Recent press reports, including a front page Wall Street Journal article have highlighted the fact that a Chinese factory producing the active ingredient that makes up the critical blood-thinning drug Heparin, has been identified  as a suspected source of contamination.  Of more concern, at least four people have died after being given the drug, produced by Baxter International.

Readers may recall previous stories of the discovery of lead paint in toys, leading to multiple product recalls in the U.S., as well as the discovery of melamine in pet food products originating from raw material manufacturers located in China. I don’t know about you, but this latest story causes me, as well as  a whole lot of others, much concern, since now the focus is on a vital medicine in our healthcare system.  Yikes!

There are even more challenging supply chain implications at play here.  First, this involves a highly regulated supply chain, one that is subjected to many process controls. A spokesperson for Baxter International indicated that the active ingredient for the Heparin in question was procured from another unnamed company, probably naïve in thinking that the Internet overcomes all information shortcomings.  According to the Wall Street Journal blog Health Block, the supplier of this suspected contaminated active ingredient is Scientific Protein Laboratories (SPL) of Waunakee Wisconsin, who’s joint-venture supplier is located in Changzhou China. The China operation has been reported to have had three different owners in the last four years.

The pharmaceutical supply chain has more than half of its products originating from India, Hong Kong, and China for producing both active ingredients as well as final products.  It has only been recently that China has been emerging as yet another low-cost source.

How this incident continues to play out in global supply chains from both a risk management, supply strategy, and distribution perspective are going to be something worth watching.  There is already speculation that healthcare providers and distributors are scouring to lock-up whatever “safe” supplies of Heparin are available, for fear of a looming shortage for a critical drug.  The press, manufacturers and politicians are pointing fingers at regulatory agencies such as the FDA, for its reported 13 years of backlog to inspect every foreign drug plant.  We may potentially discover that the long distribution pipeline back to the U.S.  may have contributed to the perishable nature of drugs of this kind, or that other manufacturers or geographic regions will be impacted by cascading events.

Supply chain risk management related to global sourcing  is the topic of the day, and this incident will add even more of a wake-up call for firms to have an active strategy in place.

Does your firm have a viable supply chain risk management strategy?

Stay tuned …..