CSCMP's Supply Chain Quarterly
December 17, 2017
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Report: global manufacturing and sourcing raise risks for pharma industry

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Pharmaceutical industry executives say that better supply chain visibility will be needed to control global supply chains that involve sales, sourcing, and manufacturing in emerging countries.

Outsourced manufacturing and global sourcing of raw materials are exposing pharmaceutical companies to an increased threat of counterfeiting, intellectual property theft, and product contamination. That was one of the main findings in a recent study that examined pharmaceutical supply chains, including the outsourcing of drug development, sourcing, and manufacturing to developing nations. The survey, which was co-sponsored by PriceWaterhouseCoopers LLP and Axendia Inc., canvassed 112 industry executives from pharmaceutical, medical device, and biotechnology companies in 12 countries.

Three-fourths of respondents said their companies plan to increase their manufacturing outside of the United States. Yet executives at pharmaceutical and life sciences companies increasingly worry about supply lines as more of them begin manufacturing and sourcing drugs and medicines in emerging economies such as China, India, Mexico, and Brazil. Half of the survey respondents said that raw materials sourced outside the United States represented their supply chains' greatest vulnerability, while 61 percent viewed contaminated or nonconforming raw materials as the top supply chain threat over the next five years.

Limited supply chain visibility based on "snapshots in time" frustrated the survey respondents. Seventy-seven percent stated that their primary method for gaining visibility into their suppliers' practices is a periodic audit. Only 25 percent of those surveyed reported sharing common practices and information with suppliers, while a mere 3 percent said that they have access to suppliers' data in real time. Sixty-six percent said they can obtain a global view of their supply chain activity but they need to manually aggregate the data from multiple locations.

Track-and-trace technology to provide supply chain visibility is now available, but that doesn't mean most companies are using it. Respondents cited four obstacles to its adoption: cost, difficulty of implementation, lack of industry standards, and lack of regulatory requirements and guidance.

Until the industry implements systems that can provide real-time, global supply chain visibility—including information from suppliers, distributors, logistics service providers, and contract manufacturers—the report says, companies will find it difficult to ensure the safety and effectiveness of pharma and life sciences products.

To view the complete study findings, go to: www.pwc.com/us/supplychainsurvey.

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