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World Courier discusses how healthcare, supply chain and public safety are inextricably linked

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Healthcare, the global pharmaceutical supply chain and public safety:

Like many industrial sectors, the pharmaceutical industry began tapping into the many resources and marketing opportunities created by our shrinking global community as early as the 1960s. Every facet of pharmaceutical operations − from research to sales to production − has since been impacted through changing business models that promote geographical solutions for increasing sales and reducing operational costs. The “merger and acquisition” mindset of the 1980s resulted in expanded product portfolios for many pharmaceutical companies and facilitated their entry into new international markets. The shifting of clinical trials from traditional western locations to developing nations in the 1990s helped to bring down research costs as did the outsourcing of manufacturing to local production facilities and the sourcing of pharmaceutical ingredients from local suppliers. The model was, indeed, a dynamic one that brought much benefit to the industry and has arguably led to an increased number of important drug discoveries as well as improved access to drugs by patients worldwide, especially the disadvantaged and those living in developing nations. 

In globalising the industry, however, oversight and control has increasingly become a challenge in managing product quality, consumer safety and organisational risk. While quality issues have led to product recalls in many industries, nowhere has the impact on public health and safety been potentially greater − both in terms of sheer numbers and human impact − than when these recalls affect products produced by the regulated industries of food, pharmaceuticals and medical devices, and cosmetics.

By 2008, the deaths of 81 patients in the US associated with tainted heparin produced in China and found in the drug supplies of 11 countries as well as other less high-profile incidents shone a light on the fragility of the global pharmaceutical supply chain .

In the face of an ever-expanding global industry where pharmaceutical companies and their researchers, raw materials suppliers, production facilities, front-line healthcare practitioners and patients are so intimately entwined, yet so geographically diverse, what safeguards are in place to protect the public and the investment that has been made? Regulatory safeguards and the operationalisation of these standards have evolved over time, beginning on the production floor and continuing on through the entire supply chain − through storage and distribution − as witnessed below.

Today’s pharmaceutical product standards are primarily assured through industry adherence to good manufacturing practice (GMP) guidelines. Production − both the input of raw materials and the output of final product − are but one side of the supply chain equation. While there are numerous authorities, responsible parties, regulations and safeguards in place to oversee product quality throughout the manufacturing process, the global nature of today’s pharmaceutical supply chain brings a second important function into sharp focus − the storage and distribution of these products and their ingredients at a global level.

Today’s top pharmaceutical companies are massive conglomerates comprised of multiple subsidiaries, divisions, research centres and production facilities dispersed among hundreds of sites around the globe primarily in Europe, the Americas and Asia Pacific. Infrastructure runs the full gamut − from company-owned facilities in developed countries to licensed production facilities in developing countries. Raw ingredients for a medicine or therapy may be sourced from locations half a world away from where they are fed into the production cycle. Distribution of finished product to hospitals, clinics, pharmacies and patients is even more widespread, touching the most remote and obscure locations on the globe. Every week hundreds of thousands of pharmaceutical consignments traverse the globe by land, sea or air, representing an annual global trade estimated at over $1 trillion[1].

Recognizing the increased vulnerability of the extended supply chain, what additional challenges does pharmaceutical product face as it leaves the relative security of the manufacturing facility and moves into the real world? What can industry do to assure product safety, minimise risk and control costs?


Running the distribution gauntlet​ 

Today’s pharmaceutical distribution channel faces challenges in five key areas:


Whether ingredients are needed at the production site or finished product is needed by patients, timing is critical to a seamless supply chain. While some delays undoubtedly occur at the production level, the added challenge of traversing long distances requires planning to ensure that shortages do not put additional strain on the supply chain. “Since 2005, drug shortages have nearly tripled in the United States and added more than half a billion dollars in costs for hospitals worldwide.”[2]


Product shortages can trigger even more far-reaching effects, claim some experts, permitting a foothold for the introduction of falsified medicines into the supply chain in response to unfulfilled demand. “Supply issues also create opportunities for counterfeiters and gray-market vendors, threatening patient safety and cutting into the revenues of legitimate companies. Supply-chain security breaches are increasing by an average of more than 33% every year, rising not only in emerging markets such as China, India, and Brazil but also in the developed world.”[3]

Product Quality Issues

“Whether it is vaccines in Nigeria, family planning and essential medicines in Ethiopia or HIV medications in Tanzania, supply chain managers need to have a solid understanding of product availability and supply chain processes in order to respond to people’s needs. This includes ensuring vaccines are kept cold and effective on route to the children who need them, and health commodities are transported efficiently so that they are available to mothers and children on-site and on-time.”[4]

While the need for effective cold chain and transport capabilities to ensure adequate product quality is an ongoing issue in developing countries, compliance issues are also routinely identified in modern pharmaceutical epicenters, with the FDA issuing over 1,600 warning letters to pharmaceutical companies in the 26-month period beginning December 2010.[5]

Human Factor

In a 2008 white paper prepared by global analyst firm IDC which studied employee error in the US and UK workplaces, researchers estimated that the UK pharmaceutical industry alone lost £23.9 million annually due to human error. Across all pharmaceutical respondents (UK and US), 89% of the companies surveyed reported exposure to the risk of reduced productivity over the previous 12 months.[6] As the supply chain extends outwards to third-party service and materials providers, the cost of potential human error and lack of compliance increases exponentially. In emerging nations, these identified supply chain challenges are compounded by a weaker import and regulatory infrastructure, lack of education, economic instability and widespread poverty. 

“...[A]nnual global health expenditure stands at about US $5.3 trillion. Of this outlay, US $750 billion (18%) is spent in the pharmaceutical market, while consumers lose about US $300 billion more to human error and corruption. Together, total expenditure for pharmaceuticals and the cost of corruption combined exceeds US $1 trillion, or approximately 1/5th of what is spent globally on health care.”[7]


The previous quote brings us to another major form of human misstep − that of corruption which includes the growth and prevalence of the counterfeit drug trade. Today counterfeit drugs account for an estimated 10% of all drugs distributed globally. While the actual figure is unknown, the value of the inclusion of falsified medicines into the supply chain ranges from between $75 billion to $200 billion annually. These numbers do not factor in the human cost that is associated with counterfeit drugs including the failure to treat minor symptoms, drug resistance and death. Each year between 100,000[8] and as many as 1 million[9] people die from counterfeit drugs according to varying statistics.

Putting it all into perspective

While at first glance, the deficiencies identified in the previous section are daunting, it is important to consider how each of these elements is completely intertwined with and fuels the others. Even so, one element stands out above all the rest: the human factor. Despite ongoing attempts by international regulatory agencies worldwide to improve quality through increasingly stringent GMP, good storage practice (GSP) and good distribution practice (GDP) guidelines, human error, in and of itself, remains the critical concern. It is the “cause” where all other “effects” converge.

What strategies can be implemented to drive down these items and streamline the supply chain? Next time we will be considering three potential options which may make all the difference.

[1] Global Pharmaceutical Market Outlook: 2015, CubeX,

[2] Ebel, Thomas; Larsen, Eric; Shah, Ketan, “Strengthening health care’s supply chain: A five-step plan”, McKinsey & Company, September 2013.

[3] Ibid.

[4] Sarley, David, “Supply Chains for Global Health”, Impatient Optimists​ (Bill & Melinda Gates Foundation), October 21, 2014.

[5] Wheelwright, Scott M., Ph.D., “Recent Quality Issues in Pharmaceutical Compliance: Lessons from Warning Letters”, Pharmaceutical Outsourcing​, May 22, 2013.

[6] “$37 Billion -- US and UK Businesses Count the Cost of Employee Misunderstanding”, Reuters, June 18, 2008.

[7] Ibid.

[8] Bate, Roger, “The deadly world of falsified and substandard medicine”, American Enterprise Institute, October 15, 2012

[9] Southwick, Natalie, “Counterfeit Drugs Kill 1 Mn People Annually: Interpol”,, October 24, 2013.

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