Editorial from the June 2008 issue of Managing Automation

Pharma Gears Up for Supply Chain Overhaul

by Beth Stackpole, Contributing Editor

Side effects from Baxter Healthcare's heparin blood-thinning drug made headlines in January. A month later, the big story involved problems with fentanyl patches. Last year, the spotlight was on GlaxoSmithKline's Avandia diabetes medication, Novartis' Zelnorm irritable bowel syndrome drug, and a multitude of antidepressants. A slew of pharmaceutical makers have faced the pain of orchestrating a product recall due to industry or U.S. Food and Drug Administration concerns about contamination, defects, or linkages to adverse patient reactions.

But beyond the complex tactical and public relations cleanup associated with drug recalls, the recent spate of high-profile events points up a larger, more strategic challenge confronting the pharmaceutical industry: the lack of end-to-end visibility in the supply chain, which leads to the inability to easily track product down to the consumer level. Without the ability to track and trace a specific batch of pills or medicinal liquid to a specific pharmacy or healthcare provider, it's nearly impossible to keep a recall from impacting the entire product line.

"While other industries, like consumer packaged goods and automotive, have been able to use or identify the supply chain as a strategic weapon in their organizations to create joint value with different trading partners, the supply chain has historically been a stepchild within life sciences," says Hussain Mooraj, research director of healthcare and life sciences at AMR Research Inc. "When faced with a recall situation, companies first have to figure out where all their product is, and that's a bear of a job because of the fragmented nature of the healthcare value chain."

This laissez-faire attitude toward supply chain best practices will very likely change soon. Pending regulations in California and Florida are putting pressure on pharmaceutical makers to revamp their supply chain practices as part of a mounting effort to curtail drug counterfeiting. The initiatives, known as electronic pedigree (e-pedigree), require manufacturers to track individual units of pills and other medications from the time they leave the factory floor to when they actually land in an individual patient's prescription package.

The high-profile California e-pedigree program, which had been set to go into effect by January 2009, was extended by two years in March. The extension is intended to give the industry more time to develop track-and-trace standards and to help pharmaceutical makers better absorb the multimillion-dollar investments in hardware and software that will be required to comply with what observers expect will be a nationwide mandate over time.

Addressing e-pedigree compliance and the larger supply chain visibility issue will be no easy task. Cost is a huge factor, with companies looking at investments in additional enterprise software, along with new scanners and other equipment associated with bar codes or radio frequency identification (RFID) technology. The latter technologies are essential for storing and accessing critical details about the product, including where it was manufactured, what its ingredients are, and where the ingredients originated.

Given the global nature of the pharmaceutical supply chain, it's not enough for companies to invest in the technology for their own manufacturing facilities; they also need to ensure that their networks of suppliers make the investment and participate in the process. "It's expensive to put the infrastructure in place to support all this traceability," says Jim Sabogal, vice president of the global industry business unit for life sciences at SAP AG.

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