The Pharma Supply Chain — Why Cost and Risk Matter Equally

Over on a recent Pharma Tech blog post, Patricia Van Arnum covered a recent pharma conference, showing how cost and risk are two critical drivers in pharmaceutical procurement. In addition to all of the standard pressures facing industry in general in today's economic climate -- e.g., commodity volatility, reduced demand, variable transportation costs, etc. -- quality control is especially critical in pharma. And while "Suppliers from low-cost countries such as China provide attractive options from a cost perspective … further considerations in the due-diligence process, project management, and review of the customer-supplier relationship need to be addressed to develop a successful sourcing program when working with suppliers from China." To achieve the desired results from global sourcing initiatves, pharma companies must "work with their suppliers collaboratively for continuous cost and process improvements, risk mitigation, and other value-added activities." In the case of active pharmaceutical ingrediants (APIs), I'd add that these types of initiatives are all the more important. It's easy to get seduced by 50-80% price savings on a unit cost basis by turning to developing markets for APIs, but when it comes to the cost of quality, many organizations are not thinking through all of the potential risks that global sourcing introduces in the pharma equation.

- Jason Busch

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