DCAT President Discusses the Pharmaceutical Supply Chain

As the pharmaceutical industry begins a new year,

Pharmaceutical Technology

spoke with Bob Kanuga, executive director of the external manufacturing organization at Merck & Co. Inc.  (Whitehouse Station, NJ) and president of the Drug, Chemical and Associated Technologies Association (DCAT). The discussion spanned the dynamics shaping the pharmaceutical industry overall, key issues in sourcing and procurement, and the role of DCAT in facilitating the business relationships between pharmaceutical companies and their suppliers and the knowledge base common to both. DCAT is a business-networking association that is made up of representatives from companies that manufacture, distribute, or provide services to the pharmaceutical, chemical, and related industries, and sourcing and procurement professionals from the pharmaceutical industry and its suppliers. Kanuga became DCAT president in November 2010.

Pharmaceutical industry and supply chain dynamics
“The pharmaceutical industry as a whole faces more challenges today than in the past, but those challenges are not insurmountable,” says Kanuga. Some of the challenges include patent expirations for innovator drugs, pricing pressures, and increasing research and development (R&D) productivity and enabling new product introductions.

As the industry responds to these challenges, it also faces a changing and increasingly complex supply chain. “Supply-chain integrity and security are of great importance,“ says Kanuga. “Pharmaceutical companies, as well as industry regulators, continue to raise their expectations that their suppliers can ensure product quality and the companies that provide products and services to these suppliers can do so as well.”

At the same time, “the industry faces the need to broaden global access to life-saving medicines,” says Kanuga. This wider scope is reflected in the rising importance of emerging markets, the need for innovation in supply-chain management and logistics, as well as pharmaceutical industry participation in private and public partnerships and global health initiatives. Against this backdrop, specific supply-chain issues can surface, such as cold-chain management for vaccines and other temperature-sensitive drug products that need to be distributed to remote areas.

These challenges underscore why the responsibilities of each entity involved at each point of the pharmaceutical supply chain must be specific, clear, and accountable. “As part of increasing transparency of the pharmaceutical supply chain, there is a greater need for first-hand knowledge and audits of upstream raw material manufacturers,” says Kanuga. “Each party in the supply chain has to own the integrity of its link in the supply chain.”

Although the responsibility of quality of the pharmaceutical supply chain ultimately resides with the market authorization holder, Kanuga points to tools, such as consortium-based efforts, which can aid with supply-chain integrity and security. These consortiums can focus on compliance with good manufacturing practices, environmental performance, and overall business conduct and ethics.

As examples, Kanuga mentions the Rx-360 Consortium, an international consortium consisting of pharmaceutical companies, suppliers, and industry associations, which is focusing on ensuring the quality of the pharmaceutical supply chain. Rx-360 is evaluating the utility and possible application of shared audits in balancing the logistical, time, and cost considerations with the need for risk mitigation when seeking to expand supply-chain surveillance of all suppliers in a given supply chain.

Kanuga said the Pharmaceutical Supply Chain Initiative (PSCI) is another industry consortium involved in collective practices for the pharmaceutical supply chain. PSCI was formed in 2006 by a group of pharmaceutical companies to support responsible supply-chain practices of pharmaceutical industry suppliers, a crucial issue as drug companies elongate their supply chains geographically and increase their levels of external development and manufacturing. After launching in 2006, PSCI implemented the Pharmaceutical Industry Principles for Responsible Supply Chain Management in late 2007. These principles specify responsible business practices throughout the pharmaceutical industry's supply chain in areas such as ethics, labor, health, safety, and the environment, and related management systems. The activities of PSCI are facilitated by the Business for Social Responsibility, a corporate-social-responsibility association consisting of 250 member companies. The goal of PSCI is to apply the Responsible Supply Chain Management principles to achieve better social, economic, and environmental outcomes for all those involved in the pharmaceutical supply chain. One of the functions of PSCI is to help companies mitigate risk in supplier relations and supply-chain practices through a structured set of principles and an assessment program.

PSCI’s evaluation process includes environmental performance. As with other industries, the pharmaceutical industry has to evaluate its performance and opportunity in meeting broader goals of sustainability. “The supply chain plays a role in a company’s carbon footprint,” says Kanuga, pointing to several examples in which this may come into play. For example, sustainability may factor in the selection of an external manufacturer by considering how effectively the contract manufacturer can contribute to a pharmaceutical company’s sustainability goals by, for example, using green-chemistry approaches for process improvement for a given synthesis.

Given the elongation and increased complexity of the pharmaceutical supply chain, several key issues face pharmaceutical sourcing and procurement professionals in 2011, Kanuga said. “Active supplier management will continue to be crucial,” says Kanuga, as will “reliable and timely market intelligence to understand the supply chain and identify any possible disruptions to the supply chain.” Strategies for risk mitigation and effective risk management will continue to be important to minimize supply disruptions due to shortages, the financial solvency of suppliers, merger and acquisition activity, and the resulting consolidation in the supplier base.

DCAT in 2010 and 2011
As president of DCAT, Kanuga sees the association playing an important role in providing industry-relevant educational programs and business-development opportunities as member companies deal with the increasingly complex pharmaceutical supply chain. He said the educational programming during DCAT Week, which is held in mid-March each year, and the Sourcing Summit, which will be held in July 2011, are ways to share best practices and insights of specific concern to sourcing and procurement professionals in pharmaceutical companies and their suppliers. “In addition, DCAT gives employees of companies, such as mine, the chance to work with and benchmark with colleagues from all parts of the industry by volunteering on various committees and projects,” says Kanuga. “Membership in DCAT is a great value for all segments of our association.”

To reflect that broadening focus, DCAT expanded its educational programming to address topics relating to excipients, generic drugs, and biopharmaceuticals in 2010. For example, its educational programming during DCAT Week included programs on the integration of the business models between innovator-drug and generic-drug companies and the impact of mergers and acquisitions in the generic-drug industry. It also added programming to examine how the US Food and Drug Administration, the International Pharmaceutical Excipients Council, and the pharmaceutical industry are addressing the issue of excipient equivalence. To address the rising importance of biologic-based product development in the pharmaceutical industry, DCAT added a Biologics Forum to its slate of programs during DCAT Week in 2010. The program examined approaches for designing and implementing a successful supplier-management program in biologics manufacturing given the specialized economic, regulatory, and technical issues involved with biologic-based manufacturing. DCAT also held its first regional business development forum during DCAT Week in 2010, in which Ireland’s investment in the pharmaceutical industry was highlighted.

In 2011, the educational programming during DCAT Week, which will be held Mar. 14–17, will continue to feature insight relating to the changing manufacturing and supply chain. At a business development forum, representatives from Pfizer (New York), Teva Pharmaceuticals (Jerusalem), Piramal Healthcare (Mumbai), and the management-consulting firm PRTM will offer perspectives on how issues such as globalization, healthcare reform, and other transformations in the pharmaceutical industry are affecting manufacturing networks and supply chains. DCAT will also provide an in-depth pharmaceutical/biopharmaceutical outlook from Wall Street and market analysts from Thomson Reuters, JP Morgan, and Deloitte Consulting.

In another program, panelists from Pfizer, Abbott (Abbott Park, IL), Lonza (Basel, Switzerland), and Valsource (Downingtown, PA) will discuss the impact of the US Food and Drug Administration’s quality-by design initiative on the pharmaceutical supply chain. Also, Eli Lilly (Indianapolis, IN) will discuss approaches in selecting manufacturing partners in an era of increasing vendor consolidation. Panelists from Amgen (Thousand Oaks, CA) and Avantor Performance Materials (Phillipsburg, NJ) will examine various solutions, technologies, and collaborative approaches between customers and suppliers in ensuring supply-chain security and integrity. And a biologics forum will focus on trends and best practices for subcutaneous biologic drug-delivery systems with insight from FDA, Roche/Genentech (South San Francisco, CA), Amgen (Thousand Oaks, CA), and Becton Dickson (Franklin Lakes, NJ).

Going forward
In his new role, Kanuga will head the association’s executive committee of the board of directors, which includes four officers­: president, senior vice-president, finance officer, and vice-president. The executive committee also consists of five segment vice-presidents: chemical; biotechnology; pharmaceutical; pharmaceutical services; and contract formulation, fill­–finish and packaging. The president serves a one-year term, which Kanuga began on Nov. 1, 2010. He succeeded Joe Principe, vice-president of global business development at Piramal Healthcare (Mumbai, India), who served as DCAT president in 2009 and 2010.

Looking ahead to 2011, Kanuga says the association will continue to build on the association’s strength in developing educational and networking opportunities for its members. “With the help of the organization’s key opinion leaders, our volunteer committee members are developing programs with relevant topics and current speakers that will be of interest to our members,” he says. “Also, we are in the process of identifying new venues and mediums to deliver this information in more convenient ways. In addition, we will continue to encourage nonmember companies who participate in our events to join our organization so that DCAT can continue to grow and be able to expand our offerings and business-development opportunities,” concludes Kanuga.

Information about DCAT may be found here