Life sciences companies have faced media and public scrutiny following supply chain security incidents that highlighted the challenge of managing trading networks that span the globe and the disparity of quality standards and controls across those networks. While new sources of raw materials and labor offer cost advantages, they need to be evaluated carefully in terms of potential risk and reward.

To gauge the strengths and vulnerabilities of the current life sciences supply chain, Marsh's Supply Chain Risk Management Practice, in conjunction with Pharmaceutical Manufacturing magazine, conducted a survey of representatives from 66 leading life sciences organizations. The survey results suggest that pharmaceutical manufacturers, given the globalized nature of the industry, do not have as much control over supply chain security as they may expect.

The study shows that different segments of the life sciences industry are moving at different paces to fully safeguard their supply chains. For example:

• Outsourcing is challenging traditional safeguards. Although the general perception of study participants is that their processes are sufficient, survey results highlight cracks in the security and product integrity foundation, especially within those enterprises that have adopted an outsourcing-intensive model, in which there is significant third party participation for discovery, clinical trials, and manufacturing processes.

Fully 91% of outsourcing-intensive pharmaceutical participants in the study report having had a "significant incident" (i.e., causing a loss of US$10,000 or more) due to quality problems or delays with contract partners. Only 59% of their more vertically integrated peers, which have mostly in-house discovery, clinical trial, and manufacturing processes, report having incidents.

• Contract manufacturers need to beef up Service Level Agreements (SLAs). Contract manufacturers serving the life sciences industry also have notable differences. They are significantly more likely to include their raw material suppliers in a supplier qualification program and they lead in adoption plans for tamper-resistant packaging and related monitoring technology. But contract manufacturers are the least likely to enforce quality control and related supplier programs through service level agreements (SLAs); only 56% of contract manufacturer respondents report having SLAs.
• Small companies struggle to implement full safety and security capabilities. Organizations with under US$100 million in revenue are less likely to have the in-depth policies and procedures of mid-size organizations and large enterprises. They trail their larger counterparts in having a fully documented supplier qualification program and in auditing and monitoring indirect suppliers.

The report recommends the companies build in process standards, policies, procedures, and processes that help to ensure the safety and security of the supply chain, are agreed to by all participants (no matter how small their role), and are reinforced by clearly defined SLAs and reporting mechanisms.

The full results of the study and list of recommendations can be found in the report entitled Building a Safe and Secure Pharmaceutical Supply Chain, which is available by clicking here.

Download Improving Pharmaceutical Supply Chain Resiliency.

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