Supply Chain Matters has featured multiple commentaries citing India based generic drug producer Ranbaxy Laboratories. Our latest commentaries were in a specific posting in late January and in an India based industry regulatory commentary published in February.
Thus, we were not at all surprised with this week’s announcement that Japan based Daiichi Sanko Co. the parent of Ranbaxy, has agreed to sell the generic drug manufacturer to India based Sun Pharmaceutical Industries Ltd. in a deal reported to be valued at $3.2 billion in a mostly stock-based deal. This transaction is expected to be completed by the end of the year.
The U.S. market accounts for a significant amount of Ranbaxy’s current revenues, while the U.S. Food and Drug Administration (FDA) currently bars imports from four out of five Ranbaxy production facilities in India due to inspectional findings. According to a report published by the Wall Street Journal, after a five year effort, Daiichi Sanko retreated from the expensive efforts to attempt to fix Ranbaxy’s drug-producing processes. Daiichi acquired Ranbaxy in 2008 for $4.6 billion. FDA warnings and citing’s continued throughout this entire period. The CEO of Daiichi indicated to the WSJ: “The deal will help accelerate a solution to the series of problems at Ranbaxy.”
A reflection on the broader picture, however, remains on the issue of production conditions across India based pharmaceutical facilities. A report published by Reuters points out that India’s drug inspectors are hard pressed to oversee current drug production facilities. An India based drug official indicates to the Reuters reporters that there are 1500 inspectors responsible for more than 15,000 drug manufacturing facilities. Inspectors lack vehicles to travel to sites with reports that some inspectional practices are ignored. A study carried out two years ago concluded that one in every twenty-two locally made samples was of sub-standard quality. According to the Reuters report, about 40 percent of generic and over-the-counter medicines sold in the United States originate at over 500 India based production facilities. While facilities are barred by the FDA from shipping to the U.S., they typically ship to other global locations.
A follow-up report published by the Wall Street Journal (paid subscription) quotes workers and former employees of Ranbaxy as indicating “they received little training and were instructed to keep production going, even if that meant cutting corners.” One former maintenance technician at Ranbaxy’s Toansa plant indicated that he often signed blank documents which were filled in with information later to appear that equipment has been inspected. However, the WSJ cites former and current FDA officials as indicating that Mumbai based Sun Pharmaceutical has a better reputation for quality. However, in March, the FDA barred imports from a Sun API plant in Gujarat.
On her visit to India in February of this year, FDA Commissioner Margaret Hamburg was diplomatic, indicating that a few India based drug manufacturers have been overshadowed by recent lapses in quality at a handful of pharmaceutical firms. The Reuters report seems to dispute that statement. Dr. Hamburg further indicated that officials at India’s Ministry of Health and Family Welfare share this goal and both agencies plan to work together to improve lines of communication and diligently work to ensure drug products exported from India are safe and of high quality.
With the proposed combination of Sun Pharmaceutical and Ranbaxy, the two India based generic drug producers when combined providing even more global scale, it would seem that the urgency among broader industry and India government regulators should be raised to aggressively address systemic production process issues and support strict adherence to published global Good Manufacturing Practices. Both domestic India drug consumers as well as global drug consumers expect such practices, and the reputation and brand value of India’s drug makers is clearly at stake. The Indian government is not the sole answer, rather India’s collective drug producers as a whole need to step-up their priorities.
General Hospital Has Been Cancelled! – A Need for Renewed Emphasis on Healthcare Supply Chain Management
A Supply Chain Matters Guest Contribution from Rich Sherman
So you think that Obamacare is changing the healthcare industry in the United States? Think again.
It’s just the tip of the iceberg. The healthcare industry is undergoing a fundamental transformation from delivering patient treatments to delivering patient outcomes. And, it’s turning the industry upside down. The television series General Hospital may have celebrated its 50th anniversary last year; but, in real life General Hospital is about to be cancelled.
With the transformation to patient outcomes, healthcare providers simply can’t afford to treat anything generally. Specialty patient outcome centers (SPOC) are emerging throughout the healthcare industry. With nurse practitioners having expanded diagnostic and treatment licensing, general health clinics are appearing in every corner drugstore, 24/7. Emergency treatment and diagnostic centers are emerging in every strip mall. SPOCs, such as oncological, cardiac, ophthalmic, orthopedic, cosmetic, etc. for every ailment are emerging in every city. Quite simply, patient care centers are appearing and proliferating across the country increasing the cost and complexity of healthcare supply chain management as well as operations management in general.
Consider that it is not unusual for supply chain costs to consume 35% or more of the operating budget of a healthcare facility.
Supply chain management is a new term to most hospital and healthcare administrators. Haven’t they got enough on their plate with compliance, reimbursement, Electronic Medical and Healthcare Records (EMR/EHR)? Yet, with the transformation in the industry, administrators have to be more focused on revenue and cost. Effective supply chain management addresses both and healthcare providers have to consider bringing on a new breed of supply chain professionals to their leadership team even to the extent of hiring a Chief Supply Chain Officer. Most other industries are recognizing the significant contribution supply chain excellence makes to the financial health of the organization.
Transforming from materials and procurement management to supply chain management requires a more holistic view of the organization’s operations. Beginning with demand generation, acquiring patients to generate revenue, through demand fulfilment, delivering a successful patient outcome, supply chain management is the support system that enables cost effective, high quality delivery. And, it’s not optional. With the proliferation of patient delivery locations, competition for revenue is heating up. We’re finding more and more of our clients are seeking help in attracting patients just to maintain occupancy and revenue. But, that’s just treating the symptom.
The cure is to be found through providing a successful outcome for operations excellence. Operations excellence requires professional operations management. Medical professionals have to focus on patient outcomes not operational outcomes. This will create a transformation in the leadership structure of many healthcare providers from medical leadership to management leadership. The days of doctor controlled operations are waning. Healthcare providers that are restructuring their organizations for effective supply chain management will lead the way as the industry transformation continues.
General Hospital may be cancelled; but, the requirement for delivering successful patient outcomes will never end.
About the Author: Rich Sherman is an internationally recognized researcher and author on trends and issues across supply chain management. He currently serves as a Principal Essentialist at Trissential LLC in their supply chain consulting practice. His book Supply Chain Transformation: Practical Roadmap for Best Practice Results (Wiley, 2012) has received praise by practitioners, academics, and non-supply chain executives as a great read on business transformation. Rich has been a previous guest contributor to Supply Chain Matters.
Supply Chain Matters provides an update to our previous commentary concerning the latest citations from the U.S. Food and Drug Administration (FDA) concerning India based generic pharmaceuticals producer Ranbaxy. In addition to Ranbaxy, India based producers Wockhardt and Strides have also been cited for failures in compliance to good manufacturing practices.
Last week on her first visit to India, FDA commissioner Margaret Hamburg declared on her blog that lapses by a few select drug makers within India have clouded good manufacturing practices followed by other producers in the country. The commissioner noted: “Ensuring that the products distributed in the United States meet our requirements for product safety and quality is among my top priorities as Commissioner. Unfortunately the many Indian companies that understand good manufacturing and quality processes have been overshadowed by recent lapses in quality at a handful of pharmaceutical firms.” Dr. Hamburg further indicated that officials at India’s Ministry of Health and Family Welfare share this goal and both agencies plan to collectively work together, including a first ever, statement of intent, to improve the lines of communication and work diligently to ensure that the products being exported from India are safe and of high quality.
Dr. Hamburg’s visit was well timed and garnered significant press coverage within India, including The Economic Times. India’s legislative and regulatory leaders have hopefully internalized the need for stepping-up standards in drug manufacturing among the chosen few who reflect negative perceptions on the remainder of drug producers across the country.
There is yet another supply shortage occurring in pharmaceutical supply chains.
A combination of factors including a heightened flu season and supply imbalances have precipitated an apparent severe shortage of intravenous saline solution commonly used to hydrate patients being treated for dehydration and other symptoms. Reports indicate that hospitals and healthcare providers are managing short supplies by administering these fluids to only the most seriously ill patients. The U.S. Federal Food and Drug Administration (FDA) is involved in helping to alleviate the current shortage.
Producers Baxter International, Hospira and B. Braun Medical are stepping up production volumes to respond to the current shortage. According to an FDA spokesperson, manufacturers first notified the FDA late last year that they expected delays in filling orders, but an increase in hospitalizations two weeks ago partly due to rising numbers of flu cases has exacerbated the problem.
To cope with the shortage, healthcare providers are using substitute oral hydration products.
According to a Reuters syndicated report, a quote from a registered nurse with Novation, a supply chain company that works with hospitals and other healthcare providers indicates that it could be another two months before the current shortage is resolved. The FDA is also looking into alternative international supply sources to resolve the current shortage.
India based generic pharmaceuticals producer Ranbaxy is once again under U.S. Federal Drug Administration (FDA) scrutiny after a visit inspection of a northwestern India production facility. The FDA banned from the U.S. market the use of drug ingredients originating from Ranbaxy’s Toansa India facility.
Readers residing in pharmaceutical supply chains are probably quite familiar with Ranbaxy and its ongoing challenges in insuring adherence to good manufacturing practices. As far back as 2008 the FDA of more than 30 generic type drugs manufactured by the India based drug maker, one of the world’s significant producers of generics. In 2012, the FDA initiated increased regulatory powers forcing Ranbaxy to halt production of the generic of the highly prescribed cholesterol drug Lipitor while it investigated tiny glass particles found in production batches and other discrepancies. That resulted in a consent decree involving the U.S. Justice Department requiring the company to take steps to insure the integrity of production at three production plants within India.
Now there are reports that on a recent FDA inspection visit, Ranbaxy workers at the Toansa India facility were discovered to be repeatedly altering test results to make it appear that active pharmaceutical ingredients (API) met required standards when they didn’t. According to a Wall Street Journal report, FDA inspectors discovered workers retesting “until acceptable results are obtained” and “deleting evidence of failed tests.” Inspectors were also reported as finding significant disrepair at the plant’s analytical and microbiology laboratories with windows that could not close and a sample preparation room laden with flies. Inspectors also reported to have found evidence of backdating lab results.
The WSJ also characterized this latest action as a serious blow since the Toansa facility supplies many critical ingredients used in Ranbaxy’s generic drug manufacturing including fenofibrate, a drug used to reduce fatty acids in blood to boost good cholesterol as well as valacyclovir which is used to treat shingles and genital herpes. Japanese drug maker Daiichi Sankyo, which now owns upwards of 60 percent of Ranbaxy has dispatched experts to India to help in determining a solution to the ongoing situation.
While these latest actions add more challenges for Ranbaxy and its new owner Daiichi Sankyo, it could add further impacts to already stressed generic drug supply chains. Increased health insurance scrutiny and subsequent regulations on the part of multiple governments has added increased pressures on the industry and generic drug manufacturers, under constant pressure for reduced pricing and more supply.
Supply Chain Matters is back after some technical downtime as our office Internet equipment failed over the Thanksgiving holiday.
Last week, Gartner announced its fifth annual rankings of its 2013 Healthcare Supply Chain Top 25. Five years ago, Gartner decided to rank healthcare related supply chains in a separate exercise than its well-known top 25 manufacturing and retail oriented supply chain rankings. The separate ranking accomplishes two purposes. The first is recognizing the unique supply chain fulfillment capabilities required to compete in the healthcare industry. The second is the proverbial sales and business development aspects for attracting more healthcare clients to Gartner.
For the third consecutive year, Cardinal Health tops the current ranking, garnering top weighted opinion from both industry peers and Gartner analysts. The cited top five healthcare supply chains for 2013 are additionally made-up of:
2. Mayo Foundation
3. Owens & Minor
4. Intermountain Health Care
In its announcement, Gartner acknowledges that industry consolidation continued to occur in 2013 as healthcare companies continued with M&A activities. At the same time, it is no secret that healthcare supply chains are the most complex, requiring lots of needed improvements to meet current capabilities exhibited by other industries. Noteworthy for this year’s rankings
In the category of surprises was the rapid climb of McKesson, moving from the number 12 ranking in 2012 to the top five, despite a lower opinion from Gartner analysts. It is noteworthy since a ten year industry alliance announcement earlier this year concerning Walgreens, Alliance Boots GmbH and AmerisourceBergen directly impacted McKesson’s distribution revenues. Supply Chain Matters further noted that in 2012, Pfizer had moved up six spots to number 13, and in the current year was ranked #11, just outside the top ten. This is despite a lower weighted industry peer opinion, coupled with 2012 inventory turns of just 1.6. However, Pfizer garnered the second-highest weighted opinion from Gartner analysts. Our commentary would not be complete without again noting that Johnson and Johnson remains ranked as the number 7 supply chain despite its continued challenges with product recalls and quality issues.
Supply Chain Matters extends it congratulations and its tip of the hat recognition to all the healthcare supply chains cited in this year’s Gartner 2013 Healthcare Supply Chain Top 25.