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Risk management in pharmaceutical supply chain

In the modern day, a company's competitive advantage in most industries will be determined by maximizing its relationships and the diligent management of its forward and backwards facing supply chains. The ability to effectively manage risks in a supply chain is an absolute must in the skill set of any current supply chain professional. This course will equip and develop procurement and supply chain professionals to be able to operate diligently and effectively with their supply base, mitigating any risks and maximizing all opportunities to gain competitive advantage in their market place.
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  • 1. Presenter: Mohammad Fat’hy Elnadi Managing Director , Regulatory consultant Reyada Pro for Pharmaceutical Consultancy Risk Management in Pharmaceutical Supply Chain
  • 2. Course Objectives • Know the characteristics of pharmaceutical supply chain • Know the challenges facing the pharmaceutical supply chain • Mapping your supply chain • Define risks associated with your supply chain • Know the risk mitigation strategies
  • 3. Importance of the supply chain • “Companies don’t Compete, supply chains compete” Quote by CIO of Nortel • Organizations nowadays competes through their supply chains not their products. • Valsartan Problem (2018)
  • 4. Importance of the supply chain Valsartan Problem: -FDA ordered for the recall of all products containing Valsartan from a Chinese supplier due to contamination with a impurities (N-Nitro Sodium Ethyl Amine) -NOVARTIS Egypt beats the competition through a declaration in the newspaper that availability of their Valsartan-containing products wasn't affected by these decisions as the mentioned supplier is not a registered supplier for NOVARTIS and the Supply of their Valsartan is from their own manufacturing facilities so they assure its safety & efficacy -Key messages in the declaration •Availability •Supply •Safety & Efficacy
  • 5. What is a Supply Chain? A supply chain consists of the flow of products and services from: – Raw materials manufacturers – Component and intermediate manufacturers – Final product manufacturers – Wholesalers and distributors and – Retailers – Consumers (End users) Connected by transportation and storage activities, and Integrated through information, planning, and integration activities Many large firms are moving away from in-house Vertically Integrated structures to Supply Chain Management
  • 6. What is Supply chain? 6
  • 7. What is Pharmaceutical Supply chain? 7
  • 8. What is a Supply Chain? • SC is a network of partners. • Each partner in the chain is responsible directly for a process or activity that adds value to the product. • Those networks of partners, processes & activities should be managed effectively & efficiently.
  • 9. Supply Chain Management • “The planning and management of all activities involved in sourcing and procurement, conversion and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers and customers.” The Council of Supply Chain Management Professionals (CSCMP) definition
  • 10. Supply Chain Management • Supply chain management involves two main functions: 1- Planning: “Making a plan on how much of each product should be bought, made, distributed, sold and when” 2- Controlling: Keeping to plan – in spite of the many problems that may get in the way
  • 11. • Chopra & Meindl defines five areas to be the performance drivers for any supply chain - Production - Inventory - Location - Transportation - Information Supply chain Performance Drivers 11
  • 12. Supply chain Performance Drivers 12
  • 13. • Why does the pharmaceutical or generally healthcare supply chain need specific attention? • Simply because of the End User Specific Nature of Pharmaceutical Supply Chain 13
  • 14. • Dissatisfied customer means - Untreated patient (Drug shortage or lack of therapeutic effect, leading to prolonged illness) - Hospitalization (in case of severe ADR or Contaminated products) - Death (in case of life saving medications) • So all parties of the supply chain need to ensure that their activities both support the health & well being of the patient and maintain business continuity. Specific Nature of Pharmaceutical Supply Chain
  • 15. • All these parties could be the focal firm in the supply chain of pharmaceutical products - Pharmaceutical manufacturers - Pharmaceutical distributors - Contract manufacturing organizations (CROs) - Pharmacies & Hospitals - Non Governmental organizations (WHO, Doctors without borders..) • Each one of these entities may face its own challenges within its supply chain, although they share most of challenges The focal organization in pharmaceutical supply chain 15
  • 16. Pharmaceutical supply chain challenges: • Lack of coordination • Outsourcing (Regulatory & quality compliance) • Inventory management • Absent demand information • Storage Conditions & Temperature control • Counterfeit Medications • Uncertainty
  • 17. Pharmaceutical supply chain challenges: • Lack of coordination - There are often so many links in the chain that the most resilient, adaptable and successful supply chains must be well coordinated. - is not always an easy task.
  • 18. • Outsourcing (Regulatory & quality compliance) - Increased sourcing & outsourcing of manufacturing to low cost countries * Stretched the supply chains * Increasing chances of disruption * Making tight Control More Challenging - Quality agreements (define detailed responsibilities) - The accountable organization has all the responsibility against the regulatory authorities - Short & simple supply chains are preferred for better control Pharmaceutical supply chain challenges:
  • 19. • Inventory management  Pharmaceutical companies tends to follow JIC strategy instead of JIT.  JIT strategy have high risks of delayed delivery specially in case of life saving drugs.  JIC strategy leads to holding excess inventory which freeze the working capital and hence the organization capabilities.  Time of holding inventory is very critical in case of biologics and even more in case of radioactive drugs which may need only few days to decay causes huge losses. So the challenge is How to Balance Pharmaceutical supply chain challenges:
  • 20. • Absent demand information - Pharmaceutical companies need greater customer insight and planning for assessing (What, when & How much of supply) to avoid * Shortage of supply * Excess inventory (in case of perishable or radioactive drugs may cause potential huge losses if they go to waste) Pharmaceutical supply chain challenges:
  • 21. • Storage conditions & Temperature control - Developing countries - Very big countries with wide range of temperature distribution (India) - The patient**** Pharmaceutical supply chain challenges:
  • 22. • Storage conditions & Temperature control (Cont’d) - Survey Done by Pharmaceutical & Packaging News in 2015 found that of temperature sensitive products: - 51% were ambient - 31% were refrigerated - 17% were frozen - 32% shouldn’t be allowed to freeze - Many pharmaceuticals also, react to humidity & light - So all these factors should be consistent through the whole supply process of the drug (Storage, Manufacturing, Transportation, Warehousing, on the shelf an also at the patient side) Pharmaceutical supply chain challenges:
  • 23. • Counterfeit Drugs In 2017, the WHO estimated 1 in 10 medical products circulating in low- and middle-income countries is either substandard or falsified, according to new research from WHO. - Consequences  Untreated patients may lead to death  Losing of brand image  Hinders the flow of the product supply by feedback mechanism Pharmaceutical supply chain challenges:
  • 24. • Counterfeit Drugs (Cont’d) - mitigation strategy  Secured packaging solutions  Barcode , RFID techniques  Track & Trace Pharmaceutical supply chain challenges:
  • 25. • Uncertainty  With complexity comes uncertainty  It comes from missing information “many unanswered question marks” 25 Pharmaceutical supply chain challenges:
  • 26. • Uncertainty (Cont’d)  Uncertainty leads to high risk profile to the whole supply chain  Supply risks  Operations risks  Delivery risks 26 Pharmaceutical supply chain challenges:
  • 27. • Uncertainty (Cont’d) 27 Pharmaceutical supply chain challenges:
  • 28. • Due to all these challenges, the supply chain is always running under risk. So it is essential to go through 28
  • 29. • “What is our plan for when things go wrong?” • Reacts to uncertainty • Appropriate when managers lack sufficient control over operational affecting factors. Risk Management 29
  • 30. Supply Chain Risk Management • Definition of risk - Effect of uncertainty on objective (Risk Management guidelines ISO 31000:2018) - The combination of occurrence of harm and the severity of that harm (ICH Q9 guidelines)
  • 31. • Definition of risk - Business wise: it is the probability for loss to the focal organization - Regulatory wise: it is the probability for health damage Pharmaceutical supply chain challenges:
  • 32. • Characteristics of the risk - Uncertainty: May or may not happen (no 0% risk or 100% risk) - Future consequences results in loss Pharmaceutical supply chain challenges:
  • 33. • Potential risks may come from: - Natural disasters (Earthquakes, Tsunami,…) - Political instability (middle east region) - Outsourcing activities - breaching regulatory requirements - Loose regulatory control over the whole supply chain (developing countries) - Non accurate demand forecasting - Inefficient operations management - Inefficient sourcing activities - Uncontrolled storage conditions through the whole distribution channels (Warehouse, transportation, distributors, pharmacies & clinics and the end user) Pharmaceutical supply chain challenges:
  • 34. • Importance of applying risk management - Supporting business continuity and secure products supply. - Reduce costs. - Minimize costs of non-conformance. - Improve business efficiency. - Increase confidence of customers & regulators. - Reduce liability. - Avoid waste & scrap. Pharmaceutical supply chain challenges:
  • 35. • Principles of risk management - Open communication - Shared vision - Team work - Integration - Future consideration - Continuous process Pharmaceutical supply chain challenges:
  • 36. • Risk Management “Coordinated activities to direct and control organization with regard to risk” 36 Pharmaceutical supply chain challenges:
  • 37. Risk management process
  • 38. • Risk management process  Identify the risks  Evaluate & prioritize the risks  Develop a strategy for each risk Pharmaceutical supply chain challenges:
  • 39. Risk Management Process 1- Establish the risk context & Criteria 1.1. Establish the Context • The strategic & organizational context in which the risk management will take place. • For Example - Strategic priorities of the organization - Type of the business - Geographic areas where your business runs - Top selling products
  • 40. 1.2. Define the risk criteria - How consequences & likelihood will be defined & measured. - How the level of risk will be determined - Scoring technique that will be used - Tools that will be used Risk Management Process 1- Establish the risk context & Criteria
  • 41. Risk Management Process 2- Risk assessment 2.1. Identify the risk - A systematic use of information to identify hazard referring to the risk question or problem description (ICH Q9) - Main objective of this stage is to determine “what might go wrong” - Brainstorming, process mapping, Cause & effect diagram “Fish bone diagram” are useful tools for this stage.
  • 42. Risk Management Process 2- Risk assessment 2.1. Identify the risk - At this stage you have to map your supply chain from different perspective (process flow, geographical flow) • Essential step for effective risk management • Creates visibility • Shows hotspots & areas of potential risks • Show areas of impact
  • 43. Risk Management Process 2- Risk assessment 2.1. Identify the risk (Cont’d) - At this stage collect information as much as you can. - There are two types of information/data Sources of Data/Information used in risk identification Hard DataSoft Data - Facts - Measurements -Analytical result -Trends -Attributes -Observations -Experience -Assumptions
  • 44. 2.2. Analyze the risk - At this step, we attempt to estimate the level of risk in terms of A- Severity of harm B- likelihood of occurrence C- delectability - It provides qualitative or quantitative estimate for each risk. Risk Management Process 2- Risk assessment
  • 45. 2.2. Analyze the risk - How to analyze the risk - Choose the suitable analysis tool in the early beginning, you can start with simple tools and as experience grows, you can transit to the more complex tools - Assign a rank or a score for each identified risk Risk Management Process 2- Risk assessment
  • 46. 2.3. Evaluate the risk - The purpose: Comparing the results of the risk analysis with the established risk criteria Risk Management Process 2- Risk assessment
  • 47. Risk Management Process 3- Risk treatment
  • 48. 1- Avoidance Strategy: • the organization choose to avoid the activities that lead to that risk • used when the risk is above the limit of tolerance • (Example: Avoidance of making direct investment in struggle regions like Syria or Yemen) Risk Management Process 3- Risk treatment
  • 49. 2- Reduction Strategy: • the organization take the necessary mitigation actions and controls to lessens the effect of the risk • Reduce either the probability or the severity or both • The main objective is to drive the risk below the level of tolerance Risk Management Process 3- Risk treatment
  • 50. 3- Transfer Strategy: • the organization transfers all or part of the risk to a third party • The main forms of this strategies are insurance & outsourcing Risk Management Process 3- Risk treatment
  • 51. 4- Acceptance Strategy: • the organization sees the opportunities within the risk • The main forms of this strategies are insurance & outsourcing Risk Management Process 3- Risk treatment
  • 52. After taking the necessary actions for treating the risks, don’t overlook: • The Residual risks: Risks remaining after making the necessary control measures • The Secondary risks: Control measures taken results in risks at their own Risk Management Process 3- Risk treatment
  • 53. Risk Management Process 4- Risk Communication • It is the umbrella that should cover all risk management process. • The internal & external communication is critical for the success of any risk management plan.
  • 54. Risk Management Process 5- Monitor & Review • In identifying, analyzing and treating the risks, the organizations make assumptions an decisions based on situations that are subjected to change • Risk review is required to ensure that the outputs of the Risk Management process are: • Revisited at defined intervals • Actively evaluated in response to current events or new information
  • 55. Risk Management Process Summary of the Risk Management Process 1) Define the context your business you need to manage its associated risks and criteria that will be used 2) Map you supply chain 3) Identify the risk events related to your supply chain. 4) Analyze the potential risk events regarding probability & severity. 5) Rank & prioritize the risks 6) Determine the treatment strategy for each risk 7) Communicate your risk management plan 8) Implement the determined risk controls. 9) Monitor and review and repeat the process
  • 56. In this activity, every participant will choose a product from his organization and implement the risk management process for this product. Steps: Develop the context & criteria for determining the risks Map the supply chain for this product (try to get to the deepest tiers as you can. Assign the hotspots and areas under risk Analyze these risks Rank the risks & prioritize tem Choose the treatment strategy for each risk Assign the appropriate control Activity 56
  • 57. • You can share your activity outputs with me for further discussion on Email: WhatsApp: +201091081800 57 Activity
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