Security Of The Pharmaceutical Supply Chain - Part 4b: The Pharmaceutical Industry Relies Heavily On Sourcing From India & China – India Segment

Security Of The Pharmaceutical Supply Chain
A Series Of Informative Disquisitions
This Installment:
Part 4b: The Pharmaceutical Industry Relies Heavily
On Sourcing From India & China – India Segment
Special Focus: The Environment as a Risk To The Supply Chain
With Introduction

The
Pharmaceutical
Supply Chain

• Today, more than 85% of Active Pharmaceutical Ingredients are
manufactured overseas with a most coming from the third world
• Increasing globalization and supply chain complexity have posed
risks to pharmaceutical safety
• Materials are procured from multiple countries, manufactured in one,
potentially packaged in yet another country and distributed &
sold globally
Introduction
Pharmaceutical Industry Supply Chain

• According to FDA internal data, between 2010 and 2015, the total number of
all import lines processed by FDA has increased by more than 50 percent,
growing from approximately 21 million import lines in 2010 to over 35.4
million import lines in 2015
• This rapid expansion of the global market opens companies up to an
exponential increase in the number of vulnerability points, coupled with
decreased visibility to them, due to insufficient supply chain information.
• Globalization also leads to a complex system of foreign, federal and state
product safety oversight with an incomplete set of enforcement tools.
• This misalignment of resources leaves U.S. drug distribution vulnerable to a
host of problems.
U.S. Food and Drug Administration (FDA), "Budgets," 2012-2016. [Online]. Available:
http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/BudgetReports/default.htm
Background

• Ultimately, complications in any supply chain impact a brand’s reputation
and require time and investment to rebuild trust among customers, partners
and patients.
• So while the opportunity to tap into the global market can generate greater
revenue and efficiency, it’s important to be mindful of these risks so that
appropriate security measures can be implemented to protect a business’
supply chain.
Background

SECURIT
Y OF
SUPPLY
IS
ESSENTIAL!
SECURIT
Y OF
SUPPLY
IS
ESSENTIAL
!

• Outsourcing does not shift ultimate responsibility
• All parties who manufacture, test, process, pack, or hold an
active pharmaceutical ingredient (API) or drug product are
responsible for meeting cGMP
• Finding, qualifying and monitoring suppliers is complicated
and resource intensive
• The $/kg is only one component in the overall cost of
responsible outsourcing
• History is clear … ineffective management of outsourcing
poses significant risk.
Security of Supply Chain is Essential

Supplier Perspective and Considerations
• Quality suppliers (should) have as much interest in securing
the supply chain as their customers
• Suppliers should understand the requirements, not only where
they operate but also of their customers and anticipate their
expectations

Quality cannot be tested into ingredients or product
• Sampling/test methods often presume homogeneity and are not
designed to detect contaminants or impurities
• Test results lack full meaning unless the sampling/test methods
are appropriate
Costly mistakes during product development:
• Important ingredient attributes (and specifications) are missed
… which limits the ability to properly qualify an ingredient and
its source.
• The Quality Unit sometimes is not involved when strategic
sourcing decisions are made. May result in significant
compliance and supply problems
Some Realities and Concerns

Supply Chain Vulnerability

Focus On
Raw Materials
Intermediates
APIs
Risk In The Pharmaceutical Supply Chain
The Pharmaceutical Quality Group - A Guide to Supply Chain Risk Management for the Pharmaceutical and Medical Device Industries and their Supplier

Dan Barreto, International Vice president of cGMP Compliance at Janssen
Pharmaceuticals, and a former FDA supervisory investigator:
“Sponsor companies have important obligations to meet all regulatory filing
expectations”
“Supply chain contractors play a vital role in meeting those obligations on a
continuous basis, but they must be proactively managed to deliver since the
ultimate responsibility inherently resides with the sponsor company.”
Supply Chain Management In The Drug Industry, 2011 by John Wiley & Sons, Inc.

• Geographic concerns
 Flood zone
 Earthquake zone
• Inconsistent component and product costs due to supply-demand
imbalances
• Unanticipated manufacturing shortfalls (blown batch, low yield)
• Quality problems in manufacturing
 54 % of drug shortages
Office Of The Assistant Secretary for Planning And Evaluation

Continuity of supply
 Single sourcing is of concern - Having only a single approved
source of materials
 Raw material shortages
 Not knowing the true raw material supplier
 Issues when vendors unexpectedly stopped offering the product
 Business events such as mergers & acquisitions
 Changes in strategy
 Loss or acquisition of in-house capability
Pharmaceutical Manufacturing, Sep 03, 2008

• Vendor approval and compliance issues
 Uncommunicated process changes
 Vendors making changes to their products without notifying the buyer
• Distribution and logistics
 Cross-blending batches
 Mislabeling
 Poor storage practices
 Production and shipping delays
 Labor strikes, labor unrest
 Weather impact
Pharmaceutical Manufacturing, Sep 03, 2008

Active Pharmaceutical Ingredient (API) Supplier Product
Contamination• Breaches in compliance and contamination
• Inadequate processing and testing
• Raw materials sourced via an undisclosed manufacturer
• Passing through several wholesalers, repackaging etc.
Management of Second Tier Suppliers
• Most supply chains involve more than one tier of supply
• The accountable organization must understand the entire supply chain
for its products to avoid potential hazards
• Each supplier within the supply chain is responsible to have supplier
assurance in place.

Primary Packaging Supplier Warehouse Operations & Pest Control
• All suppliers use warehouse facilities to store materials and they may
not have the same standard of pest control processes as their
customers
• Warehouse facilities including those used remotely, should be
maintained to the appropriate standards and checked on a regular
basis
• Regardless of the value of the product, the accountable organization
needs to consider potential hazards within the supply chain
Distribution: Temperature Controlled Transportation
• Temperature control is critical for many products in the pharmaceutical
industry
• Consideration should be given to transport conditions throughout the
supply chain

Change Control
• Auditing is an essential tool but is only part of the controls
• Changes in specifications, processes, and management changes at
suppliers should be controlled/communicated
• Cost Competitive Countries as sources of supply may have
manufacturing standards which vary significantly
• Some suppliers may falsify documents
• Standards that suppliers might claim to operate under, and might be
demonstrated from time to time, should be verified from time to time
API Supplier: Fraudulent Activities in Supply Chain

API: Implementation of a New Process
• The implementation of many new systems or processes fail due to
the lack of involvement of the relevant people right at the beginning
• The personnel involved should have a suitable level of process
knowledge in the operation of the process.
Inconsistent Analytical Results
• There may be differences with equipment or methods
• Industry Standards and chemical tests can change
The Pharmaceutical Quality Group - A Guide to Supply Chain Risk Management for the Pharmaceutical and Medical Device Industries and their Suppliers

Continuity of Supply
• Financial stability of suppliers is important
• Delivery issues a warning sign
Brokers in the Supply Chains: Raw Material Source of Origin
• Full traceability of the supply chain is critical
• Unacceptable unknowns
 Capacity
 Adherence to specifications
 Processing methods
 Analytical methods

India produces a third of the world’s medicines, mostly in the form
of generic drugs
• 300 large companies
• 10,000 medium and small-scale companies
• Less than one-fourth produce APIs
• 77 percent – make formulations
Pharmaceutical Sourcing From India
India’s pharmaceutical sector was worth $6 billion in 2005
• $18 billion in 2012
• $45 billion by 2020
BioWorld Today, July 15, 2015

API Sourcing From India: Challenges
• Poor infrastructure
 Power supply
 Highway system
• Energy cost
• IP theft due to high mobility of staff between companies
• Increasing reliance on China for raw materials,
intermediates, base chemicals
• Gap in technology – Fermentation, steroids, narcotics
• Quality issues
Newport Premium™ for Generics, TR Research 2014

• From 2008-2015, the US FDA issued 50 warning letters
to Indian companies
• 40% were converted into import alerts
• One third of warning letters issued between 2008 and
2013 have been resolved
Manufacturing Chemist – Pharma, April 2016

• Data integrity and quality assurance issues have long been a
problem for several Indian pharma firms
• The entire India brand has been affected by lapses and violations
of protocols by several firms.
• Aditya Berlia of the Apeejay Svaran Institute for Biosciences &
Clinical Research:
“If companies do not improve to meet U.S. FDA standards, “50 to 70
percent of pharma firms in India will need to be shut down”
BioWorld Today, July 15, 2015

Data integrity issues:
• Failure to record activities contemporaneously
• Document back-dating
• Copying existing data as new information
• Re-running samples to obtain better results
• Fabricating or discarding data
Study On Indian Pharmaceutical Industry, Export-Import Bank of India March
2015
Data Integrity & Quality Issues Remain the Biggest Problem

• FDA discovered the existence of a hidden "uncontrolled Custom QC laboratory”
 The company had been repeatedly testing APIs, never recording failed
tests, and only including those that showed the batches had passed
• An API plant in Miryalaguda there evidence of workers changing and
destroying records
• Oncology Formulation manufacturing facility at Duvvada, inspectors found that
there were no standards to ensure drugs met specs for strength, quality, and
purity and an overall lack of that employee training
The Problems
https://www.fda.gov/ICECI/EnforcementActions/WarningLetters/2015/ucm473604.htm

The Fallout
• The Harvard Drug Group recall of the antifungal drug fluconazole
that were manufactured by Dr. Reddy's at the Bachupally plant
• South Korea’s Mezzion filed a lawsuit saying that Dr. Reddy's
repeatedly represented to Mezzion that it was compliant with FDA
regulations, when it was not.
 The legal action claims that plant problems were “the sole
reason given by the FDA” to deny approval of Mezzion's
NDA for udenafil for the treatment of erectile dysfunction
http://www.fiercepharma.com/regulatory/dr-reddy-s-blasted-warning-letter-for-hiding-existence-of-testing-lab-from-fda

• The results of 22 failed tests had not been recorded and data
files were wiped from some machines
• Batches of rejected drugs were stored in the 'approved material'
area, and some batches did not carry expiry dates
• Inadequate air handling
• Sterility problems with the gowns worn by personnel
The Problems
https://www.fda.gov/iceci/enforcementactions/warningletters/2016/ucm534983.htm

• Wockhardt had not fully investigated the cause of 22 failings on a
sterile line
 Operators ignored equipment errors, retested batches and
deleted the failed test results
• Lapses in data integrity
 Deleted test results found in the trash
 A bag shredded documents marked with QA stamps found
next to a shredder in the microbiology testing lab.
The Problems

The Fallout
• 35 recalls of 20 different drugs including:
 Amlodipine Besylate
 Lisinopril
 Phenytoin Sodium
 Ambien
 Azithromycin
For perspective, more than 7.2 million bottles, cartons, pouches and
drums amounting to hundreds of millions of tablets and capsules
http://www.fiercepharma.com/m-a/updated-india-s-wockhardt-recalls-millions-of-packages-of-drugs-sweeping-recall

The Fallout
Wockhardt’s Chikalthana Plant:
• Testing "trial samples" of drugs and linking results to official
samples which did not meet test requirements
• Test data not stored on computers for confirmation
• Computers not secured, allowing for negative test results to be
deleted or changed
https://www.fda.gov/ICECI/EnforcementActions/WarningLetters/2013/ucm37691

The Fallout
https://www.accessdata.fda.gov/cms_ia/importalert_189.html
Wockhardt’s Waluj Plant:
• Quality Assurance personnel were hiding records
• Not allowing FDA access to all of the areas of the facility
• Standing urine in a bathroom & mold near sterile manufacturing area
• Urinals that emptied into an open drain in a bathroom six meters
from the entrance to a sterile manufacturing area.

Wockhardt’s bulk manufacturing plant in Ankleshwar:
The Fallout
• Failed to establish and follow appropriate written procedures to prevent
microbiological contamination of sterile drug products including validation of
aseptic and sterilization processes
• Failed to ensure manufacturing personnel wear clothing appropriate to
protect drug product from contamination
• Failed to ensure that laboratory records included complete data
• Failed to exercise appropriate controls over computer systems
• Failure to record activities at the time they are performed, and destruction of
original records

• Records had forged signatures of directors who were not even in
the plant when they were supposedly signed
• Signatures that were backdated to indicate they approved drugs
before they were shipped, when in fact they hadn't
• Operators logged batch records on "rough notes" that were later
destroyed after being "transcribed”
 The original data was unknown and may have been altered
5.htm

• Failed to investigate unexplained discrepancy or failure of a batch
or its components to meet specifications
• Failed to clean, maintain, and, sanitize or sterilize equipment and
utensils to prevent malfunctions or contamination
• Failed to establish adequate written responsibilities and procedures
for the quality control unit
The Problems

The Problems
• Not keeping audits of tests for APIs
• Tests for out-of-specification investigations were conducted on
equipment not protected from data deletions.
• Equipment was purposely set to “mask identification and
quantitation of impurities”
• Employees denied access to, or provided adulterated copies of
data
• Some of records were found shredded in the trash
http://www.fiercepharma.com/regulatory/fda-warning-scorches-divi-s-labs-for-refusing-to-cough-up-

The Fallout
http://www.bseindia.com/corporates/anndet_new.aspx?newsid=85d1e0e4-1486-43de-b899-0eafe02a71ab
BUPROPION HCl
CARBIDOPA
DESLORATADINE
DEXTROMETHORPHAN
HBr FOSPHENYTOIN
SODIUM
IOPAMIDOL
LEVODOPA
NABUMETONE
NAPROXEN
NATEGLINIDE
NIACIN
PHENYLEPHRINE HCl
PROGUANIL HCl
QUETIAPINE FUMARATE
RISEDRONATE SODIUM
SERTRALINE HCl
SIBUTRAMINE HCl
TAMSULOSIN HCl
TELMISARTAN
TOPIRAMATE
TRIPOLIDINE HCl
VENLAFAXINE HCl
VIGABATRIN
ZOLPIDEM TARTRATE

The Problems
• Failed to clean, maintain, and sanitize or sterilize equipment to prevent
malfunctions or contamination
• Failed to establish written procedures for production and process control
• Using corroded equipment that had never been validated
• Isoxsuprine Hydrochloride:
 FDA never approved Vista’s ANDA
 Never performed process validation
 Metal found embedded in one of the drug tablets
 Reports of adverse events by patients

The Problems
• Sal Pharma had generated certificates of analysis (COA) by
removing the name of the original producer and replacing it with
information from its own letterhead
• Failure to transfer all quality or regulatory information received
from the API manufacturer to customers
• Failure to relabel and hold API under appropriate CGMP controls

The Fallout
• Lansoprazole
• Itraconazole

The Problems
• Limited FDA’s inspection
 Doors to the vessel room, packaging and labeling storage areas were
locked
 Failure to provide records
• Unkept Facility
 No lights were turned on, requiring inspectors to use flashlights
 Powder scattered throughout the production areas, including powder
caked on the floor
 Empty boxes, trash, finished drug products covered in powder, and
containers littered throughout the facility
Vikshara Trading & Investments

• Vikshara Trading & Investments Ltd delayed attempts to
schedule a pre-announced inspection
• The company provided falsified copies of employee resignation
letters and a photograph of striking employees blocking the
facility's entrance
• Despite the claims, the FDA wrote; “despite your assertions that
your employees were on strike, FDA obtained evidence that your
firm actively manufactured numerous products, including at least
4 batches of drugs, between July 11, 2016 and August 9, 2016
http://www.pharmtech.com/fda-warns-vikshara-trading-investments-ltd
The Problems

The Fallout
As a reward for a new low in deceptive practices, the FDA has
levied a total import ban for all products manufactured by

The Problems
• Falsifying testing results and deleting failed tests
• Backdated and falsified temperature records
• The FDA observed workers tweaking parameters to get the
desired result and overwriting raw data
• Failure to have computerized systems with sufficient controls
to prevent unauthorized access or changes to data
• Failure to adequately investigate and resolve critical
deviations

• Failed to ensure that laboratory records include complete data
• Failed to establish test procedures to assure products conform to
appropriate standards
• Failure to follow and document laboratory controls
• Failure to document and explain departures from laboratory
procedures
The Problems

• Banned 20 APIs--and 50 products in which they are used
• The Swiss-based Global Fund, which fights the spread of
AIDS, tuberculosis and malaria, dropped Ipca as a source
for malaria treatment drugs
The Fallout
http://www.reuters.com/article/us-ipca-labs-pharmaceuticals/indias-ipca-says-global-fund-stops-buying-its-anti-malarial-drugs-idUSKCN0X42B4

The
Environment
Can Be A
Risk To Supply
Chain Security

• Hurricane Maria wiped out electricity for all of Puerto Rico
• Nearly 50 pharmaceutical plants on the island are idled
• Power isn't likely to be restored to the island for three to six
months
• Pharmaceuticals represented 72% of Puerto Rico's 2016
exports, valued at $14.5 billion
• Eli Lilly suspended "normal manufacturing operations" at its
two Puerto Rico plants
• AstraZeneca’s plant in Canovanas, Puerto Rico halted
production
USA TODAY Sept. 22, 2017
Environmental Risk To The Pharmaceutical Supply Chain

• Smog blanketed New Delhi in 2016.
• About 1.1 million people die prematurely in India every year from the
effects of air pollution
• Deaths caused by air pollution grew to 4.2 million in 2015 from 3.5
million in 1990, an increase of 20 percent
India’s Air Pollution Rivals China’s as World’s Deadliest
NY Times, FEB. 14, 2017

• More than 13,000 licensed industries generate about 4.4
million metric tons of hazardous waste every year
• Due to the absence of disposal mechanisms, industries
either stored wastes onsite or dumped them in the open
• Temporary storage—permitted for 90 days under the 1989
rules—became permanent
Environ Health Perspective, 2005 Jun; 113(6), A394–A397.
Hazardous Waste Anarchy

• Pharmaceutical & Chemical Manufacturers discharge their
hazardous waste in illegal dump sites outside industrial estates,
along roadsides, in low-lying areas, along with municipal wastes, or
in rivers and canals
• The authorities have ignored warnings, reports, investigations, and
studies that highlighted zones of ecological degradation due to
indiscriminate dumping and disposal of hazardous waste
Hazardous Waste Anarchy

http://www.downtoearth.org.in/news/supreme-abuse-51876

• Hetero Drugs has 25 manufacturing facilities worldwide
• Turnover of over $1 billion
• On track for targeted revenues of over $2 billion for 2015-20
• According to CSE, Hetero Unit IV (Bonthapalle)
 Operates without environmental clearance
 Manufactures eight APIs without government consent
 Their volume of waste is three times over the
allowable limit

Hetero Drugs Ltd (Unit I)
• The amount of pharma ingredients it produces is more than
seven times the government allowance.
• Its water consumption and waste generation is twice the
permitted amount
• No details of a vendor to dispose of hazardous waste
Hetero Labs Ltd
• Operates without Environmental Clearance
• Three times the amount of permitted water consumption

Impacts of pharmaceutical pollution on communities and environment in India, February 2016

Example: Aurobindo
• Aurobindo is one of India's largest pharmaceutical companies
with $2 billion in revenue for 2016 - 2017 and an estimated $3
billion for 2018 – 2019
• Aurobindo exports to over 150 countries across the globe with
more than 86% of its revenues derived from international
operations
• Aurobindo was identified as one of the "worst polluters" by the
Centre for Science and Environment (CSE)

• In 2009, Pfizer would licensed four injectable antibiotics from
Aurobindo
• The antibiotics were to be supplied from Aurobindo's Unit VI,
Antibiotics Manufacturing Facility in Hyderabad
• The FDA suspended imports from the facility due to bad
manufacturing practices
• Annual sales to the U.S. market from Unit VI were estimated to
be $30 million
• The FDA ban lasted until March 2013, interrupting the supply

July 2012: Andhra Pradesh Pollution Control Board orders closure of
12 pharmaceutical manufacturing units in Hyderabad for violating
pollution regulations:
• Aurobindo Pharma, 2 facilities
• Hetero Labs, 4 facilities
• Cirex Pharmaceuticals, 1 facility
• Covalent Laboratories , 1 facility
• Divis Pharmaceuticals , 1 facility
• Sri Krishna Pharmaceuticals , 1 facility
• Innogent Laboratories , 1 facility
• SMS Pharma , 1 facility

• Hema Chemicals had been dumping 77,000 metric tons of highly
carcinogenic hexavalent chromium waste over the past 20 years
• A recent study by the National Institute of Occupational Health of
Ahmedabad; revealed blood chromium levels in exposed Hema
employees to be more than twice as high as control subjects
• Travancore Titanium Products
• No effluent treatment plant
• Effluent of pH less than one and temperature more than fifty
degrees centigrade is being discharged into the open sea

Sourcing From The Third World Involves Risk To The Supply Chain
• Potential For Drug Shortages
• Can Result In Supply Discontinuation
• The Environment Is Actively Suffering
• Quality Problems (i.e. Out Of Spec Material)
• Communication Difficulties:
 Time Differences
 Language Barrier
• Contrasts In The Regulatory Environment

• Onshoring Of Manufacturing To The United States Is Already In
Progress
• Recent Government Mandates In China & India WILL Affect The
Supply Chain
• Cost/Price Is Approaching Parity With The United States
What IS The Risk In Saving A Few Dollars?

Stuart Silverman
CEO & Founder
RyMat Incorporated
stu@rymatinc.com
RyMat Incorporated

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Security Of The Pharmaceutical Supply Chain - Part 4b: The Pharmaceutical Industry Relies Heavily On Sourcing From India & China – India Segment