Pharmaceutical Supply Shortages Point to Lapses at Contract Manufacturers

One of our 2012 Predictions for Global Supply Chains in 2012 calls for additional challenges and turmoil for pharmaceutical and healthcare supply chains.  The issues are many and varied, and began manifesting themselves in a highly visible way in 2011, with Supply Chain Matters provided multiple commentaries reflecting on these problems. The industry has shown no public signs of resolving a myriad of supply chain issues involving the increased complexity of a global supply chain involving generic and contract manufacturing relationships.

The latest reinforcement of this alarming situation came in a recent Wall Street Journal article, New Lapses at J&J’s Doxil Supplier.  (paid subscription or free metered view required)  The WSJ shines the light on the fact that big drug companies have been cutting back on their own in-house manufacturing in favor of the outsourced manufacturing model.

The article reports that contract manufacturer Ben Venue Laboratories, a unit of Boehringer Ingelheim GmbH, has been cited by regulators for a series of quality and sterility lapses in its production processes. One of the problems cited by WSJ is a 10 gallon container in a storage area of the plant which independent laboratory testing pointed to substances consistent with urine.  Ben Venue is the sole supplier for Johnson and Johnson’s cancer drug Doxil, which is prescribed for the treatment of certain ovarian cancers. Sales of Doxil have plunged nearly 80 percent in the third quarter because of the production shortage, and medical care providers must now adhere to a patient allocation listing for distribution of any additional scarce supplies.

The WSJ reports that European regulators recently recommended the recall of three other cancer drugs manufactured by this contract manufacturer, citing contamination risks. Ben Venue additionally produces sterile injectable drugs on behalf of other drug companies, including Bedford Laboratories arthritis pain reliever Indomethacin, and The Medicines Co.’s anticoagulant drug Anglomax. The company has since shut down production operations at its Bedford Ohio plant and continues to work on corrective actions.

As the pharmaceutical industry continues to be challenged with needs to cut costs, it remains entangled in a web of contract manufacturing sourcing decisions that have come back to haunt companies and their supply chain teams.  Our readers are well aware, this is a highly regulated industry, and all production must adhere to specified Good Manufacturing Practices (GMP). That includes contract manufacturers, regardless of geographic location. Instead, there appears to be a pattern where contract manufacturers, because of their own needs to control costs and insure profitability, are becoming lax in quality and consistency of process.

One of the negative aspects of this era of very lean supply chains is the passing of the cost burden down the supply chain, transferring the burden of cost and asset management to a major supplier.  In the case of pharmaceutical and healthcare supply chains, this phenomenon needs a major strategy re-visit.

Bob Ferrari

© 2011 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters, All rights reserved.

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1. Bob Ferrari says:

   December 27, 2011 at 5:33 pm

   Hello Everyone,

   This is an update to our December 15th commentary regarding Johnson & Johnson and the supply of the Ovarian Cancer drug Doxil, supplied by contract manufacturer Ben Venue Laboratories.

   At December 24 article published in the Wall Street Journal now indicates that J&J does not expect to receive new supplies of its cancer drug Doxil from Ben Venue until late 2012 at the earliest.

   The latest setback results from a decision by the contract manufacturer to extend the suspension of manufacturing at the Bedford Ohio facility further than originally expected.

   J&J indicated that it will continue to pursue other options to make Doxil available including shifting production to another supplier.

   Bob Ferrari
2. Bob Ferrari says:

   January 26, 2012 at 4:11 pm

   Hello Everyone,

   I would like to share a postscript to our December 15, 2011 commentary, specifically Johnson & Johnson and its contract manufacturing challenges related to the supply of Doxil.

   As of this writing, J&J reported an 89 percent drop in fourth quarter profits. In interviews related to the earnings announcement, J&J CEO William Weldon indicated that the company learned a “painful lesson” from the supply shortage for Doxil, and will try to have a better contingency plan to avoid such disruptions in the future. U.S. sales for Doxil fell a whopping 82 percent during the fourth quarter.

   It indeed seems that a painful lesson has been learned, namely the lack of active supplier monitoring or backup contingency plans.

   Bob Ferrari