Diversifying the Supply of Raw Materials

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Raw materials are integral to developing and manufacturing safe and effective therapies. When the supply of these materials is in jeopardy, so are the final drug products those materials are used in. Any delay in the complex supply chain of a drug can lead to a shortage of much needed medications.

The COVID-19 pandemic highlighted some of the problems in supply chains of many different products, not just pharmaceuticals. The fast development and market delivery of COVID-19 vaccines and treatments, however, also created a belief that drugs can be developed, manufactured, and marketed quicker than the industry has been used to, according to Jordi Robinson, chief commercial officer, Navin Molecular. “As such, there has been a shift in the industry whereby delivery times of raw materials need to be faster, with the aim of getting molecules into the clinic more rapidly than ever,” says Robinson. In this post-pandemic world, pharmaceutical manufacturers are applying the lessons learned during COVID-19 in regard to the supply of the raw materials they procure.

Some pharma companies are choosing to make APIs and excipients in-house instead of relying on foreign suppliers, and others are diversifying the suppliers they choose to obtain materials from. “This helps ensure a steadier flow of materials, which is crucial to keep production lines humming. Of course, there’s a trade-off. Companies are also holding onto more safety stock—extra ingredients in case things get tight again. It might mean a bit more storage space needed, but it’s a small price to pay to avoid those production slowdowns,” says Ada Bedelek, director of Supply Chain and Demand Planning, C2 PHARMA.

“By lowering reliance on China and other vulnerable geographies and supplier de-risking through a diverse supply base, efforts have been made to diversify and build a robust supply chain,” says Sundar Narsimhan, chief procurement officer at Neuland Labs. “To lessen future interruptions, there is also a stronger focus on sourcing essential supplies from local production to secure critical materials and ensure supply continuity during crises, while aligning with broader economic and geopolitical strategies to decrease reliance on far-flung supply markets. Companies are also focusing on shortening the supply chain through better logistics and distribution practices, that help improve agility and responsiveness to market changes.”

Wherever they obtain their materials, manufacturers should find suppliers that provide quality materials in a reliable fashion because the final product is influenced by the consistency of the raw materials involved, asserts Bedelek. “Therefore, it’s crucial to thoroughly evaluate suppliers’ quality management systems, certifications, and track records to ensure they consistently meet specifications. When evaluating reliability, assessing the supplier’s capacity, production capabilities, and supply chain resilience helps avoid risks of disruptions,” she states.

Choosing a supplier

When choosing a raw materials supplier, Selwyn Lustman, senior vice president, Global Sourcing and Procurement, LGM Pharma, specifies that pharma companies should ensure that a supplier meet the basic criteria of quality, price, and delivery. Pharma companies should also consider how long the supplier has been in business and if the supplier’s goals and priorities align with those of the pharma company, he remarks. The supplier should be able to meet the pharma company’s short- and long-term needs and provide sufficient space capacity to meet requirements. Suppliers should also have all the needed approvals for the appropriate markets. Environmental requirements are also a consideration, according to Lustman.

Suppliers must follow current good manufacturing practices (CGMPs) and maintain a robust quality system, emphasizes Narsimhan. “Alongside this, factors such as reliability, financial stability, stringent quality controls, and ethical conduct are also crucial considerations,” he adds. “Additionally, when selecting a supplier, we keep a close eye on his/her past performance, innovative approaches to efficiency, and customer-centricity.”

Robinson points to sustainability as a “critical factor” in selecting a supplier. “The supplier’s approach to sustainability is also becoming a critical factor in materials sourcing, with a requirement that they achieve minimum standards in both industry metrics (such as their Ecovadis rating) and reporting,” he says.

“Additionally, sourcing groups are often under pressure to reduce the number of suppliers that they use, so ideally a chosen partner should offer a broad platform of technologies as well as the ability to support a wide range of manufacturing scales,” Robinson adds.

The type of raw material needed should also be a consideration for manufacturers when deciding on a supplier. The nature and complexity of raw materials, as well as the techniques needed to produce them, may require different supply chain securities, explains James Lawler, general manager, C2 PHARMA. “In addition, raw materials for APIs which are designated as lifesaving medicines or form part of niche or orphan drugs may require additional security measures,” he says. “These can vary widely and are critical factors when considering supply chain securities.”

Single versus multiple suppliers

“Alongside the increasing pressure to deliver new drugs to the market quickly and efficiently, is the complexity of new molecules, and, by extension, their raw materials,” says Robinson. “In order for the supply of such materials to meet clinical and commercial demand uninterrupted, it is critical that key materials can be sourced from multiple suppliers. These will often be strategically spread geographically, to mitigate against any potential manufacturing issues that might arise, or wider geopolitical issues that could affect the supply chain.”

Flexibility and adaptability can be ensured by having multiple suppliers of necessary raw materials. However, warns Bedelek, more suppliers mean performing more qualification actions. “If the demand is small, it may not be worth qualifying several suppliers,” she says. “While there are benefits to working with multiple suppliers, it’s essential for manufacturers to carefully manage these relationships to optimize performance effectively.”

Lustman agrees that additional suppliers may mean additional precautions and work. “When a manufacturer develops a new drug product, they will generally go with the source that meets the right quality, regulatory, pricing and delivery requirements,” he says. “Approving more than one API source requires significant time and manpower; specifications of both/all sources have to match to ensure approval of the drug product by the authorities. Some manufacturers may choose to work with one source for launch and then add a further source later. It is very rare to see more than two API sources being approved for any one drug product. The key is to work with reliable sources, have good relationships with them, give forecasts and confirm POs well in advance of need to ensure a continuous supply chain.”

Narsimhan counters that not having a good supply of materials outweighs the risk and cost of multiple suppliers. “Diversifying suppliers not only mitigates risks but also introduces new perspectives and strategies for achieving efficiency, fostering innovation throughout the supply organization, and promoting sustainable solutions across all business domains. However, it’s essential to allocate business shares appropriately and employ scientific criteria to ensure optimal outcomes from this practice,” he says.

Advanced intermediates for API synthesis

Intermediates, used during API synthesis before the molecule becomes an API, are hygienically formulated using high-grade raw materials (1) and are often used in research and development. Advanced intermediates are advanced forms of drug intermediates used to perform drug interaction activity (1). According to Lawler, the supply of these important materials is tenuous. “Availability of key materials relies heavily on suppliers being able to produce intermediates utilizing a wide variety of, and often complex manufacturing techniques. However, the supply and availability of these may also be limited or restricted due to high manufacturing costs, high raw material costs, availability of materials, environmental concerns and/or restrictions, and on geo-political factors,” he says.

According to Lee Karras, CEO, Noramco Group, “there is a gap in high-quality, domestically supplied advanced intermediates—most come from India and China. These advanced intermediates still require significant regulatory oversight, and in many cases, are regulated similarly to final raw materials/APIs.”

“The supply chain for advanced intermediates is fraught with challenges that tend to affect its resilience. The intricacies of synthesis, rigorous regulatory and quality control requirements, and the ever-changing dynamics of the global market and cost pressures brought about by competition are among the factors that pose hurdles in the supply chain for advanced intermediates used in API synthesis,” says Narsimhan. “To address these concerns and establish a robust supply chain, stakeholders often implement strategic sourcing strategy that focusses on continually generating options for diversifying/derisking the supplier base; [adopting] risk management practices to address supply risks; and relentlessly [monitoring] supply market signals. Additionally, collaboration among industry participants, regulatory bodies, and research institutions plays a crucial role in overcoming challenges and bolstering resilience in the supply of advanced intermediates.”

“There is a change in the market regarding advanced intermediates,” asserts Lustman. “Traditionally, starting intermediates and advanced intermediates were sourced from China. The Indian manufacturers understand that this may lead to supply chain issues with an overreliance on Chinese manufacturers of raw materials. Many Indian API manufacturers are now backward integrating their process so that they can start production of API from the early starting materials. This [integration] ensures a stable supply of needed advanced intermediates and better control over costs.”

Domestic verses international suppliers

Onshoring versus foreign supply is a debate that extends across many industries. The critical nature of patients in need of safe and effective medicines adds to the complicated conversation. Drug manufacturers have a variety of quality, regulatory, and cost considerations to evaluate. Ensuring a quality product means performing risk management and qualification of the materials used in drug products.

Narsimhan points out that countries have taken steps to stabilize the supply chain and there has been a move toward onshoring. “This [move] involves decreasing our dependency on certain international suppliers and establishing our own local supply lines. I’ve personally witnessed companies placing greater importance on strengthening partnerships with local suppliers. This strategic shift aims to reduce our reliance on unpredictable supply sources, resulting in a shorter supply chain, increased resilience, lower transportation costs, and ensuring a more secure and reliable provision of critical materials,” he says.

According to Lustman, there is a shift in industry away from suppliers located in China to those located in India and Europe, which has been driven by geopolitical and quality factors. “A US bill has recently branded certain Chinese biotechnology companies as security threats. The bill is a threat not just to a few specific companies in China, but also to the wider pharmaceutical industry based there,” he states. “With increased FDA inspections of foreign manufacturing facilities, we are seeing more scrutiny on the quality of APIs being shipped to the USA. To help ensure quality and reliability of API production, many drug product manufacturers are reassessing the sources of product they are purchasing from, with a move to Europe and India from China.”

“The increasing tensions around the China-Taiwan situation, as well as recent developments with respect to the [United States] and the use of Chinese CDMOs [contract development and manufacturing organizations] has led to changes in sourcing strategy for many big companies, with many now employing a ‘China +1’ approach, whereby at least one of the material suppliers has to be non-Chinese,” adds Robinson. “This has led to an increased preference for providers in other low-cost economies such as India, and in some cases the re-shoring of projects to Europe and the US. A requirement for manufacturing partners to similarly be ‘China independent’ in respect of their own supply chains is becoming an important factor in the selection of vendors, to ensure robust, secure provision of materials.”

So, should manufactures choose a supplier close to home? “For security of supply chain and risk mitigation, where possible, most companies look to have multiple sources of raw materials and advanced intermediates. It is always preferable to have reliable suppliers which are either based domestically, local, or both, and many companies now favor full or nearly full back integration for key intermediate supply especially for high value APIs and those under patent protection,” specifies Lawler.

“I fully expect that drug shortages will continue to be the norm and actually get worse, without a real commitment from the US government to ensure more high-quality domestic supply,” warns Karras.

Reference

BioSpace. Drug Intermediate Market: Fast Growing Biotechnology and Life Sciences Sectors Is Expected to Drive the Growth. Biospace.com. Sept. 3, 2020.

About the author

Susan Haigney is lead editor for Pharmaceutical Technology®

Article details

Pharmaceutical Technology®
Vol. 48, No. 6
June 2024
Pages: 20-22

Citation

When referring to this article, please cite it as Haigney, S. Diversifying the Supply of Raw Materials. Pharmaceutical Technology 2024 48 (6).