This posting provides another update to our continuing commentaries reflecting on the causes of unacceptable supply shortages of critical life-saving drugs among various pharmaceutical and life sciences supply chains.

Our most recent Supply Chain Matters commentary reflected on the FDA’s latest alert to healthcare providers indicating that some non-approved, potentially counterfeit versions of the cancer treating drug Avastin as well as other medicines has begun to further infiltrate both U.S. and global supply chains. That development added ever more heightened concerns to the existing problem of limited supplies of critical life-saving injectable drugs.  As healthcare providers attempt to find all means to save patient lives, they sometimes have little choice but to explore all available means, with the unintended consequence of exploring grey market or foreign based distribution supply sources.

This situation however seems to have developed additional complications.  Pharmaceutical supply chains have long been challenged by conflicts in stakeholder interests and some of these conflicts may be compounding themselves in both leading up to as well as resolving the current problems. The drug manufacturers themselves, in an effort to respond to cost control directives, may have placed too much emphasis on singular points of production, which have suffered breakdowns in quality and production consistency.  This placed healthcare providers in the precarious position of stockouts and lack of adequate response from certain drug manufacturers.  The other conflict involves a high pricing imbalance among geographic markets, which has fostered an alternative grey market supply chain.

Last week the Wall Street Journal published an article (paid subscription or free metered view required) observing that the importation of low-cost foreign pharmaceuticals into the U.S. may be at the core of the current concern for safe product.  Noted were investigations of Canadian based distributors who have long histories in the providing of alternative low-cost drugs for U.S. consumers. One Canadian distributor is reported as acknowledging that his company may have inadvertently shipped fake vials of the cancer treatment drug Avastin to U.S. healthcare providers. The byline of the WSJ article points to the flourishing of grey market distributors because of the large price differential among U.S. channels as contrasted to lower-cost, foreign based Internet channels. These drugs enter the U.S. presumably after they have been shipped across many other foreign jurisdictions with different regulatory controls.  In the specific example of fake Avastin, which turned out to contain starch and cleaning solvents, there is some belief that the supply route originated in China and made its way through Turkey, Egypt the UK and Canada before its entry into the U.S. supply chain.

However, it is important to keep a historic perspective to industry tensions. The WSJ points out that for the past several years, there has been a history of drug manufacturers pressuring Canadian based wholesalers to stop supplying lower-cost drugs because in effect, it undermined the ability of drug companies to charge far higher U.S. prices than exist in Canada or other countries. Drug companies seek proprietary supply and pricing control, but as the current supply shortage crisis continues to unwind, events compound themselves.

In the point of view of Supply Chain Matters, there remains three significantly different challenges at-play and industry participants and government regulators need to align toward common stakeholder interests to resolve the current shortage crisis.

Pharmaceutical and life sciences companies should strive to provide the most innovative and cost affordable drugs to combat diseases and ailments.  Their supply chains should be focused on insuring safe and adequate supply, with contingency for unexpected supply interruption or unforeseen quality breakdowns.  Industry supply chain teams have always marched to the mission of zero stockouts and never failing to provide needed drugs when patients are in need.  That mandate extended itself into far too much excess inventories, or having on-hand supplies that exceeded expiration dates.  Today, the counter reaction has perhaps been too much emphasis on cost reduction without corresponding controls and process investments, resulting in a complete breakdown in insuring adequate supply.

Healthcare providers strive to provide their patients with safe and speedy choices in the treatment of chronic diseases such as cancer. Any patient faced with a chronic condition should demand the best available outcome without having to endure financial peril. Patients and their providers expect drug manufacturers to collaborate on cost affordable choices, particularly in the new era of needed healthcare reform.  This goal should not equate to drug manufacturers cutting back on quality, demanding proper adherence to good manufacturing practices (GMP) or placing additional single source production supply risk on any critical life-saving drug’s supply plan.

When broader political and industry agendas are brought to bear on an existing chronic problem, the issues become ever so compounded and patients suffer even more.  In our view, the current chronic supply shortages should not be the fodder in efforts to curb competition or derail the efforts of generic drug producers to introduce more cost affordable sources of supply. Just this week, India’s patent office granted an India based producer of the generic equivalent to Bayer’s kidney and liver cancer treating drug Nexavar, the right to distribute its drug to patients within India.  The government felt compelled to act because the cost differential was substantial, $5600 per month for the proprietary drug compared to $175 per month for the generic equivalent.

As this situation continues, it benefits all of us to differentiate within the current media reporting to identify the existence of competing stakeholder interests and urge industry stakeholders to align and solve one problem at a time. Now is not the time for the industry to be seeking protections, but rather a speedy response to current patient needs.

Bob Ferrari

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