When things go wrong in the pharma supply chain

Managing supply chain relationships can be a full time job

Managing supply chain relationships can be a full time job, particularly in the face of stringent regulations, financial constraints and a growing number of threats, whether it’s fraud, product failures and financial difficulties. As those working in the pharmaceutical industry will know, when one of these menaces kicks in the health of a supply chain is put at risk. In these situations, it is vital that key information can be passed effectively along the chain.

Threats from all sides

To survive, the pharma supply chain needs to be agile, efficient and highly-optimised. In particular, teams need to be able to manage risk and compliance throughout the supply chain and be able to trace products from manufacture to patent, managing product recalls when or if they happen.

The number of worldwide counterfeit drug incidents is growing exponentially – according to the Pharmaceutical Security Institute, incidents increased from 196 in 2002, to 2,108 in 2012 to 3,509 in 2017. As a result, international governments are focusing their efforts and laws on combating this illegal trade. This year, the Falsified Medicines Directive comes into force across Europe, requiring all prescription medicines to come with a security feature enabling hospitals, pharmacies or healthcare providers, to verify their authenticity. In the US, the FDA’s Drug Supply Chain Security Act outlines requirements to develop and enhance drug supply chain security by 2023. Ensuring businesses in your supply chain are meeting these requirements can be vital to the health of your own business.

Supply chain relationships also come under scrutiny when a product recall occurs. In such circumstances, manufacturers are required to communicate clearly and swiftly with the entire supply chain, from wholesalers to pharmacies—and even patients in some cases—and collect the faulty items.

Additionally, fraud can be a huge threat to the health of your supply chain and can manifest itself in many ways. It could be that a fraudster disguises themselves as a known supplier and deceives you into redirecting a regular payment, or that a supplier you have used for a number of years starts to encounter financial difficulties. Just because your relationships with suppliers begin with the best intentions does not mean that they cannot become risky over time. Businesses can also be at risk of other types of fraud, including computer software service fraud, fraudulent trading with insolvent suppliers and business directory fraud.

All of these factors underline the importance of P2P teams knowing their suppliers really well and ensuring they aren’t putting the business at risk by the suppliers they choose. Trust and knowledge is key and the more you know about your supply chain, the greater your ability to mitigate risk. Within the pharma industry, this is amplified as the stakes are so high and no one can afford to have a weak link.

Digital support

It is really important to know if suppliers are at risk of becoming insolvent, or are involved with financial crime or politically sensitive situations. Given these threats to the supply chain, AP departments operating in the pharma sector should increasingly be prioritising Know your Supplier (KYS) checks and looking for statistical and financial data to inform them whether to choose a supplier in the first place. Additionally, but just as importantly, AP teams should undertake regular checks to determine whether they should continue to use existing suppliers, to avoid circumstances where suppliers become insolvent or no longer working above board.

Given the size of the task required, many are turning to integrated and up-to-the-minute digital solutions such as , to help with the process. Using a service like Mastercard Track, available via Tungsten Network, can help teams conduct the essential checks and balances during the onboarding process giving them the confidence needed for a successful and efficient supply chain.

The more you know about your supply chain, the greater your ability to mitigate against risk in the P2P process. Through essential checks during the onboarding process and closely monitoring your supply chain thereafter, pharma companies can have confidence to trust their supply chain.

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