Get Ready for the MAPS (Mapping America’s Pharmaceutical Supply) Act: Pharma Supply Chain Obligations Move Closer

With draft legislation to force end-to-end mapping of the US pharma supply chains to work through Congress in the year ahead, time is running out to embrace supply chain visibility.

We can’t say we weren’t warned. Regulation to force life sciences to take supply chains seriously has been on the cards for a while. Ever since the incoming Biden administration’s 100-day supply chain review in 2021, the writing has been on the wall regarding regulation to bolster supply chain resiliency in the US.

With the publication of the Department of Health and Human Services (HHS) Essential Medicines Supply Chain and Manufacturing Resilience Assessment report the following May, that seemed a certainty. As we noted at the time, “legislation… now looks inevitable”.

As we head towards the end of the year, though, we now have a better idea of what that legislation might look like. It looks like the Mapping America’s Pharmaceutical Supply (MAPS) Act or, as we like to call it, the SCAIR® Act.

Mapping America's Pharmaceutical Supply (MAPS) Act

Introduced in the Senate in July with support from both Republicans and Democrats, the proposed legislation has been a long time coming.

A pet project of Michigan Senator Gary Peters, it builds on his earlier reports from 2019 (on lowering prescription drug costs) and in March 2023 (specifically on drug shortages). According to Peters, those reports identified an “overdependence on foreign sources for critical drug products” and – crucially – “insufficient visibility into US pharmaceutical supply chains”.

This is what the MAPS Act would address.

As Peters explained, “As we saw first-hand 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.

“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.”

The Act would require the Secretary of the HHS to establish a federal database mapping the origin of each drug, the location of its manufacturing facilities and associated inspections and risks to supply, such as recalls and import alerts. It could then make “data-driven decisions” on supply chain threats and investments in domestic manufacturing, says Peters.

It supports another bill the Senator announced the previous month, again with bipartisan support: The Pharmaceutical Supply Chain Risk Assessment Act. That would require the HHS, along with the Departments of Defense and Homeland Security and the White House Office of Pandemic Preparedness and Response Policy, to determine how potential drug shortages can impact national security and public health.

Both proposed pieces of legislation have been referred to the Senate Health, Education, Labor, and Pensions Committee.

Gaining Traction: Support for Pharma Supply Chain Action

The legislation is not without faults or challenges.

Key to the proposed laws, for instance, is not just the belief that there needs to be better visibility of supply chains and their vulnerabilities but also an antipathy to reliance on foreign manufacturers, particularly China.

As Peters’ 2019 report identified (and the 2023 report reiterates): “[M]ore than 80% of the active pharmaceutical ingredients for prescription drugs sold in the US come from overseas, primarily China and India.”

This poses a national security risk, he contends, but – as we’ve discussed before – it will not be easy to address and arguably conflicts with Peters’ other priorities such as affordable drugs.

Onshoring production, particularly of APIs and generic drugs, in supply chains that have evolved over decades and pushed manufacturing overseas for good reasons is unlikely to happen overnight.

Many of Peters’ ideas from his reports, such as prohibiting “unjustified price increases” and encouraging competition in (the already exceptionally tight margin world of) generics are, to put it mildly, easier said than done.

Nevertheless, the proposed legislation has gained significant support – and not just from both sides of the Senate, but outside.

The MAPS bill has so far been endorsed by the Michigan Health & Hospital Association, the American Society of Health-System Pharmacists (ASHP), the American Society of Clinical Oncology, the American Hospital Association (AHA), United States Pharmacopeia, and nonprofit generic drug company CivicaRx.

“Addressing drug shortages is complex and costly to hospitals and health systems in terms of staff time and other resources required to manage the shortages,” noted Lisa Kidder Hrobsky, a Senior Vice President of the AHA.

“A critical step in protecting America’s drug supply chain is understanding its vulnerabilities from the beginning of production to the moment a drug is administered to a patient. The MAPS Act creates a plan for the Food and Drug Administration and the Department of Defense to map the US pharmaceutical supply chain. The Act also includes use of data analytics to identify and predict supply chain vulnerabilities and other national security threats.”

The ASHP also stated it strongly supports the Act. “By requiring the Department of Health and Human services to coordinate with other agencies and the private sector to map the pharmaceutical supply chain, threats to the US pharmaceutical supply chain can be identified and addressed before they place patients at risk,” said Tom Kraus, vice president of ASHP government relations.

A New Supply Chain Data Duty

That private sector involvement will be central to the effectively implementing any MAPS-type legislation.  

As the draft legislation makes clear, the HHS is to support efforts “including through public-private partnerships, to map the entire United States pharmaceutical supply chain, from inception to distribution”. It can then use data analytics to identify supply chain vulnerabilities, the bill proposes.

Neither the HHS nor any other agency can get that data on its own. It will need to come from the private sector.

Consequently, while the obligations under the Act nominally fall on the HHS, they ultimately impose a duty on the industry. The nation-wide map of the US pharma supply chain cannot be constructed unless pharma businesses are required to supply detailed information about their supply chains to the HSS.

It can then consolidate the information from across the industry to build its national picture.

To be able to supply that information, pharma businesses need to have it – and in a way they can share. In practice, they need to be doing the supply chain mapping themselves.

The benefits of using pharmaceutical supply chain risk management tools such as SCAIR® that are available to do precisely what the proposed Act requires have long been obvious in terms of improved resilience, inventory optimisation, reputation protection, and investor relations.

Visibility of the supply chain provides a clear competitive advantage.

That’s the carrot for early adoption of mapping, and it’s long been available to those willing to grasp it.

The legislative moves in the US, though, mean we’ll discover what the stick looks like sooner rather than later.

Pharma Supply Chain Risk: Why Assessing it Correctly to Minimise Disruption is Notoriously Tricky

Pharma supply chain risk and supply side failure can have catastrophic consequences for life science organisations – the results could have financial impacts as well as cost lives.  Beyond developing treatments, it is the industry’s raison d’être to make drugs available where they’re required. A failure to do so is a fundamental flaw.

Globalised, complex supply chains make it challenging to avoid disruptions, but that only makes it more important to prepare for failure. Pharma businesses should concentrate on what they can control.

The risks of supply side failure are all too frequent. As this recent piece notes, there are currently over 200 drugs in short supply on the US Food and Drug Administration’s online drug shortage database.

Moreover, shortages have grown over the past decade. A study published last year by the National Academies of Sciences, Engineering, and Medicine shows ongoing and active drug shortages are more frequent and last much longer than in the past.

It was cited in a letter by Republican leaders on the House Committee on Energy and Commerce to the FDA Commissioner in March, calling for action.

There are options for mitigating such shortages: sourcing an alternative supply and/or increasing stock levels to either carry through temporary disruption or switch to the alternative. In practice,  both are costly, but alternative sourcing is complicated by limited  options and, more often, by the ability to even identify the vulnerability and risk.

Several related factors contribute to the identification challenge – some common across industries, others more specific to pharmaceuticals and life sciences.

Assessing Pharma Supply Chain Risk - Common Issues Facing Pharma Supplies

Perhaps the most obvious factors that make achieving resilient supply chains across industries difficult, are the related issues of globalisation, supply chain complexities and concentrations of risk.

These impact life sciences just as other sectors, and more than many. We’ve discussed before Western pharma businesses' heavy reliance on overseas manufacturers, particularly China and India, when it comes to active ingredients.

Such globalised supply chains are perhaps unavoidable, particularly for low-cost generics, where margins require low-cost production centres.

But they mean that pharma supply chains are vulnerable to a wider range of risks than they would be were production onshore – whether that’s export restrictions by foreign governments, hurricanes hitting Caribbean islands, or the difficulty maintaining standards – and avoiding dreaded FDA Warning Letters in remote production locations.

Far from reducing globalisation, recent years have, if anything, accelerated it. US pharmaceutical imports from China (and exports to it), for example, are booming.

This contributes to the second challenge of complexity. Both risks and dependencies are more difficult to identify with supply chains that span the globe and can reach across industries – from laboratory facilities to farms.

Over a decade ago, for example, the life science industry saw a huge recall of heparin, an anticoagulant used to prevent harmful blood clots and extracted from pigs’ intestines, in small workshops based in China. This dependency may change in time with new production methods, but where animal derived products are concerned, this type of dependency is unavoidable.

Complexity may also disguise concentrations of risk – even if these are avoidable: Reliance on common manufacturers by a vast range of manufacturers is nothing new; one thinks again of the explosion in  Shin Etsu’s manufacturing facility at Naoetsu in 2007 – disrupting the supply of chemicals for cellulose derivatives used by many major pharma groups for their tablet formulations and coatings. More recent examples are not hard to find.

Even where alternative suppliers exist, pharma businesses are left scrambling and competing for this extra capacity – at a minimum, driving up costs.

Pharma-Specific Supply Challenges

Other factors exacerbate these challenges. Some are, again, common across industries: The rise in just-in-time manufacturing and its spread from automotive businesses across industries has undoubtedly had an impact.

While reducing inventory may have merits in terms of efficiency, it is not necessarily well suited to complex, globalised supply chains. We’ve considered before whether time is up for just in time – at least when it comes to pharmaceuticals.

Other challenges also may affect pharma manufacturers more acutely, if not uniquely. One is the scale of manufacture: pharma and biotech companies’ influence over some suppliers is limited because the volumes purchased are often small – even while the supplies have a disproportionately high value at risk attached to them.

In the ordinary course of trading, there may be no issues; in times of crisis, however, perhaps due to soaring demand from other sectors sourcing the same supplies, pharma businesses can find they are a low priority where supplies are limited.

This can be a particular problem because the drug development process starts small, and sometimes specific sources will be identified in the regulatory dossier that are difficult to change post-approval.

And that leads us to the critical challenge that particularly affects pharma: The regulatory demands the industry faces.

On the one hand, as the reference above to Warning Letters and OAIs  (Official Action Indicated) notices indicates, the rightly strict standards for pharma and other life sciences products contribute to the risk of quality issues and subsequent regulatory action.

Quality related issues remain the leading root cause of supply chain disruption historically.

At the same time, bolstered by the experience of Covid, government interest is also increasingly focussed on not just quality but continuance of supplies. In June, US Senators put forward a bill to force government agencies to investigate weaknesses in the country’s pharma supply chain and develop plans to reduce dependence on foreign countries. It is just the latest example of the trend towards  governments pushing for increased resilience.

That these twin priorities – of ever stricter quality requirements, making setting up new production facilities prohibitively expensive, and continuity of supply on the other – may conflict, goes largely unacknowledged.

Mitigating Measures for Pharma Supply Chain Risk

The range and difficulty of these challenges should lead us to a critical conclusion: attempts to anticipate the specific events that lead to major supply chain disruptions are largely futile.

In general terms, identifying issues that may cause an interruption, such as the weather, political action or regulatory enforcement, may be possible.

In most cases, however, predicting the wide range of specific threats that might impact first, second or third-order suppliers is impossible. Even if it weren’t, most events that may affect their supply chains are outside companies' power to control.

It also suggests a solution because the risk is not simply determined by the chances of disruption – but also by its impact. The first is very difficult to quantify; the second is more feasible.

As a consequence, rather than looking to precisely predict the sources of major disruption, businesses are better off assessing their supply nodes: determining which are most critical by focusing on those that are unique or difficult to replace and estimating the potential loss from their disruption.

Quantifying that loss will help prioritise mitigation efforts.

This will also provide the justification – or otherwise – for the cost of mitigation, whether that’s investing in alternative facilities, holding more inventory or establishing alternative sources.

In truth, there may not always be a cost-effective solution for avoiding shortages. Onshoring prospects for low cost generics are particularly limited . Low cost drugs come with that price.

However, two issues should be noted: first, the visibility of the supply chain that the exercise promotes can also lead to opportunities to drive efficiency, particularly as technology advances; and second, whether mitigation is worth it, is a calculation that can only be made once you know the cost of failure.

And if you do not understand the value at risk at each supply point, your competition still might.

Supply Chain Cyber Security: A Growing Threat

As reliance on technology has increased, digital vulnerabilities in the pharma supply chain have grown – and it makes a tempting target for bad actors. Supply chain cyber security is now a key vulnerability.

With SCAIR®, we spend a lot of time thinking about the flow of goods across the supply chain. As companies have discovered to their cost, disruptions to seemingly small players can have big consequences. But increasingly in the last decade or so, it’s not just goods and services that flow: It’s data, too. And that produces a whole new set of vulnerabilities.

It’s not just industry worrying. It’s governments too. In January, the US government launched a new office for cyber supply chain risk management (C-SCRM) within the Cybersecurity and Infrastructure Security Agency (CISA)- the United States Department of Homeland Security body – which is responsible for strengthening cybersecurity and infrastructure protection across government.

As Shon Lyublanovits, head of the new office noted, while some government agencies like NASA were well advanced in managing supply chain risks, others still needed help with the basics.

“I think the thing that plagues agencies the most are two things: One, where to start? And two, how do I have that conversation with my leadership?” said Lyublanovits. The issue wasn’t just a government or industry problem, she noted. It was a national one.

Others seemingly agree. Not long after CISA announced its new office, the UK’s National Cyber Security Centre, which performs some similar roles to CISA, also issued new guidance on mapping the flow of information from providers. As with the physical flows of materials and goods through the supply chain, an essential first step in managing cyber risks is mapping your connections. Organisations need to understand who their suppliers are, what they provide and how they provide it.

Just as you can’t manage what you can’t measure, you can’t protect what you can’t see.

Supply Chain Cyber Security Risk Drivers

To manage the risk, though, organisations also need to understand it. There are several drivers for the increasing interest in cyber supply chain risks – all of which have relevance to pharma businesses.

Perhaps most obvious is the increasing frequency, severity and sophistication of attacks. Ransomware alone has the potential to cost the pharmaceutical manufacturing supply chain $31 million, according to research in 2021. It’s only likely to have grown since.

It’s not simply the ubiquity of risk nor the widespread availability of sophisticated tools that even inexperienced attackers can access through resources such as the dark web: it’s the scale. Widespread reliance on common, widely used platforms means a single breach can have consequences for organisations globally. The recent SolarWinds attack – among the biggest breaches of the 21st century, affecting thousands of companies and governments worldwide – was a striking example.

It was also an illustration of the threat from not just criminals but state actors – with that attack traced to Russia’s Foreign Intelligence Service. In a period of volatile geopolitics, the risk is heightened, but it’s already not wholly unfamiliar to pharma businesses, as China’s attacks on Moderna showed.

Increasing Connectivity, Increasing Risk

There are other drivers, too. In some cases, changes have improved supply chain management but nevertheless increased potential vulnerabilities. The sprawling network of connected sensors, devices and systems on the Internet of things, for example, has been invaluable in managing cold chain distribution. Indeed, the potential for using RFID for temperature logging individual packets of drugs was part of the ReMediES (Reconfiguring Medicines End-To-End Supply) project.

With cheap and ubiquitous sensors, cloud computing and other devices, the availability of real-time data and potential applications have rapidly expanded. With that, though, comes the potential for data breaches and disruptions.

Similarly, connected medical devices offer new and potentially dangerous vulnerabilities. While that risk is well recognised and managed through a regulated Quality by Design process, it cannot be entirely eliminated. Personal devices and wearables that transmit data over public networks offer perhaps even greater potential for data breaches.

In life sciences, it is not simply the amount of data now available that heightens the risk, but its sensitivity. The large amount of sensitive personal data held, such as medical records for clinical trials, make the sector an attractive target for bad actors. Attacks that put systems or devices down, meanwhile, can have critical consequences.

As the US Health and Human Services deputy secretary has put it: “Cyberattacks are an increasing threat across all critical infrastructure sectors. For the health sector, cyberattacks are especially concerning because these attacks can directly threaten not just the security of our systems and information but also the health and safety of American patients.”

At the very least, attacks on systems have significant potential to disrupt the supply of drugs.

Back to Basics

Part of the problem for organisations is that so much is outside their control. As retailer Target showed many years ago, your own security is only as good as your suppliers. Its massive data breach came through its heating, ventilation, and air conditioning vendor, with an employee falling for a phishing trick, which ultimately enabled hackers to gain log-in credentials for Target’s systems.

It is, in reality, often impossible to avoid providing access to third parties and suppliers. Indeed, application programming interfaces that allow systems to communicate and automate the flow of information between each other are likely to play an increasing role in bringing efficiencies to the supply chains in future. Organisations must therefore try to ensure those they deal with have robust security in place – enforcing this contractually where they can.

Even then, though, there’s an additional challenge – one of ownership. As the FDA’s revisions to its medical device cybersecurity “playbook” last November made clear, it isn’t simply an IT issue. Rather cybersecurity requires a diverse team “including clinicians, health care technology management professionals, IT, emergency response, and risk management and facilities staff.”

Crucially, data security in the supply chain cannot be managed independently of the supply chain itself. To map connectivity and identify vulnerabilities and prioritise security, organisations need to bring the physical and digital flows together: Identifying their critical suppliers, evaluating the need for access, and examining the strength of critical partners’ cybersecurity.

As with any vulnerability, understanding your cyber supply chain risk starts with gaining a clear view of the suppliers within it.

SCAIR®'s parent company Intersys Ltd, provides cyber security services for many highly regulated sectors including bio-pharma, pharmaceuticals and life sciences.

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?

Painkiller tablets and 'out of stock' message


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.

FDA inspection map

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

Head shot of 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.

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.

Going local? Brexit, Trump and supply chain challenges

Businesses have a window of opportunity to make preparations for a more protectionist future. It will not be open forever.

John Major’s intervention aside, a hard Brexit remains the government’s position on the EU, and industries are starting to take note. Today, The Times reports UK car manufacturers are looking to source more parts domestically in response to the threat of tariffs when the UK leaves. Over time, the current ratio of two thirds sourced internationally to one third at home may be reversed.

The concerns are not restricted to the UK, nor worries over Brexit. Going local was a key message at this year’s Davos meeting of the World Economic Forum, as businesses try to pre-empt a Trump-led populist backlash against globalisation.

America first: bringing production home

Furthermore, while they’re particularly exposed, it’s not just car makers in the firing line. According to the new head of the President’s National Trade Council, repatriating international supply chains is a priority for the new administration.

“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,” Peter Navarro told the Financial Times

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

In the UK, meanwhile, the Road Haulage Association has warned of fresh food rotting as Brexit “cripples” supply chains – tariffs or no tariffs – if the right customs controls aren’t in place.

Time to future proof the supply chain

We’ve noted before that predictions about the impact of Brexit are particularly unreliable. Confirmation the UK will exit the single market and full membership of customs union have given us some indication of what to expect from Brexit. Until negotiations get well underway, however,  and even then, there will continue to be massive uncertainty as to the final trading relationship, tariffs and customs arrangements in place.

The same is true to an extent in the US. Despite the frantic activity of the Trump administration, it will be some time yet before it becomes clear to what extent Trump wants – and can – pursue an isolationist trade policy.

These are not reasons to wait, though. Rather, they give time to act – and it may end up being a narrow window of opportunity. The speed and size of currency movements since the Brexit vote has already shown how quickly things can move. Likewise, in the US, should some of the more worrying potential consequences of the new administration’s policies and rhetoric materialise, they could do so quickly.

If organisations don’t yet have the confidence to anticipate the future trading landscape, they do at least have sufficient warning that changes are on the way. They need to be building resilience in their supply chain now – ensuring they have the visibility and flexibility to react when the time does come.

The Brexit case for proactive supply chain changes

EU vote has brought risks, but also opportunities. It’s time for a review.

Brexit is among the factors pushing supply chain risks to a three-year high, according to a new survey. The Chartered Institute of Procurement and Supply quarterly Risk Index is up one point on last quarter, and up almost two on last year to reach 80.8 (out of 100).

Two months on from the EU referendum, however, we’re actually little closer to knowing what Brexit will mean.

With the government still not invoking Article 50 (despite some pressure), negotiations for the UK’s withdrawal from the EU have yet to even begin. Theresa May has said it will not be triggered this year, and there is “idle chatter” of further delays – perhaps until after the French and German elections in May and September, respectively.

In the absence of those negotiations, we’ve no way of knowing the likelihood of any of the various options: whether we’ll end up with someone similar to Norway’s membership of the EEA or an entirely new arrangement – a “special status”.

In one sense, then, we’re no further on than when we last looked at this issue. Yet, the intervening period has been useful in a couple of respects.

Supply chain risks sooner rather than later

First, it’s shown us that some of the more dire speculation about the impact of Brexit was just that. Both unemployment and retail sales figures have so far confounded the doom-mongers. There’s no guarantee that will last, but it makes it clear that predictions about the impact from Brexit are unreliable.

It also makes it clear that there’s still time to make changes to respond to a new environment. But that window could close soon.

For many, the risks need to be monitored closely well before the final parting. As a recent report by Credit Suisse makes clear, for instance, many UK exports are not goods being sold to consumers but components used by EU manufacturers’ products. Those EU producers are likely to be reviewing their supply chains now, even if you are not.

“Indeed, the risk is that the current uncertainty surrounding the UK’s membership of the EU may be sufficient for some EU companies to slowly shift sourcing parts of their value chains away from the UK. As such, the negative effects on UK export demand may occur sooner rather than later,” the report notes.

Making the most of Brexit

But Brexit also presents opportunities. Whether it forces you to or not, Brexit probably should change your supply chain – or at least make you consider changes. A lot of companies have taken this to heart, with a survey of retailers by Barclays showing many looking to new sources.

In fact, the Brexit vote – like any big change – is a prompt to review the supply chain to check its robustness and its efficiency, because where there are risks, there are also often opportunities. It’s better to try to address both early on.

Major business interruption events challenge the robustness of global supply chains

2010 – a year of surprises? Or was it all pretty predictable?

2010 started uncomfortably for certain organisations with freezing Eurostar trains stuck in the Channel Tunnel and the threat of Pandemic flu still just lurking just over the horizon. April brought disruption for many more companies with the volcanic ash cloud casting an impenetrable shadow over the movement of goods and people in Europe. Car production lines came to a standstill when critical components were failing to arrive ‘just-in-time’.

Such headline grabbing events are always followed with the inevitable probing questions:
• Should these organisations have been better prepared for such eventualities?
• Where were their contingency plans?

The defence is invariably that “these acts of God were unforeseeable”. Is that acceptable in the current age of “if it can go wrong, it will”? After all, we live in a world that does not tolerate disruption – there’s no room for slippage in our modern, just- in-time existences.

This provided a topic for discussion on Radio 4’s ‘The Bottom Line’ a couple of weeks ago. Their general conclusion seemed to be plan for the ‘FORSEEABLE’ (aka freezing trains), but don’t waste your time planning for the UNFORSEEABLE (aka Ash clouds). If you don’t respond well to the Forseeable then you look silly - the Unforseeable you can get away with.

Well, there is a parallel argument that goes something along the lines of 'plan for the effect rather than the cause'. There is no point in trying to plan for every single unforseeable scenario (cause), but there is a great deal of value in planning for the impact of the unknown threat ( the effect). Analysing the impact focuses risk mitigating actions on the most exposed areas.