Pharmaceutical Companies Struggle to Improve Supply Chain to Battle Counterfeits

Sept. 10, 2009
IBM study says over half of the companies are not repsonding quickly enough

Although reducing the risk of counterfeit drugs and contaminated medications are among the top concerns of the pharmaceutical and life sciences industries today, a new study by IBM says that than 50% of executives polled say their companies fail to respond quickly enough to pandemics and other emergencies because of lapses in their supply chain.

Counterfeiting is one of the biggest risks facing the pharmaceutical industry today. According to the World Health Organization, approximately 10% of the worldwide drug supply is counterfeit.

Tracking every step of how drugs are manufactured and distributed are key priorities for more than 70% of companies, according to the study entitled "The Smarter Supply Chain of the Future: Life Sciences Edition." And while the industry is far ahead of most others when it comes to supply chain planning with suppliers, the study indicates the industry falls far behind on collaborating with customers on demand planning, forecasting and replenishment.

Other key findings:

  • 64% reported rising customer demands such as requests for designer drugs or specialized packaging as a major challenge
  • Monitoring risk to prevent counterfeiting, drug and device recalls, or even the loss of intellectual property, is a priority for 75% as margins become slimmer and supply chain complexity rises.
  • Three-quarters have risk and performance initiatives such as surveillance programs, anti-tamper devices and specialized labeling, but with mixed results.
  • 46% consider vendor-managed inventory for their customers extremely effective but only 4% use it to ensure they are precisely meeting customer demands for products
  • 65% collaborate with suppliers on demand planning but only 31% do so with customers, often resulting in an overstock of supplies or missed sales targets

Compared to 18 other key industries, the life sciences business is one of the most highly globalized, particularly in the area of Research and Development, however from a supply chain perspective, the industry is not as advanced. For the life sciences 50% reported increased sales from their globalization efforts due to the growing population of consumers in rapidly developing markets.

"As the industry faces a time of transition, supply chain executives are outsourcing more business processes, turning to emerging markets and becoming more globally integrated, all while actively managing risk," said Dr. Philippe Cini, IBM Global Business Services, Life Sciences Supply Chain Management Partner. "The companies we spoke with said they are looking to a different kind of supply chain -- one that gives the insight to react instantly to risks or threats, is much smarter and able to provide them the insight and agility necessary to compete in a changing marketplace."

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