5 Supply Chain Questions Every Drug Company Should Know The Answers To

By Hal Craig, founder, Trout Creek Consulting, LLC

Part 1 of this two-part column, “They’re Not Mind Readers: Have You Told Your Suppliers What You Want?”, raised the point that if you’re not happy with one or more of your suppliers, it may be because you haven’t clearly told them what you want, what your expectations are, and what is important to you. The article also compared and contrasted the perspectives on what “partner” means to a drug company and its suppliers and, further, how different experience and perspectives may lead a drug company to make different decisions than its supply chain partners would. Finally, Part 1 discussed the importance of managing inherent supply chain partner conflict and understanding team capability to ensure success. Here in Part 2, we explore five important questions that can serve as a brief checklist to help drug companies both figure out and communicate their expectations to suppliers and understand their suppliers’ expectations.  

1. Do you know what you want your mission-critical suppliers to do and have you told them? Do they know your expectations?

Voluminous supply and quality agreements, including the responsibilities table in the quality agreement, while important, are not the whole answer to these questions. Everyone at both your and your suppliers’ organizations who is involved with your products is not going to absorb these generally long agreements and what is different about your product from their typical approach. The more complete answer to these questions includes up front conversations at the start of your relationship with each supplier, summary notes of the leading points, and ongoing conversations and relationship building throughout the life of the supply chain to improve communication and understanding. For process/product development, CAPEX projects, clinical campaigns, validation campaigns, product launches, and other similarly involved efforts, distribute a clear, concise scope document and have an in-person kickoff meeting to clearly set expectations for:

1. The timeliness, frequency, mode, and transmitter/recipient of communication by topic type;
2. The areas where you expect the supplier to step up and fill the gap by providing technical know-how, equipment capability, resources, creativity, services, oversight, and decision input and decision making;
3. The areas where you want to limit the supplier’s discretion;
4. The metrics that are important to you.

Find ways to reinforce and recognize compliance with these expectations during subsequent team meetings and contact between meetings. Don’t be afraid of, and be receptive to, discussions about where areas are not working in the supply chain with the goal of making improvements. Focus on the positive, not placing blame or penalties.

2. Do you know where your suppliers need your company, the drug sponsor, to step up and the timing of receiving that support? Do you know their expectations of you?

There’s no need to guess the answer to these questions. Ask what your company can do to ensure supply chain success. Your firm may not be able to step up in all of the areas they suggest, but at least the areas are identified and work-arounds can be found.

As the drug sponsor, it falls on you to know what atypical CMC data the FDA and other regulatory authorities are expecting for your product, its impurity profiles, delivery device if applicable, and other related items given the therapeutic indication. If your drug product uses something new, say manufacturing technology that is new to the drug industry or a non-compendial novel excipient, it falls on the drug sponsor to take the lead in defining and ensuring compliance with the regulatory requirements.

Certainly, your CDMO, and probably other suppliers, will need a forecast per agreed upon requirements. Build in excess production time or building inventory if you think an upside is probable. Do not assume that capacity, all materials, and personnel will be available on short notice. The drug sponsor’s inability to forecast does not mean that suppliers will damage their other customer relationships or absorb extra costs to help you; partnership means respecting your partner’s other commitments and policies.

The drug sponsor, and not its suppliers, should have the better view of investor appetite for risk, meeting milestone timelines, and providing funding. There are development paths that have more or less risk of regulatory approval. It falls on the drug sponsor, and not the CRO or CDMO, to understand its investors’ willingness to take a lower first-time cost/higher regulatory risk development path vs. a higher first-time cost/lower regulatory risk path. Similarly, it falls on the drug sponsor to balance the investment vs. data trade-off with respect to obtaining favorable formulary position, reimbursement, and product adoption rate.

3. Do your mission-critical suppliers know the “why” behind your expectations? Do you know the why behind their expectations?

If you’ve worked with me or seen me present at a conference, chances are you’ve heard me mention the importance of “understanding the chemistry and physics of the process” to make technology transfer, process development and scale up, and plant design/construction/start-up/operation successful. Basically, this is understanding why something works. This same logic applies to creating and managing an outsourced supply chain for success: If you and your supply chain partners each know why the other’s expectations are important, everyone is more likely to identify and mitigate potential problems. There are many “whys” in an outsourced supply chain, of which some examples are:

1. Drug sponsor needing to reach an investable inflection point before running out of money
2. Supplier needing to order seasonally available natural raw materials
3. Securing production capacity when demand matches or exceeds supply
   1. The supply/demand imbalance might be somewhat foreseeable due to equipment, personnel, permitting, or spatial constraints
   2. The supply/demand imbalance might be a sudden capacity withdrawal for regulatory or plant incident reasons – in this case, there’s a premium on securing new capacity fast before other customers realize the impact on their supply chains
4. Scheduling production, shipment, or other activities around multi-week national holiday seasons in some countries
5. Drug sponsor is looking for a first mover advantage – first to market or first to file

4. Have you identified and prioritized the gaps that you expect your outsourced supply chain to fill and are you periodically updating this assessment as your product(s), technology, and funding progress over time? Is it realistic to fill these gaps virtually?

It is important to know what gaps you expect your outsourced development (process, product, and clinical) and commercial supply chains to fill and when they need to be filled. It’s also important to understand whether outsourced suppliers or “internal” resources – employees, consultants, interim employees, drug company-owned manufacturing capability – are the best ways to fill these gaps.

5. Does your supplier selection and qualification process yield suppliers that fill the identified gaps with economics that work?

A product’s supply chain will evolve as that product progresses from pre-clinical development to post-approval commercial sales globally. At each step in that evolution, the drug company should have a supply chain that (a) can cost effectively and reliably “get it done” while complying with regulations and the drug company’s policies, (b) is straightforward and, dare I say, easy to work with, and (c) is capable of responding to change because the chemistry, physics, biology, regulatory environment, raw material availability, and other items might not be fully understood or defined.

Conclusion

Ensuring a successful and productive partnership with your suppliers involves both clearly communicating your needs and expectations to your suppliers and listening to what their needs and expectations of you are; ensuring that you and your suppliers understand the why behind each other’s expectations so that everyone is more likely to identify and mitigate potential problems; identifying and prioritizing supply chain gaps that need filling; and verifying that your supplier selection and qualification process yields the cost-effective, reliable, compliant supply chain that can get it done. Getting answers to the above questions will have you well on your way to a mutually beneficial relationship.

About the Author:

Hal Craig is the founder of Trout Creek Consulting, LLC, a strategy and life science supply chain consultancy focused on solving CMC, outsourcing, strategy, and technical challenges. Clients include venture-backed, family owned, private equity-owned, and publicly traded companies. Craig serves on the Physical Sciences Investment Advisory Committee of Ben Franklin Technology Partners of Southeastern Pennsylvania, is an assistant scoutmaster and committee chair emeritus with a Boy Scout Troop, and has a BSChE from the University of California, Berkeley and an MBA from the University of Michigan. You can reach him at hcraig@troutcreekconsulting.com and connect with him on LinkedIn. Trout Creek Consulting has been a member of Life Sciences Pennsylvania for over 10 years.