findings and recommendations.

“Drug shortages are not new. There are a number of factors that contribute to drug shortages, including economic drivers that lead to a lack of manufacturers willing to enter or remain in the market or invest in quality manufacturing systems, insufficient visibility into the entire supply chain for critical medications, and an overreliance on foreign and geographically concentrated sources for the materials needed to make these drugs,” Peters said at the opening of the hearing.

MAPS Introduced

All this led Peters and other senators to introduce two pieces of legislation to the Senate in July.

One, the Rolling Active Pharmaceutical Ingredient and Drug (RAPID) Reserve Act, introduced on July 26, 2023, aims to increase the supply of critical medications and mitigate “the national security threat posed by our nation’s overreliance on China for critical medications”.

It would do so by requiring the Department of Health and Human Services (HHS) to award contracts to “quality generic drug manufacturers” in the US or another OECD country to build and maintain reserves of critical drugs; oblige these contractors to keep sufficient reserves of key ingredients and finished drug products and production capacity to prevent potential shortages; and prioritise domestic producers for federal contracts.

The other, introduced just over a week before on July 18, with senators James Lankford and Mike Braun, was The Mapping America’s Pharmaceutical Supply (MAPS) Act – specifically aimed at boosting supply chain visibility as key to building resilience.

“As we saw firsthand during the COVID-19 pandemic, federal agencies did not have enough visibility into our reliance on foreign manufacturers and other chokepoints in the supply chain, limiting their ability to anticipate and respond to drug shortages and related challenges,” said Peters, introducing the bill. “This bipartisan legislation will provide the federal government with a more comprehensive understanding of the weaknesses in our pharmaceutical supply chains so we can take steps to address them and prevent future shortages.”

“This bill will shed light on the weaknesses in our pharmaceutical supply chains and allow us to make better informed decisions to address vulnerabilities in our drug supply chain,” added his cosponsor Senator Braun.

Mapping America’s Pharmaceutical Supply Act – Key Provisions

The bill consists of three key requirements:

It also requires the HSS to identify and regularly update a list of essential medicines, including both the drugs of their APIs.

These are defined as those likely to be required to respond to a public health emergency or chemical, biological, radiological, or nuclear threat and those for which a shortage would pose a significant risk to the US health system or at-risk populations.

The bill's text makes clear how ambitious this is, stating that the intention is to map “the entire United States pharmaceutical supply chain, from inception to distribution”.

That includes the location of API and finished dosage forms of the essential medicines, including “the amount of such ingredients and finished dosage forms produced at each such establishment” and establishments involved in producing the key starting materials and excipients needed to produce the APIs.

It also requires the HSS to keep a database of regulatory actions, including with respect to labelling requirements, registration and listing information, recalls, inclusion on current and prior drug shortage lists and discontinuances of the medicines.

A Joint Effort – Pharma Industry Responsibilities Under MAPS

The need for private sector involvement is clearly stated in the bill’s text.

First, right at the outset, the proposed legislation clarifies that the supply chain mapping by the HSS is to be done in coordination with other relevant agencies, such as the Secretary of Defense and the Secretary of Homeland Security, “including through public-private partnerships”.

Second, the list of essential medicines is also to be drawn up (and maintained) “in coordination with the private sector”.

Moreover, where obligations on the industry are not explicitly set out in the text, they are heavily implied. Without massive industry input, it is impossible to see how the HSS could map the “entire” supply chain – from inception to distribution.

Should it try, its efforts are unlikely to be the last word: The bill provides that within 18 months of its enactment, the HSS must report on “gaps in data needed for full implementation”.

Next Steps for the MAPS Act

The Act has already received significant bipartisan support inside the Senate and from outside organisations, such as the American Society of Health-System Pharmacists (ASHP), the American Society of Clinical Oncology, the American Hospital Association (AHA), United States Pharmacopeia (USP).

In a virtual summit in September on Drug Shortages co-hosted by USP, Peters reiterated his call to push through legislation: “We must urgently put these solutions in place to ensure that everyone can access the lifesaving medications that they need,” Peters told summit attendees.

While MAPS is not yet law, previous efforts will give supporters cause for optimism: In June, the President signed three bipartisan bills authored by Peters to bolster cybersecurity, including the Supply Chain Security Training Act.

His bill to strengthen US supply chains and domestic production capacity in relation to homeland security has also passed the committee stage.

It may be some time before MAPS is signed into law – or perhaps it will be usurped by legislation originating elsewhere. However, as we’ve said before, change is coming. The proposed legislation vindicates what we’ve long argued: That supply chain resilience begins with supply chain visibility.

Pharmaceutical supply chain risk management software such as SCAIR® is specifically designed to address the issues highlighted by the Senate report that helped prompt the legislation, such as the concentration of risk through reliance on common API or manufacturing sources. As it noted, the “universe of actual suppliers for a particular drug may be much smaller than it appears”. SCAIR® is the x-ray vision that reveals these hidden vulnerabilities.

Likewise, the Act is right to focus on identifying critical drugs and points of vulnerability – not relying on the impossible task of identifying all the potential sources of disruption. Again, this is the approach we’ve long taken with SCAIR® – helping focus on impacts, not causes.  

We’ve long believed this is the best route to supply chain resilience. Increasingly, it seems likely to be the approach governments will insist the industry takes to ensure the supply of critical drugs is maintained.

Acting now, using tools such as SCAIR® to gain visibility – and sharing it as required – will enable pharma businesses to ensure the relevant authorities see them as allies rather than obstacles in that effort.

An Enterprise Risk Management Approach for Pharma Supply Chains

A changing risk landscape as disruptions become more persistent and frequent while regulators’ demands for resilience grow calls for a broader, more structured approach to managing supply chains.

When does “disruption” become the norm? Whether it is extreme weather, political and trade disputes or regulatory action, pharma and life sciences businesses – and their customers – have long contended with periodic interruptions to supplies.

Various trends in recent decades have put increasing strain on pharmaceutical supply chains. The complexity of pharma supplies, the move towards just-in-time manufacturing, the reliance on India and China for active ingredients, low prices, climate change and ever tighter regulatory requirements (more on this later) have all contributed to an environment where disruption, if not inevitable, is expected.

In that context, the Covid pandemic and its impact (including drug shortages from surging demand) added to the supply chain risk vocabulary, but it didn’t invent the language.

Cancer Drug Shortages

There are, however, two trends in the aftermath that have subtly altered the landscape. The first is the persistence of shortages.

One commentator notes: “The US has faced shortages of medical devices, drugs, and other key healthcare products since the onset of the pandemic, but these shortages have continued into this year.”

For some supply chains, disruptions are not just temporary blips in production but evolving yet permanent features. In US non-profit ECRI’s survey of nearly 2,000 respondents on drug, supply, and equipment shortages, a majority said shortages compromised patient care.

“Many of the respondents clearly communicated their struggles to address shortages which are occurring at an alarming rate, making it nearly impossible to provide safe, high-quality patient care in a fiscally responsible manner,” it noted. For good measure, it added that many were concerned that tornado damage to the Pfizer plant in North Carolina could worsen drug shortages – a reminder that traditional disruptions are never far away.

Disruptions are increasingly persistent, frequent and widespread. And they’re often as serious as can be. Only in September was the Biden administration in the US able to announce that supplies of cisplatin, a critical chemotherapy drug, were up to almost pre-shortage levels, but even for it, shortages remain, while shortages of carboplatin and methotrexate, though improving, persisted and concerns were growing for other cancer drugs.

In the National Comprehensive Cancer Network survey of 29 cancer centres over 86% reported a shortage of at least one cancer drug.

New Supply Chain Regulation

The other trend is not unrelated: A new interest in and interventionist attitude to supply chain shortages on the part of governments.

Of course, as mentioned, regulation has long been a contributor to supply chain shortages. High quality and safety standards across life sciences ensure safety but frequently jeopardise supply. Non-compliance with consequent regulatory action is a common cause underlying many shortages. It’s why SCAIR®'s Regulatory Incident Monitor, providing compliance trending and alerts, is such a simple yet powerful tool, giving rapid access to any supplier’s complete non-compliance history.

Regulatory enforcement actions continue to cause disruptions to supply chains. More broadly, new regulations can threaten to disrupt supplies. (The European Federation of Pharmaceutical Industries and Associations is currently warning that EU proposals to ban fluorinated substances could put 600 essential medicines at risk, leading manufacturing in Europe to “grind to a halt). Rule makers rightly determined to protect the public, sometimes can inadvertently put them at risk.  

But in addition to restrictions that can disrupt supplies, recent regulatory developments could arguably put more direct pressure on businesses to enhance their supply chain resilience. Governments are increasingly looking at positive obligations to ensure supply. As one consultant has written, the stream of disruptions we’ve seen, from Covid and Brexit to the invasion of Ukraine and the Suez Canal obstructions, have focused governments and public bodies on the issue.

“[M]ajor health authorities around the world have been issuing new recommendations to Life Sciences manufacturers and their supply chain partners to ensure that in the future vital drug supplies remain continuously, safely and conveniently available to the patients that need them, right around the world,” he writes.

That move has seen new guidance on risk management from the FDA requiring risk management plans for critical products that identify stakeholders, drugs for which shortage assessments are needed, and risk mitigation plans, ideally based on ICH Q9 principles (defined by the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use to encourage science and risk-based approaches to ensuring quality).

And outside the US, where businesses may have yet to see regulation, they face investor pressure. As we’ve noted before, change is coming.

A New Enterprise Risk Management Framework for the Pharmaceutical Industry

Crucially, the change in the nature of the risk they face requires a new response from the industry.

First, the regulatory focus on proactive steps to ensure resilience (rather than just reactive responses to tackle quality issues) argues for a more systematic, documented approach to supply chain risk management. That will require an investment of effort, time and probably money.

Fortunately, at the same time – the trend (recently accelerated) for more long-term and more frequent disruptions also helps justify investment in resilience. Sourcing and validating alternative supplies, building up inventories, or looking to more expensive but more reliable (whether in terms of quality or logistical simplicity through sourcing close to end markets) is hard to justify if disruptions are short and infrequent. The return on investment is more obvious when the impact of disruptions and fragility of supplies have been clearly and repeatedly illustrated.

One approach long suggested is to take lessons from other highly regulated industries, such as financial services and energy sectors, which have faced their own challenges with heavy regulation, increased government expectations and evolving risks.

As a piece by consultants McKinsey noted a few years ago, while pharma businesses face unique risks there are also plenty of similarities between it and other industries.

“Like energy companies, pharma companies have high capital expenditure and long payoff periods for assets. Like banks, pharma companies operate in a highly regulated environment in which compliance risks are very high (for instance, for improper or poor filings) and other risks (such as sales-conduct risks) are present across many markets globally.”

Crucially, the key lesson to learn is to put supply chain risk management within the context of enterprise risk management – linking risks and mitigations back to the organisation’s objectives.

That means identifying, evaluating and prioritising risks according to their potential impact on the business; reviewing risk mitigation – both reactive and proactive, so that due diligence on new suppliers, products and markets considers risks; establishing a risk appetite so that decisions to mitigate or accept risk are conscious, considered and weighed against the impact to the business, and stakeholders, including customers; and putting in place crisis management plans – so that mitigation plans swing swiftly into place should disruptions occur.

The Cost of Mitigation and the Value at Risk

The benefits of such a structured, considered approach are numerous. For a start, setting the risks of disruption in the context of the overall business case takes us beyond simple mitigations to consider broader questions such as the sustainability of low-price production for some generic drugs, that might prevent effective mitigation. Even where there is no resolution, it enables businesses to distinguish between problems they can solve and those they cannot to make the best use of their time and resources.

Moreover, the exercise, properly structured and documented, will go a long way to reassuring stakeholders, such as investors, and, should the time come, satisfying regulators’ demands for evidence that supply chain risks are being appropriately and proportionately mitigated.

Finally, it enables the business to determine their risks and define and justify appropriate investments in mitigation more accurately. It does so by helping focus businesses on what really matters: Not defining and anticipating the wide range of risks they may face through their suppliers (which are often impossible to predict and outside the business’s control) but the value at risk from each supplier.

That’s where SCAIR® comes into its own, helping identify the single source, long lead time suppliers for high-value products for better business decisions, mitigation and contingency plans. As we work towards more resilient supply chains, it’s such tools that will help chart the way.

Pharma Supply Chain Challenges: Common Vulnerabilities that Must be Addressed

It’s a standard refrain when looking at pharma supply chain challenges that every company is different: Businesses face unique vulnerabilities that can only be understood and addressed by an in-depth understanding of their particular supply chain.

And yet, as is repeatedly illustrated, many have common points of failure: Significant sections of the pharmaceutical industry, like others, are frequently hit with widespread shortages due to common dependencies. They are, in a sense, similar to the systemic risks of the financial centre revealed during the financial crisis. Or, to put it another way, they are an example of “the seemingly unrelated consequences and vulnerabilities stemming from global connectivity”.

Often, these dependencies are buried deep in the supply chain: second or third-order suppliers that share a common critical source of raw materials, for example. As a result, such risks can evade detection – until the problem materialises. Even if they are detected, the major challenge remains: Identifying them is one thing; addressing them is another.

Nevertheless, as ever, understanding and identifying the causes of common vulnerabilities is an essential first step.

Regional Supply Chain Dependencies 

Perhaps the most obvious and most exposed source of common points of vulnerability is the geographic concentration of certain suppliers. Past years have seen numerous examples across industries – from the Thai floods and Japanese earthquake over a decade ago that disrupted automotive supply chains; to semi-conductor shortages during Covid –  exacerbated by the fact that 75 percent of the manufacturing capacity and key materials are located in China and East Asia.

Examples in pharmaceuticals and life sciences are relatively easy to find, too: from the hurricanes that continually hit key pharma production centres such as Puerto Rico to the dependency on China and India for active pharmaceutical ingredients.

The incidents that may see such risks manifest will depend, in large part, on the extent of the concentration in supply: Often, suppliers are tightly clustered regionally within a county so that even a localised weather event can cause widespread disruption. Even if suppliers are dispersed nationally, they remain vulnerable to common risks – whether that’s a pandemic, trade war, civil unrest or regulatory issues.

Such concentration is not always possible to avoid. As we’ve noted before, tight margins favour particular production centres, particularly for low-cost generics, while regulatory requirements add to the cost of establishing new manufacturing bases.

Scarce Resources

It is a similar story when industries rely on rare materials, where regional or supplier–based concentrations may be unavoidable.

Technetium-99m (Tc-99m) is a good example. Used in approximately 80 percent of radiopharmaceuticals (pharmaceutical drugs containing radioactive isotopes), it is produced at only five reactors in the world. It saw shortages in the late 2000s due to repeated shutdowns of two of these, in Canada and the Netherlands, responsible for about two-thirds of global production of molybdenum-99, which decays to Tc-99m. The problem persists today. As recently as November 2022, a mechanical failure in one reactor impacted the world's supply.  

In some cases, shortages are naturally occurring. In others, they result from high barriers to entry that limit supply. That can be particularly common in highly regulated industries, such as pharmaceuticals.

Many pharma businesses are dependent across their portfolios on common feedstocks such as tablet excipients. Despite these being unsophisticated chemicals and theoretically simple to produce, strict regulatory requirements mean few chemical manufacturers have the capability to deliver a product to the United States Pharmacopeia standards. That was graphically illustrated by the explosion in March 2007 at chemical company Shin Etsu’s facility in Naoetsu, Japan, leading to a shortfall in a key ingredient for tablet formulations and coatings. The shortage lasted more than a year. Let’s hope that a recent FDA Warning Letter to Dupont’s manufacturing plant in Newark (which supplies many pharma companies with Microcrystalline Cellulose, a common tablet excipient) does not trigger a similar situation.

There, again is no easy answer, given the obvious need for strict regulation. Indeed, the shortages themselves illustrate this. See, for instance, the 2008 recall of heparin, an anticoagulant, by multiple companies following the identification of a contaminant, oversulfated chondroitin sulfate, responsible for the numerous deaths and traced to a chemical plant in Changzhou, China.

The Difficulty of Going it Alone

With potentially whole sectors exposed to single points of failure, a significant pharma supply chain challenge exists for individual companies seeking to address such risks.

The extent to which they can be mitigated will, in large part, depend on the particular circumstances. Where required commodities are necessarily constrained by the requirements for a specific environment or access to natural resources, there may be little companies can do to ensure resilience against weather or other disruptive events. In such cases, the best they may be able to manage is to offset potential losses through financial instruments.

Likewise, dependence on particular suppliers for highly specialised materials exposed to common threats, the opportunities to source or create another supply base may be few.

The challenge is exacerbated by two factors: First, the reliance on just-in-time manufacturing so that many manufacturers hold minimal stock. As a result, disruptions to the supply of anything more than a few days can halt production. This can be remedied to an extent, but not without cost, which could reduce competitiveness.

The second factor presents even more difficulties: the concentrations of risk are often not in their direct supply base but in their second or third-tier suppliers, over which their control is limited. Any solution requires oversight of not just vendors but their suppliers.

Building Supply Chain Resilience: Knowledge is Power

Acknowledging that there are pharma supply chain challenges is not, however, a counsel of despair.

For one thing, identifying common points of weakness that cannot be addressed individually makes it possible to at least make a case for industry or even state-sponsored efforts to manage them.

The Covid pandemic, for instance, has prompted public-private manufacturing partnerships, such as contract development and manufacturing organizations (CDMO). The UK, likewise, has established the Medicines Manufacturing Innovation Centre, funded jointly by the industry and regulators, a state-of-the-art facility for small molecule and fine chemical manufacturing. Increasingly, governments see the value of onshoring.

Even more recently, the war in Ukraine saw governments stockpiling iodine pills, offering protection against radioactive exposure. Outside pharma, we’ve witnessed joint anti-piracy initiatives from the shipping industry.

Such cases will, necessarily, be rare, however. In their absence, though, increased visibility of weaknesses in the supply chain and their potential impact are rarely wasted. It gives businesses the tools to focus their efforts – whether that’s in discussions with vendors to strengthen their own supply chain risk assessments and mitigation; seek alternatives; or increase inventories.

It also prevents manufacturers from taking – and potentially wasting time with – alternative suppliers that ultimately share the same points of vulnerability.

Common vulnerabilities are not easily overcome. However, as with any supply chain challenge, they are never best ignored. And, if they cannot be successfully addressed, businesses at least have one comfort: We’re all in it together.

SCAIR® highlights supply chain dependencies and vulnerabilities within pharma supply chains. It quantifies value at risk to help build resilience and improve profitability.

Calling Time on Just in Time: New Answers to Efficiency and Resilience in Life Sciences Manufacturing

Like many disasters, just-in-time (JIT) manufacturing started as a good idea. Pioneered by the car manufacturers, notably Japan’s Toyota, in the 1950s and 1960s, aligning production directly with demand in terms of orders and supplies with the consequent production schedules. As Toyota’s handbook explained: “Making only what is needed, only when it is needed, and only in the amount that is needed.”

It brought significant efficiencies to the industry, eliminating waste from overproduction, transport and excess inventory, among other areas. Little wonder, then, that it has been widely adopted across other industries, from retail to technology. Apple’s Tim Cook has been among its most evangelical supporters, describing inventory as “fundamentally evil”. Inevitably, it was also widely adopted in pharmaceuticals.

But while accountants seized on the JIT concept because it meant less working capital on the books (they love stock reduction), something got lost in translation. Two things specifically.

First, JIT worked for the auto industry because suppliers to the continuous production lines were close to the main assembly plants. There was usually not much that could go wrong between supplier and manufacturer. Second, JIT works better for industries where, if problems do arise, it’s easy to switch to alternative (also probably local) suppliers if one does not deliver.

Neither was necessarily true for many businesses and industries that eagerly took it up. JIT came to be applied regardless of the geographic relationship between site and supplier; production and inventory management was applied to supply chains that were not just national but international. Moreover, it was applied in industries like pharma, where manufacturers couldn’t simply switch to another supplier in case of a delivery failure;  suppliers of quality critical components need to undergo lengthy qualification or process revalidations, making swapping suppliers much harder.

Both factors make it much harder to meet customer demand without significant stock inventories to cover delays in sourcing and securing a new supply.

Time’s Up for Pharma JIT

That was graphically illustrated during the Covid crisis.

The crisis facing pharma supply chains was, in fact, two-fold: Massive disruptions to logistics, and especially cross-border supplies, due to restrictions and worker shortages, which were common to all industries; and, more pertinently for pharma specifically, a massive surge in demand – particularly for certain drugs and components and materials needed by vaccine manufacturers, such as syringes, stoppers, vials, hygienic filters and processing equipment, with a knock-on effect for the wider pharma industry.

It was the perfect storm, and while JIT cannot be solely blamed for the shortages seen, given the scale of the crisis, it undoubtedly made it worse in many cases.

Moreover, it’s not a crisis we can confidently predict will not happen again. For a start, supply chain disruptions persisted long after the worst of the pandemic had passed. The war in Ukraine should tell us that it’s never possible to be sure that international supply chains won’t face sudden and significant derailment. And demand can quickly again become volatile: If not a pandemic, then perhaps just a very bad flu season. After all, supply chain problems did not start with the pandemic.

It's not surprising then that even relatively early in the pandemic, some were asking whether JIT was finished. Moreover, at that point, it was assumed it would simply be for industry to decide; that’s unlikely to be entirely true for pharma, where it’s increasingly clear governments intend to have a say in ensuring the supply of critical drugs.

Even without regulatory pressure outside pharma, many businesses are voting with their feet. As the FT has put it, companies are shifting from just-in-time to “just in case” when it comes to managing stock.

Long Live Low Inventories

In manufacturing more broadly, it’s unlikely that JIT has had its day. Instead, for many, it might go back to first principles. A significant consequence of the disruption seen across industries is an increase in onshoring. A recent survey of British manufacturers by industry body Make UK, meanwhile, shows more than a third (35%) planning to switch to home-based rather than international suppliers.

In bringing suppliers in closer proximity to manufacturing sites, some manufacturers will be able to save JIT, which was always a legitimate efficiency drive in the right circumstances.

For many pharma manufacturers, this is unlikely to be a solution, however. For onshoring to really work and maintain supply chain efficiencies, the supply base would need to relocate, along with the main manufacturing. As we’ve discussed before, that may be possible for new in-patent products and high-value materials and components. They already have the margins to support investment in stock, secondary suppliers and other mitigations that ensure high-quality, resilient supply chains. That could likewise support investments to bring supplies and manufacturing together.

The dependence on offshore locations for cheaper components and active pharmaceutical ingredients for generics did not happen by accident, however. The cost-benefit analysis for tight-margin products in most cases still argues for offshoring. While there have been exceptions, a wholesale move to onshore APIs dominated by China and India looks unlikely. Of course, government intervention, through regulation or subsidy, could change that, but we’ve yet to see it.

But if JIT as a production process might have been fatally undermined by the last couple of years, its drivers in terms of cutting costs remain as critical as ever – and particularly for low-margin products. The need for resilience doesn’t displace the need for efficiency. For a sustainable future, pharma manufacturers need both.

The Best of Both Worlds? Supply Chain Resilience and Efficiency

The key will be to improve supply chains’ visibility and manage them with more granularity. It’s notable that the recent US Department of Health and Human Services (HHS) report on building supply chain resiliency for essential medicines talks of onshoring but also emphasises supply chain transparency.

That’s far from being achieved in many supply chains, given their complexity. A McKinsey survey of pharma businesses and other selected industries in 2020 showed nearly half of respondents citing sole sourcing of inputs as a critical vulnerability, while a quarter pointed to a lack of visibility into supplier risks.

Solutions like SCAIR® are critical to overcoming these obstacles and enabling pharma businesses to ensure that they’re holding stock but doing so efficiently – in the right place in the supply chain to most effectively mitigate potential shocks, rather than across the board. It enables manufacturers to identify their critical, single source, long lead time suppliers effectively. They can then hold the appropriate stock to protect them while taking a leaner approach for easily substituted supplies.

This hybrid approach combines just in time and just in case inventory levels at different points in the supply chain. It provides the resilience businesses need to stand up to sudden demand surges or supply chain shocks, when they inevitably arise; and the efficiency to ensure that the business is still around to see them.

Good Business Insurance Exposure Management Means Quantifying Profit at Risk

The pandemic has brought business interruption (BI) risk into sharp focus for companies with complex supply chains as well as their insurers. However, many firms still struggle to accurately quantify which supply points and exposures pose the biggest threats to their profits.

The wave of insolvencies and production shutdowns caused by recent global supply chain disruption has highlighted the importance of knowing where your exposures lie and having agile business continuity plans in place – particularly in complex manufacturing segments whose supply chains contain multiple suppliers and interdependencies. Unfortunately, these plans are often misguided as they are based on the wrong type of information.

Focus on Profit at Risk, Not Gross Spend

When prioritising where to focus risk management efforts within their supply chains, companies often look first at the gross sum they spend with each supplier. However, this ‘risk by spend’ approach paints a distorted picture of the company’s risk profile as the gross cost of a component tells you little about its impact on business continuity.

The figures that really matter are the revenue or gross profit at risk if any given supply point fails. These are the numbers that tell how much money your company stands to lose every day, week or month you are unable to supply your customers  because of being without any given component.

These are the numbers that define success and failure as a business – and guide you on where most investment should be spent mitigating risk and putting business continuity plans in place.

At present, SCAIR is the only Enterprise Grade supply chain risk assessment tool that calculates value at risk.

Holistic Risk Assessment

To accurately quantify supply chain exposure, several other factors must also be taken into consideration, such as the risk mitigation actions the company has in place. If a contract is already in place with an alternative supplier, for example, this will have a material impact on mitigating the real-world profit exposure and should be factored into calculations.

So should the projected recovery time of specific facility types, the cost and time of onboarding alternative suppliers or building new facilities if supply points fail. It is vital to extend the assessment to tier two suppliers or beyond to root out interdependencies lurking further up the supply chain.

Testing exposures against multiple scenarios is also key. How would an earthquake in Japan affect production? Are there multiple suppliers located in the same Florida floodplain or Californian wildfire zone? How would a regulatory shutdown, cyber-attack or insolvency of one or more suppliers disrupt your organisation – and at what cost?

Failing to assess risk in this level of detail makes it impossible to accurately quantify business interruption exposures across a highly complex supply chain. As well as exposing companies to potentially devastating – and unexpected – financial shocks, this can also result in misplaced allocation of effort and resources, as well as over- or underinsurance.

For insurers, many of whom have been hit with heavy BI losses from the pandemic, it is prudent to ensure clients accurately quantify their BI exposures from both an underwriting and loss mitigation perspective. Scenario testing across portfolios of insured risks can also play a key role in helping insurers manage their own underwriting exposures, rooting out hidden interdependencies and unwanted risk accumulation within their portfolios.

Armed with this information, insurers can more accurately price risk, meaning clients are charged premiums that fairly represent their risk. Overlaying company non-compliance data across the portfolio can also help insurers in the client due diligence process.

Say Goodbye to Spreadsheets

As well as getting the methodology right, companies also need to be using the right infrastructure for their risk assessments. Most firms – including even large brokers with market-leading business interruption assessment capabilities – still quantify their exposures on spreadsheets. This comes with a variety of risks and limitations. While spreadsheets can be easily adapted to suit the characteristics of any given company or supply chain, they become increasingly unfit for purpose as organisational and supply chain complexity increases.

Spreadsheets are easily broken, vulnerable to human error and lack transparency and flexibility. One of the biggest risks is that risk accumulations can go unnoticed. For example, a supplier may have acquired another and although they may operate under two names, they are in fact the same organisation, with many shared risks. If address and supplier name identification is not automated and verified this is easy to miss.  

Spreadsheets also do not integrate easily with third-party datasets, models and overlays and require manual management, making it difficult for the company to view their exposures in real-time or slice and dice data for analysis or visualisation purpose, limiting its agility.

Leading organisations are moving away from spreadsheets for these reasons in favour of tools that enable them to centrally manage, analyse and visualise their evolving supply chains while, crucially, more accurately calculating their exposures.

With supply chains under exceptional pressure, these firms are at a distinct competitive advantage and while the threat to those left behind continues to grow. 

SCAIR's supply chain risk assessment and management tools can help organisations identify, track and manage supply chain exposures.

Technology Will Transform US Pharma Supply Chains: and Data and Analytics are Central to a Government Drive for Resilience

There seems little doubt that regulation is coming for the pharma industry’s supply chain. As previously discussed, the Department of Health and Human Services (HHS) Essential Medicines Supply Chain and Manufacturing Resilience Assessment published on May 23 stems from one of the early acts of the Biden-Harris administration. Indeed, the writing has been on the wall from the moment Covid struck and limited supplies of essential drugs globally – even if that was sometimes more of a product of soaring demand than disrupted supply.

In fact, the seeds of a broader, more interventionalist approach to critical supply chains predate even that. In the early weeks of Trump’s presidency, the US was already looking at a more protectionist future, with the head of the President’s National Trade Council outlining its intention to repatriate international supply chains.

“It does the American economy no long-term good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” the Financial Times reported him as saying.

“We need to manufacture those components in a robust domestic supply chain that will spur job and wage growth.”

Given the shock to supply chains from Covid, it would be surprising if moves towards reshoring were not seeing a renewed sense of urgency – particularly of what it has determined are “critical goods, products, and services”, as Biden’s Executive Order 14017 puts it. That’s all the more so when 87 per cent of API facilities for the generic drugs (which represent 90 per cent of US prescriptions) are overseas.

Supply Chain Challenges

But if the HHS report is part of a longer-term move toward a more prescriptive approach to supply chain resiliency, that doesn’t mean it’s nothing new. What it gives us is significant on what the US government sees as the key challenges and potential solutions to the resiliency of the pharma supply chains. It’s worth taking these in turn.

In terms of the challenges, it identifies at least six:

What’s noticeable about this list – and explicit elsewhere in the report – is that while some issues may be for the government, much is going to be down to the private sector. Most obviously, regulatory matters and perhaps STEM education might be primarily down to legislators (although even here, there will be a role for business). For much of the rest, businesses have a significant role to play – and, as we’ve said, are increasingly likely to have regulatory obligations.

Supply Chain Risk Assesment Tools Boost Visibilty

That’s perhaps particularly true of the first solution strategy the report puts forward: increased supply chain coordination, security and transparency. 

The benefits of this are apparent. As it states, “Improving supply chain visibility will offer a greater ability to anticipate, prioritize, and respond to critical issues, demands, and potential disruptions.”

It says this can be achieved in several ways. One is “Expanding [the] use of data, analytics, and predictive tools to mitigate and manage risk.”

It goes on to suggest several strategies to pursue, with, again, a mix of public and private sector efforts involved. These include improving data sharing and standardisation, strengthening public-private collaboration and coordination and establishing a more comprehensive “centralised control tower platform”, including developing a national critical drug tracking, monitoring and alert system. It also emphasises the importance of physical and cyber security throughout the supply chain.

Quite a number of these plans – particularly those involving the public sector will take time. Strikingly, though, some are readily achievable in the near term. It will probably take time to create the shared data infrastructure for government agencies and supply chain stakeholders that the report suggests.

However, the private sector can already start to gather that data and – at least for their own business, use data analytics to identify the key risks and vulnerabilities in their supply chains.

Solutions like SCAIR® already exist to map, monitor, and analyse critical supply points and relationships. This can help create more resilient supply chains and better business decisions around mitigation and contingency plans.

The HSS report makes it clear this is the direction of travel in efforts to boost pharma supply chain resilience. The winners, as the US and other countries reshape their critical supply chains, will be those that start on the journey now.

Regulatory Due Diligence Remains Key in Pharma M&A

The Importance of Due Dilligence in Pharma M&A

Catherine Geyman offers a word of caution when it comes to the M&A spree in pharma this year.

It looks like a record year for mergers and acquisitions in pharmaceuticals. Time will tell if that’s a good thing.

Beginning, as it did, with Bristol-Myers Squibb’s $74 billion purchase of Celgene, 2019 has looked a promising year for pharma M&A from the off. With AbbVie’s $63 billion takeover of Allergan ending the first half as well, it’s unlikely to disappoint those looking for big numbers.

In fact, with transactions worth $172 billion, the pharma, medical and biotech (PMB) industry led the way for M&A in the months to July and put the last couple of years activity in the shade: the value of the top ten deals announced in 2019 is up by almost half (47%) on the same period last year.

Moreover, we can probably expect activity to continue in the remaining months. New leaders at giants such as Gilead Sciences and Pfizer show continued appetite for deals, and the list of candidates to drive activity remains strong.

Let’s hope, though, that Pfizer has learnt lessons from its takeover of Hospira back in 2015 with respect to the cost of underestimating the regulatory risks presented by a company with a poor compliance history.

Pharma M&A drivers

Senior Female Scientist Works with High Tech Equipment in a Modern Laboratory. Her Colleagues are Working Beside Her.


There are, in fact, a number of reasons to be a little cautious about the scale of activity we see.

First, some of the mega mergers mentioned do tend to skew the figures. The bulk of the value is found in just  one or two of the biggest deals (of which the BMS merger was the largest), and overall activity is a little less impressive: by transaction volume, the PMB industry ranks only fourth in the M&A tables, and in the first quarter the number of pharma deals was actually 10% lower than in the same period in 2018.

There also remain significant barriers to deals in some cases, as illustrated by Roche’s continuing attempted takeover of US gene therapy specialist Spark Therapeutics – delayed again in June due to regulators’ competition concerns. Potential regulatory action in other areas, such as over pricing (already being seen in countries such as Canada), could also dampen activity in the future.

Third, it should be noted that the deals are as much of a sign of weakness as they are of strength. Some of the drivers for M&A are benign, including pent-up demand after lower activity in 2017 and 2018, as well as US tax reform in 2018 that left big pharma companies with more cash. Higher activity also reflects significant opportunities in oncology; with M&A being used as a way for big players in pharma to expand into new therapeutic areas – as was the case with the BMS deal and Eli Lilly’s $8bn purchase of Loxo Oncology, among others.

As ratings agency Standard and Poor’s makes clear however, the activity also points to pressures over pricing, continuing patent expiration and fewer alternative avenues for growth. While M&A may stave off some of these issues, it’s hardly a silver bullet. Furthermore, S&P warns that groups’ consequent willingness to “compromise financial policy strength” and buy rivals at higher values could put pressure on some of their credit ratings.

Regulatory due diligence

Pfizer pharmaceuticals building in Tokyo


The most important reason we should not get too excited about the rash of deals we’ve seen, however, is that successful mergers and takeovers are notoriously difficult to pull off.

Completion of the purchase is a big milestone in any M&A, but it is really when the real work begins if the deal is to bring anything more than a short-term boost to the businesses involved. And if it’s not handled right, it can end up being a long-term burden.

The industry is awash with less than successful M&A that should force us to take a sober attitude to current activity. Pfizer’s $11bn aquisition of Array is among the headline deals that show M&A strength continuing in the second half of the year, for instance (as well as another example of the continuing attractions in oncology for the big players). But will it prove more successful long-term than the giant’s ill-fated takeover of Hospira?

In 2015 when that deal was announced, Hospira seemed to offer Pfizer an opportunity to dominate the generic sterile injectables drugs market, which was forecast to see rapid growth, as well as the biosimilar market – generic versions of expensive “biologics” medicines. It therefore promised to provide the business with avenues for rapid growth as well as mitigation for expiring patents.

Instead, the deal has helped drag down Pfizer’s sales figures and make a significant contribution to drug shortages affecting the US, with Hospira’s McPherson plant singled out by the American Society of Anesthesiologists in its contribution to the FDA’s public discussion on the root causes of shortages.

“[W]e observed the impact of how business decisions, such as mergers, impact drug shortages. The purchase of Hospira by Pfizer, for example, brings to light what can happen during manufacturer and production consolidation. The quality issues that are facing Pfizer in the McPherson plant have greatly impacted access to sterile injectables,” wrote the society’s President Linda Mason.

It certainly serves as a powerful lesson in the importance of due diligence when it comes to mergers and acquisitions for pharma companies.

A common problem

White lightbox with word fda recall on wood background


Hospira had a history of problems with  Rocky Mount, the North Carolina plant when Pfizer bought the business. In the three years before the deal, there were 239 recalls relating to the plant, according to the FDA. Despite assurances the problems had been largely addressed by 2015, these persisted afterwards, with a further 45 or more in the three years following. It’s been a continuing headache for Pfizer.

As recently as March, the company announced a recall of three lots of 8.4% sodium bicarbonate injection due to contamination by glass particles in some vials. In January, it also announced the closure of two manufacturing facilities in India, which have long been troubled, too.

Such problems are hardly unique to Pfizer and there is a range of other examples we could examine:

In other cases, businesses have had lucky escapes– such as Fresenius in 2018, when it realised the scale of the data integrity non compliance issues just in time to back out of its acquisition of Akorn.

For all of the above examples, major non compliance notices had been published by regulators such as the FDA or EMA prior to these acquisitions, suggesting that regulatory due diligence was either lacking or the potential impacts of ongoing issues seriously underestimated.

Nevertheless, these cases don’t necessarily reflect badly on the businesses involved so much as reflect the scale of the challenge. There are of course, risks for any industry when it comes to M&A. Often in pharma, as elsewhere, it’s the “soft factors”, such as culture, brand and people – and whether those of the two businesses fit well together – that determine the success or otherwise of the venture. That’s a handy reminder to those of us too tempted to be impressed by the big values being bandied about: It’s not all about the numbers.

But pharma also faces some unique issues relating to the tight regulation of the industry. Indeed, as this piece by Jenny Yu at insurer Munich Re makes clear, the regulatory risk facing the industry has been exacerbated in recent years by two factors: first, the move to outsourcing much of the pharma supply chain and second, ever expanding regulatory requirements.

As Pfizer’s woes with Hospira (and Bayer’s issues with its Leverkuesen plant) illustrate, there is a significant challenge in  addressing problems such as contamination and other regulatory issues when they do occur – not to mention potentially massive expense; major manufacturing issues have cost the biopharma industry over $12bn in lost revenues and remediation in the last two decades.

The key is to make sure you thoroughly do your due diligence on the business and its entire supply chain and then do it again. To do so, businesses should use all the tools at their disposal, including developments such as SCAIR’s Regulatory Incident Monitor tool. It collects a wide range of regulatory non compliance data from major North American and European regulators into a single historical report for each company – giving you an at-a-glance warning of any red flags.

It not only provides businesses with an early warning system for potential acquisition targets, but also a way to continually monitor and keep ahead of supplier issues. It can help businesses make sure they make the right decisions at the outset – so they don’t end up paying for others’ mistakes later.

Catherine Geyman, Director, Intersys Risk Ltd

Head shot of Catherine Geyman, Director, Intersys Risk Ltd

Out and about at CPhI Worldwide

Greetings from Frankfurt where we've been at CPhI Worldwide.

We’re just returning from a successful week taking SCAIR to 36,000 pharmaceutical professionals.

You don’t have to be at the conference long to appreciate the importance of technology: The event brings in participants from every part of the pharmaceutical manufacturing and delivery, with over 20 dedicated zones covering ingredients, APIs, excipients, packaging, biopharma, machinery and so on. There are also participants from over 150 different countries.

Visiting this conference, it’s impossible not to get a sense of the both complexity of the modern pharma supply chain and its truly global nature. With new innovations announced every day at the conference, you also get a sense of how fast moving it is.

CMO uncertainty

And you get a sense of the risks: The annual report of the event’s organisers picks up on some of these, including including political uncertainty in the US, with a new administration that has shown a “keen political desire… to reduce drug prices, but with very little indication of policy”.

That’s left pharma companies and the contract manufacturing (CMO) “in the dark”, the report notes, and vulnerable to decisions that could disrupt their entire business model.

We’re at CPhI to show how technology such as SCAIR can address this type of risk, as well as more long-standing challenges that affect operators across continents and across the supply chain.

We don’t pretend to be able to control Trump, but SCAIR can enable businesses to quickly get to grips with the impact any changes may have. With the software they can visualise their end-to-end supply chains and quantifying accumulated exposures of the company’s product portfolio to each critical supply point.

Nat cat and compliance

This Supply Node Exposure module in the software is also used to identify locations critical to the company for natural catastrophe alerting. Warnings and reports of hurricanes, earthquakes and floods are overlaid on these locations to rapidly highlight potential losses.

Finally, SCAIR deals with another key concern across the industry and highlighted frequently at CPhI: Compliance. It collects and consolidates non-compliance and supply chain interruption information from leading regulators such as the FDA and EMA. Root cause analysis of data such as recalls, production shortages, enforcement actions helps avoid issues in future.

As fast as the industry changes, events like CPhI make it clear these traditional concerns, along with issues such as maintaining data integrity and good manufacturing practice, continue to be key. It also suggest, though, that those companies that tackle them successfully, can look forward to the future with considerable confidence.

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.

Brexit and the pharmaceutical supply chain

There’s work to be done on all sides – not just by the negotiators – to prepare supply chains for a future outside the EU.

For anyone already sick of Brexit, Michael Barnier’s recent announcement won’t have been encouraging: “The hard work starts now,” the EU’s chief negotiator Michel Barnier told reporters – more than a year after the UK voted to leave.

It’s a big issue – and a particular challenges for some.

One is the pharmaceuticals industry, and a couple of days before Michel Barnier was urging the UK to knuckle down, leaders in the UK and EU pharmaceutical industry were issuing a warning to both Barnier and Britain’s Brexit Secretary David Davis of the risk to supplies of life-saving medicines.

“In the case of an unorderly withdrawal, there is a risk that all goods due to be moved between the UK and EU could be held either at border checks, in warehouses or manufacturing, and/or subject to extensive retesting requirements,” the letter warned.

And it’s not just the industry that’s worried. The week before, the UK’s health secretary and its business secretary called for continued co-operation with the European Medicines Agency after the UK left the EU – “in the interests of public health and safety”.

Preparing your supply chain

Hopefully, these warnings will have their desired effect, and arrangements – transitional or otherwise – will be in place when the negotiations finish. In that case, this will all be put down as a crisis averted or just another “scare story”, according to taste.

As we’ve noted before , though, whatever happens Brexit will be a game changer not just for pharma but for all businesses. The currency volatility we’ve already seen could well return as the deadline for negotiations gets nearer; the regulatory framework remains uncertain; and supply chains are going to have to get more complex – perhaps in the short-term, as contingencies are put in place, or in the long-term to deal with new realities.

Many companies have already made changes to their supply chains to make them more resilient to whatever results from the negotiations; many other are still looking but have at least gained an understanding of the risks they face and the vulnerabilities in their supplies. For any that haven’t made much progress, though, or those that haven’t even begun, the hard work truly does need to start now. Time is not on our side.