Achieving Global Supply Chain Visibility, Control ... - Axendia

Life Science Global Supply Chain Research Trusted Advisors to Life Science and Healthcare Executives

Research Report

Achieving Global Supply Chain Visibility, Control & Collaboration in Life‐Sciences: “Regulatory Necessity, Business Imperative”


Contents Executive Summary....................................................................................................................................... 3 Trends and Challenges for Life Science Global Supply Chains ...................................................................... 5 The Need for a New Outsourcing and Globalization Model ......................................................................... 7 Recommendations for a New Supply Network Paradigm ............................................................................ 9 On-Demand-Visibility .................................................................................................................................. 10 Visibility: Current State .......................................................................................................................... 11 Road Map to On-Demand-Visibility ........................................................................................................ 13 Control Over the Global Supply Network ................................................................................................... 15 Control: Current State ............................................................................................................................. 16 Road Map to Supply Network Control .................................................................................................... 21 Collaboration............................................................................................................................................... 24 Collaboration: Current State ................................................................................................................... 24 Road Map to Collaboration ..................................................................................................................... 26 Conclusion ................................................................................................................................................... 28 Study Demographics ................................................................................................................................... 30 About Axendia............................................................................................................................................. 31 About the Research Sponsors ..................................................................................................................... 31

Copyright Notice © 2010 Axendia, Inc. All Rights Reserved. This publication is copyrighted by Axendia, Inc. and protected by United States copyright laws and international treaties. This document may not be reproduced or posted on another web site beyond the Sponsors’ or their authorized representatives without prior written consent of Axendia. Unauthorized reproduction of this publication or any portion of it by other parties may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent necessary to protect the rights of the publisher.

© 2010 Axendia, Inc

Axendia Research Report

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Executive Summary The globalization of Pharmaceutical Drug, Medical Device, Diagnostic and Bio-Pharmaceutical Products has created unique opportunities and demanding challenges for Industry and Regulators alike. Globalization has enabled consumers to benefit from medical innovation around the world. It has also allowed cost containment in the manufacture of some Life Science Productsi by enabling Brand Ownersii to globalize and outsource some activities to lower-cost markets. On the other hand, the growth in the volume of global facilities and Suppliers, as well as the increased variety and complexity of globally sourced Products from a large number of countries calls for a new paradigm in Global Supply Chain management. Although individual organizations have made significant strides to address specific areas in the Global Supply Chain, Industry-wide efforts are in their infancy. To identify key initiatives Industry and Regulators are undertaking to address this issue, Axendia conducted this study. This research identified key trends, requirements, and initiatives Life Science Product Stakeholders should implement to transition to a new paradigm for operating in this increasingly global and outsourced reality. Based on research, analysis and responses from Industry Executivesiii, Regulators and other Stakeholders, we have cataloged the findings into the following three categories: On-Demand-Visibility Control over the Supply Network The Need for Collaboration We hope findings from this research study provide actionable advice to enable the Life Science Product ecosystemiv to capitalize on the benefits of Global Supply Chains while controlling their risks.



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Research Approach Axendia’s research team deployed complementary approaches to arrive at the results published in this report. An “Industry Advisory Council” comprised of leading Industry Executives was established. This council played an advisory role throughout the research, data collection and analysis phases of the project. We also deployed a web-based survey to gain a quantitative sample from Industry Executives across a range of products, organizational sizes and geographies in the Life Science Product ecosystem. The data in charts and figures in this report are from the web-based survey responses. In addition, we examined relevant literature on this topic and performed in-depth interviews with “industry leaders” to validate, distill and refine our analysis. This study is co-sponsored by leading companies active in the Life Sciences sector. They are (in alphabetical order): Camstar Systems Inc. (www.camstar.com), IBM (www.ibm.com), and PricewaterhouseCoopers (www.pwc.com). These companies are supporting this research to increase the understanding of processes and systems that enable global visibility and transparency across the Life Science Value Chain. Axendia retained full editorial control during the execution, analysis and compilation of this report.

Acknowledgements: Axendia wishes to thank the following Industry Executives for their contributions to this research (in alphabetical order): Michael DiBello Director of Regulatory Affairs Henry Schein, Inc.

Ron Guido Vice President, Global Brand Protection & Supply Chain Integrity Johnson & Johnson

Jeffrey S. Meltzer Director, Quality R&D Alvogen, Inc.

Gerry Migliaccio Vice President of Quality; Environment Health & Safety; and Agility Pfizer, Inc.

Martin VanTrieste Chairman Rx-360



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Trends and Challenges for Life Science Global Supply Chains The globalization of sourcing, manufacturing and supply of Life Science Products has created unique opportunities and challenges for Industry and Regulators alike. Globalization has enabled consumers to benefit from medical innovation around the world. It has also allowed cost containment in the manufacture of some Life Science Products by enabling manufacturers to globalize and outsource some activities to lower-cost markets. According to a recent FDA report, “The growth in imports during the last decade has been staggering.”v Over the last five years, the import of Life Science Products has grown by nearly 50% and at last report represented 81.5 Billion US Dollars according to United States government figures.vi

"What we have is a global supermarket and the products Americans purchase come from all over the world. More foreign facilities are supplying the United States with products, the volume of imported products is increasing, and the supply chains continue to grow in complexity.”

Figure 1 – Growth of Medical Device Imports into United States

Murray Lumpkin, M.D., Deputy Commissioner of International Programs, USFDA.

Globalization and outsourcing of Life Science Products can be traced to the late 1990s. At that time, Life Science companies began to evaluate their core competencies and many decided to outsource non-core competency functions. The primary reason for this trend was the drive to lower costs. According to Industry Executives participating in our research, 68% identified Business Profitability as one of the key drivers for Global Supply Chain initiatives. (See Figure 3)

“The 21st century reality is *that+ our borders are now boundaries, not barriers to our realm of activity, not barriers to disease, not barriers to product flow, not barriers to challenges of globalization," said Murray Lumpkin, M.D., Deputy Commissioner, International Programs, USFDA. "What we're seeing is the reality of the challenges of globalization, which has fundamentally changed the environment for regulating food and medical products. Borders can no longer be the first line of defense. We can no longer “inspect” out bad products at the border. Borders must be places where we “audit” that indeed quality has been built in at the point of manufacture.”vii



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The findings in this study support the FDA’s perspective. Industry Executives were asked, “In which of

these emerging economies does your company conduct business or plan to in the next two years?” 80% 70% 60% 50% 40% 30% 20% 10% 0%

Key Supplier Sell Products

Figure 2 –Emerging Economies -Axendia Global Supply Chain Study 2010

As indicated in Figure 2, 70% of Industry Executives responded that they have key suppliers in China and 57% in India. Last year, Life Science Product imports from China and India represented 1.5 Billion US Dollars and 2.2 US Dollars respectively.viii Although access to key suppliers was a primary driver for the expansion of supply chains around the globe, emerging economies represent fresh markets for the sale of Life Science Products. Globalization has also opened new markets for Life Science Products around the world. The majority of respondents noted that they sell products to China, India, Japan, Mexico and Brazil, and nearly half said they also sell to South Korea, Argentina and Russia. Globalization of manufacturing, sourcing, and sale of Life Science Products is expected to continue to increase. When

Increasing

78% 76%

asked, “What are the expected global

trends for your company over the next three years?” our Global Supply Chain Study 2010 respondents reinforced this radical shift in direction that Life Science companies are heading.

Global Product sales (outside U.S.) Global Sourcing (outside U.S.) Global Manufacturing (outside U.S.)

1% 4% 2%

Decreasing

5%

Same 0%

18% 22% 20%

40%

60%

80%

Figure 3 – Our Global Future -Axendia Global Supply Chain Study 2010



94%

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100%


The Need for a New Outsourcing and Globalization Model “Supply Chain security is the responsibility of all parties involved in procurement/sourcing, manufacturing, packaging and distribution of raw materials, intermediates and final product,” commented Mr. Migliaccio Vice President of Quality; Environment Health & Safety; and Agility at Pfizer.ix “Ultimately, the marketing authorization holder (Industry) is responsible for assuring that all parties in the Supply Chain fulfill their responsibilities for delivering safe and effective medicines to customers,” he added. To gain a deeper understanding of the major influences that are pushing Life Science Stakeholders to reevaluate their globalization strategies, we asked Industry Executives

“What are the drivers for your Global Supply Chain Initiatives?” The “Big

Quality improvement

75%

Three” drivers for Global Business profitability 68% Supply Chain Initiatives are quality improvement, profitability, and regulatory Regulatory requirements 68% requirements. (See Figure 4) This is not surprising, given the Industry’s culture and 0% 10% 20% 30% 40% 50% 60% 70% 80% track record. In a global and Figure 4 – Globalization Influencers -Axendia Global Supply Chain Study 2010 outsourced environment, the ability to balance the big three drivers has become more difficult. Globalization and outsourcing have also uncovered significant risks and challenges for Industry and Regulators alike. “I think the Industry realizes that there is an increasingly complex and thus more risky Supply Chain environment out there right now and that they have to adapt their quality systems, including their ingredient audit program and ingredient qualification program to address those risks,” said Richard L. Friedman, Director of the Division of Manufacturing & Product Quality in the Center for Drug Evaluation and Research, FDA Office of Compliance. x Findings from our research support Mr. Friedman’s assertion. When asked “Where do you see the

greatest risk or vulnerability in your Value Chain?” several areas of concern were listed by Industry Executives. Raw Materials sourced outside the US represented the greatest risk to the Value Chain, with 94% of those who responded seeing it as a significant or moderate risk.



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When comparing the risk profile of US vs. foreign raw material Suppliers, United States Suppliers were classified as low risk nearly 10 times as often as foreign Suppliers.

Significant Risk

Moderate Risk

Raw Material Supplier outside the U.S. 50% Contract Manufacturing 22% Counterfeiting 31% Finished Goods 14% 43% Product Diversion 18% 38% Distribution 17% 39% Shipping 17% 33% Raw Material Supplier in the U.S. 10% 38% Manufacturing (internal) 4% 22% 0%

10% 20%

30%

Low Risk 44% 52% 37%

40% 50%

6%

26% 31% 44% 44% 44% 51% 53% 74% 60% 70%

80% 90% 100%

Figure 5 – Greatest Risk -Axendia Global Supply Chain Study 2010

Higher risks also extended to Contract Manufacturers. When comparing the risks to the Value Chain between internal and contract manufacturing, the risk associated with Contract Manufacturing is nearly four times higher compared to products manufactured internally. When rating Contract Manufacturers, only 26% see them as a low risk, whereas 74% rate Internal Manufacturing as low risk. When asked to “Look forward over the next five years, what do you see as the biggest business

threat to your Global Supply Chain?” contaminated or nonconforming raw material was named the top threat. However, threats that as little as ten years ago were virtually non-existent, like counterfeiting and product diversions, are expected to be major concerns moving forward.

Contaminated/Nonconforming raw materials

61%

Impact on product safety, efficacy, effectiveness

51%

Our product being counterfeited

44%

Lack of ability to trace products

43%

Cost of complying with additional regulatory burdens

42%

Our product being diverted (bought and resold without our permission)

35% 0%

20%

40%

60%

80%

Figure 6 – Business Threats in the Next 5 Years-Axendia Global Supply Chain Study 2010



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Recommendations for a New Supply Network Paradigm Supply Chain dynamics are driving Life Science Product ecosystem to seek innovative approaches which improve product safety, efficacy and quality for enhanced clinical outcomes, reduce costs and risks while ensuring compliance with all applicable Regulatory requirements. To attain the sustained benefits of globalization, the Life Science Product ecosystem must implement a new paradigm to manage Global Supply Chains. They must implement strategies which capitalize on the benefits of while proactively reducing and controlling risks. This calls for changing the business, technology and regulatory models traditionally used in the Industry. Based on our analysis of the research data, we have categorized the findings into the following three categories: On-Demand-Visibility Control over the Complete Supply Network The Need for Collaboration



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On-Demand-Visibility Historically, the major drivers for visibility and analytics in the Life Science Industry have been processes understanding and control, as well as post-facto crisis management and root-cause analysis to support Corrective and Preventive Actions (CAPAs), Adverse Events, Recalls, etc. The value of visibility was often measured by “how quickly can you get the data to fix the problem.” Historical data, although valuable when “fixing problems” does not support the proactive and predictive approaches needed to support today’s agile and fluid Life Science environments. In a global and complex Supply Chain environment, just having post-facto visibility is not a viable option. This global paradigm calls for the implementation of an “On-Demand-Visibility” approach across every stakeholder in the Supply Chain. Axendia defines “On-Demand-Visibility” as the ability to obtain relevant information about the

Life Science Product at the appropriate time to enable decisions with a high degree of confidence based on the analysis of contemporary data. For example: The use of Electronic Batch/Device records at every step of the Supply Chain, created at each step of the manufacturing process, reviewed by exception, and available on demand should be available to support inquiries and investigations. This approach would provide Brand Owners the opportunity to improve quality while managing costs by enabling process optimization and adjustment of critical-to-quality in-process parameters within a design space. Maintaining “On-DemandVisibility” of upstream processes (whether internal or outsourced, local or global) allows downstream control strategies to take into account the actual characteristics of raw materials, ingredients and components to support Process Analytical Technology (PAT) and Quality by Design (QbD) approaches. By connecting the dots across the Supply Chain, Brand Owners can attain On-Demand-Visibility to manage risks, improve quality, while managing costs. The consequences of the lack of visibility were evident to the extreme in the Heparin Sodium USP incident with the discovery of a “Shadow Factory”.xi (See Sidebar)

Shadow Factory FDA uncovered a “Show Factory” at Shanghai No. 1 Biochemical & Pharmaceutical Co. Ltd, and its “Shadow Factory” at Qingdao Kangyuan or Qingdao Jiulong. The FDA Warning Letter stated, “The inspection revealed that the facility was not manufacturing, and did not appear to have ever manufactured, Heparin Sodium USP (or Heparin Sodium) for the U.S. market.”

On-Demand-Visibility also plays a key role in reducing risk and supply disruption by enabling Stakeholders to use Business Intelligence tools to gain value from data across the complete chain. It



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allows Stakeholders to analyze data and begin “connecting the dots” to identify trends before they become problems. Lack of Visibility leads to lost opportunities and increased costs. On-Demand-Visibility provides a more complete picture—more accurately measuring risk associated with longer Supply Chains and globalization.

Visibility: Current State As a result of outsourcing, many Brand Owners have lost the ability to collect, act and capitalize on critical-to-quality indicators and process parameters. Visibility into the Supply Chain is primarily based on “snapshots in time” with little sharing of common practices and information. When we asked Industry Executives: “What is your visibility into your

external Suppliers', Distributors' or Shippers' practices?” 77% of Industry Executives stated that the primary method used to gain visibility into suppliers is a periodic audit. We share common practices and information We have little visibility to their practices We audit them periodly

15%

Shipper

43% 43% 23% 27%

Distributor

53% 51%

Contract Manufacturer

9% 55% 25%

Supplier

15% 77% 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Figure 7 – Visibility to External Partners -Axendia Global Supply Chain Study 2010

Only 25% stated that they share common practices and information with suppliers and only three percent have access to Suppliers’ data in real-time. This trend is a bit higher with Contract Manufacturers with 51% of Executives reporting that they share common practices and information. The challenge with an audit is that it is somewhat of a “black box”. Companies perform an audit and often, the next time they receive data is either when they get a batch of product along with some form of a Quality Certificate or a Certificate of Analysis. The lack of On-Demand-Visibility is illustrated by the slow speed associated with the gathering of relevant information across the Supply Chain.



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When asked whether they could obtain information from their Supply Chain within two hours: 19% could get the information from critical suppliers 11% from distributors 6% from customers

Greater than 3 business days

Within 3 business days

Within business day

Within 2 hours

Customers

28% 33% 32%

6%

Other Company Sites

11%

18%

43%

28% 13%

37%

Distributors 40% The availability of 11% interconnected systems could 6% 27% Critical Supplier 49% enable On-Demand-Visibility 19% across the organization, and 0% 10% 20% 30% 40% 50% 60% ideally throughout the Supply Chain. For example, in the Figure 8 – On-Demand-Visibility -Axendia Global Supply Chain Study 2010 event of a Regulatory investigation, the value of On-Demand-Visibility would be critical to demonstrate a state of control. Surprisingly, only 28% of Industry Executives reported they could obtain information from their own company sites within two hours and only 43% could get it within a business day. Less than half reported the ability to obtain information from their Supply Chain within a business day.

When asked about their ability to gain global visibility into the Supply Chain, “Does your system allow

you to roll out data from multiple locations and sites to provide a Global view?" Only 19% of those who responded said that they can do that in real-time. 15% say it is just not possible 66% say although the can do it, they need to manually aggregate the data.

Figure 9 – Global View of Data -Axendia Global Supply Chain Study 2010



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This data provides further evidence of the difficulty Life Science organizations face gaining On-DemandVisibility into their Supply Chain. This lack of visibility supports the need for the implementation of data acquisition and analytic systems and processes to provide On-Demand-Visibility across the Supply Chain. The willingness of partners to share information was a top issue uncovered by the research. When asked

“What are your Organization’s concerns regarding increased regulatory focus on Global Supply Chain issues?” nearly 60% of Industry Executives are concerned about the willingness of Suppliers to provide information to support Global Supply Chain information to address regulatory requirements, and 44% are concerned about their Distributors’ willingness to provide information required to meet these requirements.

Lack of clear requirements

58%

Willingness of supplier to provide information

58%

Amount of effort required

58%

Cost of the initiatives

57%

Willingness of distributors to provide information

44%

Management commitment

36%

Availability of track/trace technologies

26%

Availability of software solutions

23% 0%

10%

20%

30%

40%

50%

60%

70%

Figure 10 – Regulatory Compliance Concerns -Axendia Global Supply Chain Study 2010

Road Map to On-Demand-Visibility Why is On-Demand-Visibility needed? Brand Owners are responsible for the safety, efficacy and quality of their product in a court of law and the court of public opinion. In a Risk-Based regulatory environment lack of visibility translates to higher risk: Brand Owners cannot outsource Liability, Compliance nor Safety If your company’s name is on the box, you are responsible Brand Owners must address issues when they are a trend, not a recall



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On-Demand-Visibility would enable the next link in the chain to adjust process parameters to compensate for product characteristics. On-Demand-Visibility would ensure that organizations could actually get the information they need in order to support full genealogy and traceability across the Supply Chain. The willingness of Suppliers to provide that information is critical to achieve this goal. It is not enough to look at the first link in the Value Chain. In an age when Outsourcers are outsourcing the chain gets longer and more difficult to assess, Brand Owners must go further into their Supply Chain and assess Distributors, as well as Suppliers to their Suppliers. Today’s technology has matured to support the implementation of interconnected and interoperable systems that provide On-Demand-Visibility across the Supply Network. This does not imply a monolithic approach, where everyone implements the same system. Rather, each Stakeholder should implement interoperable systems, based on today’s web and cloud-based technologies. These interoperable systems would enable collaboration across the Supply Network. Another option is for Brand Owners to provide appropriate access to internal systems to enable data exchange and collaboration. Today’s audit-driven visibility and control approaches should also be addressed. “We understand that qualifications of Suppliers are not going to be at the same rigor for each Supplier,” commented Mr. Friedman. “There’s going to be more frequent ongoing audits of some Suppliers that might not be as strong in their manufacturing ethics as one who has a long-proven track record. So, you might audit one manufacturer every year and one every three years depending on what their supplier reliability quotient is. There is that type of risk management going on in the Industry already, weighing of risk is very important. The cooperation of all members of the Supply Chain is paramount for this risk-based approach. You are only as strong as your weakest link in the supply chain,” he added.xii Brand Owners must gain On-Demand-Visibility with their critical Suppliers to ensure that downstream processes can be honed to adjust for ingredients. Brand Owners should require Suppliers to provide a complete batch-history record for the raw materials/components being delivered instead of a certificate representing a snapshot in time. The availability of this batch-record for raw materials would enable the use of critical-to-quality parameters to adjust downstream processes. Outsourcing and globalizations should not translate to a loss of visibility. On-Demand-Visibility would also enable the shift from “magnifying glass”style inspections, where auditors ‘on the ground’ scrutinize every aspect of companies’ Quality System for a short (and pre-announced) period of time to an “Air Traffic controller” approach to ensuring quality. In the latter, information is available On-Demand, enabling authorized Stakeholders to “spot audit” Suppliers by reviewing contemporaneous data, and changes potentially impacting product safety, efficacy and quality.



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Control Over the Global Supply Network Traditionally, Life Science Product manufacturers relied on “testing quality out” of the process to ensure that only the highest quality products reached consumers. This typically involved inspections to remove defective product through a progression of “incoming inspections”, “in-process inspections” and concluded by a final “finished goods testing”. In the 1990s, Industry and Regulators began cooperating in ways to change the paradigm for Life Science Product development and manufacturing; shifting from “testing quality out” to “building quality in”. This collaboration resulted in innovations such as the Critical Path Initiative, Process Analytical Technology (PAT), Quality by Design (QbD) and Total Product Lifecycle (TPLC). The thrust of these initiatives focused on gaining deep process and product understanding to ensure tight controls over critical-to-quality parameters. As a result, the product resulting from these highly controlled processes would meet quality standards without the need for testing at the completion of each manufacturing operation. The new paradigms enabled forward-thinking Life Science Organizations to implement advanced control strategies to speed innovation, improve quality, and lower costs while facilitating compliance to Regulatory requirements. Around the same time, Life Science Organizations began pursuing globalization and outsourcing strategies as a means to lower cost by outsourcing non-core competency activities, processes and supplies. The complexities associated with global and outsourced Supply Chains has led to the loss of control over many of the gains Industry sought through initiatives such as Critical Path Initiative and TPLC. According to Gerry Migliaccio, Vice President of Quality; Environment Health & Safety; and Agility at Pfizer, “while we have been very successful at advancing science and risk-based approaches to quality, all of our efforts can be rendered moot if we cannot secure the Supply Chain.” The lack of control, along with the sluggishness of systems used to support Global Supply Chains (See Sidebar) contributes to a high level of concern over outsourced products and processes. According to the research, these trends are expected to grow over the next five years.



Contaminated and nonconforming raw materials identified as the top business threat to Supply Chain in the next five years. Raw materials sourced outside the US and Contract Manufacturing represents the greatest vulnerabilities in the Value Chain. 87% say that at least 25% of raw materials, ingredients or components come from external sources. 60% report getting raw materials from at least seven outsourced locations. The perceived risk associated with Contract Manufacturing compared to Internal Manufacturing is nearly four times higher.

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In some cases, Industry has reverted to “testing quality out” approaches where incoming ingredients and components undergo incoming inspections. Gone is the visibility into critical-to-quality attributes tightly controlled during manufacturing. This is especially distressing given the increasing risks over counterfeit Life Science Product ingredients. According to Ambassador Ron Kirk, US Trade Representative, “…in China, domestic chemical manufacturers that produce APIs (Active Pharmaceutical Ingredients) can avoid Regulatory oversight by not declaring that the bulk chemical is intended for use in pharmaceutical products. This contributes to China being a major source country for APIs used in counterfeit pharmaceutical products.”xiii Today, control over the Supply Chain extends well past ingredients and components coming though the Brand Owner’s receiving dock. Brand Owners are also faced with the necessity to maintain control over the product once it leaves their facilities. Counterfeiting, product diversion, and thefts are on the rise and Brand Owners must deploy systems and technologies to provide visibility and control not only in the Supply Chain, but also in the entire Value Chain, from ingredients to the consumer.

Control: Current State The research shows that today, the top driver for reevaluating Life-Science Supply Chain initiatives is the need for quality improvement (75%). Yet, the vast majority (77%) of Brand Owners outsourcing strategies rely on periodic audits to evaluate and provide visibility into suppliers the suppliers’ quality systems (See Figure 7). In contrast, only 3% of Brand Owners have access to Supplier’s real-time data and only a quarter share common practices. As a result, little or no control is available or exerted on the process until the Brand Owner takes delivery of product from the Suppliers. The limited use of common practices and “On-Demand-Visibility” can create a ‘black box’ effect (See Visibility: Current State). This is especially important in light of the fact that Industry Executives ranked contaminated or non-conforming raw materials” as the top threat to the Global Supply Chains in the next five years. (See Figure 6) In addition, Brand Owners have little control over the processes used to manufacture components and ingredients, which may be critical to their finished product. This could make it difficult to meet FDA regulations, which regards contract facilities as an extension of the manufacturer's own facility. xiv Furthermore, due to the lack of visibility and control over external Supplier practices, Industry Executives participating in this research reported the need to improve the effectiveness of Supply Chain processes and systems. When asked, “How useful is your current Supply Chain process or system

for managing your Business?”, only 21% responded that their current systems or processes are very useful in this regard. On the other hand, 13% said that their current systems do not provide real help



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managing their Supply Chain and 57% reported that obtaining the information needed to run the business is slow, although their current systems are helpful.

Figure 11 –Process or Systems Helpful -Axendia Global Supply Chain Study 2010

As expected, the vast majority (96%) of large organizations (those with revenues over 1 Billion US dollars) have implemented systems or process to manage their Supply Chains. However, Industry Executives in larger companies have lower satisfaction levels with those systems. Only 17% of large company Executives ranked their systems as very useful, compared to 21% for smaller companies. Larger companies generally support more complex Supply Chains, and as a result may have more mature systems. Executives from larger companies reported a lower satisfaction with the speed of their Supply Chain systems at retrieving that information. Over two-thirds reported that obtaining the information needed to run the business was slow, compared to 52% for executives from smaller organizations. Under 1 Billion in Revenue

Over 1 Billion in Revenue

80% 70% 60% 50% 40% 30% 20% 10% 0% Very useful

Helpful but getting information is slow

No real help in managing business

No system

Figure 12 – System Usefulness based on Revenue –Axendia Global Supply Chain Study 2010



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Counterfeiting and Product Diversion are becoming a growing threat to the Industry. According to the latest report by the White House Office of the United States Trade Representative, “The manufacture and distribution of pharmaceutical products bearing counterfeit trademarks is a growing problem that has important consequences for consumer health and safety.”xv Industry Executives agree. When asked, “Where do you see the greatest risk or vulnerability in

your Supply Chain?” a large majority of Industry Executives reported concerns of elevated risks with product counterfeiting and diversion. 69% of executives reported counterfeiting as a high or moderate risk 64% of executives ranked product diversion as a significant or moderate risk 40% of all respondents that produce Life Science Products have reported that their company's products have been counterfeited or illegally diverted, with pharmaceutical products leading the way. Analysis of the data regarding Business threats to the Global

Supply Chain in the next five years (See Figure 6) showed: 44% are concerned about product being counterfeited 43% lack the ability to trace products

40% of all respondents that produce Life Science Products have reported that their company's products have been counterfeited or illegally diverted. 50% Pharmaceutical 34% Medical Device 35% Diagnostic

35% are concerned about product diversion Industry is working to address the growing threat of counterfeiting and diversion thought the implementation of readily available technologies. The availability of Track & Trace systems / technology is not a barrier to adoption; only 9% saw the lack of a technology solution as a barrier. When asked “What do

you currently use or plan to employ for product or materials tracking technologies?” mature technologies such as one and twodimensional barcodes had Figure 13 – Current and Planned Tracking Technology -Axendia Global Supply Chain Study 2010



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high uptake. The availability of technology enabling Industry to attain better control over the supply networks is not a limiting factor to implementation. Industry Executives identified the following four hurdles for implementing Track & Trace technology: Cost of the technology Difficulty of implementing technology

U.S. Government Proposed Initiatives

Lack of industry standards Lack of regulatory requirement /guidance

Mandated use of electronic Track & Trace for Pharmaceuticals and Medical Products

A recent report to the President and Congress, the Notification requirement for counterfeit Intellectual Property Enforcement Coordinator (IPEC) pharmaceuticals and medical products points to the US Government’s eagerness to address Increased enforcement efforts to guard against the some of those barriers. The report recommends the proliferation of counterfeit Pharmaceuticals and modification of the Food, Drug & Cosmetic Act to Medical Devices require that manufacturers, wholesalers and dispensers implement a Track & Trace system, to allow for Establish and implement protocols to reduce illegal authentication of Life Science Products and the creation Internet Pharmacies of an electronic pedigree using unique identifiers.xvi The report also calls for increased enforcement efforts to guard against the proliferation of counterfeit pharmaceuticals and medical devices (See Sidebar). This is in line with FDA initiatives already underway to require serialization of Pharmaceuticals and Medical Devices. For Pharmaceutical Products, FDA utilizes Standardized Numerical Identifiers (SNI) for most prescription drugs packages through a serialized National Drug Code (sNDC).xvii For Medical Devices, it proposes the Unique Device Identification (UDI) system to adequately identify Medical Devices through distribution and use and may include information on the lot or serial number.xviii

Figure 14 – Global vs. Local Solution -Axendia Global Supply Chain Study 2010



Although Track & Trace and serialization mandates are being developed

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locally (California’s ePedigree, Turkey, Brazil, France, etc.), the majority of companies are implementing global solutions to meet serialization requirements. When asked “What information can you currently track related to key/critical components of

your product?” the vast majority of Executives said they could track manufacturing location (84%) and genealogy (73%) such as raw material, ingredient, component, etc. On the other hand, 50% or less said they could track critical information for key components including: Transaction history Chain of custody Record of Ownership Environmental storage conditions (when critical to for product safety/efficacy) ePedigree When asked which systems their company uses to support Global Supply Chain Visibility , Enterprise Resource Planning (ERP) and Quality Management Systems (QMS) were the leading responses with 65% and 55% None 5% respectively. Paper System 27% Homegrown (Spreadsheet/DB/Custom)

31%

ERP (Enterprise Resource Planning) QMS (Quality Management System) CRM (Customer Relationship… LIMS (Laboratory Information… SCM (Supply Chain Management) Analytics/Business Intelligence ECM (Electronic Content… MES (Manufacturing Execution Systems) PLM (Product Lifecycle Management) 0% 10% 20% 30% 40% 50% 60% 70%

However, it is worth noting that 31% stated that they still use homegrown systems, such as spreadsheets, custom systems and databases. 27% still rely on paper.

Figure 15 – Global Supply Chain Visibility Systems -Axendia Global Supply Chain Study 2010

Most organizations today rely on “command and control” systems such as ERP and QMS, which were designed to provide inward visibility. Although they have played a critical role in supporting the shift to proactive control, most ERP and QMS platforms today have severe limitations in providing control outside the corporate walls. There is often a struggle to attain visibility and control over Suppliers, Assemblers and Contract Manufacturers, as well as post-release Track & Trace information.



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ERP and QMS systems primarily support receiving, incoming inspections and audits. They offer limited capabilities to feed Supplier information to downstream processes to ensure tight controls or adjust control parameters. They also often lack the ability to provide enough granular information to ensure that the product met internal standards for all Key Performance Indicators (KPI’s) (properly characterized to meet downstream needs for process control). In addition, the multitudes of systems in use to support global supply chain visibility are often not interoperable. This makes it difficult to support “On-Demand-Visibility” to control operations in a global environment. The addition of business intelligence and analytics tools could help fill the control and visibility gap. According to the survey, Life Science Product companies are using business intelligence and analytics to track key Suppliers. These could alert Brand Owners of changes that could affect the Supplier’s ability to meet their commitments. 80% track quality trends on materials supplied 71% look at financial health 61% keep an eye on the percentage of the Supplier’s business they represent 56% look at management structure

Road Map to Supply Network Control Life Science Product Organizations must gain tighter control over the complete Supply and Value Chains, from ingredient to patient. To attain this goal, Brand Owners should consider shifting from Supply Chains to Supplier Networks. The need for control and collaboration does not imply a one way street, where Brand Owners pressure suppliers to “do it my way”. Instead control over the Supplier Network benefits all constituents in the Life Science value chain (see collaboration Road Map for additional detail) Supply Chains provide for only two-touch points at each end of every link. Today’s complex and global Supplier, Distributor and Repackager arrangements require more than two touch points. It beckons for the availability of “On-DemandVisibility” at every step of the process. In addition, Brand Owners should consider implementing riskbased supplier management strategies. Not every component or supplier has the same value and risk profile, but everyone



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must be in place to complete the product. Brand Owners should assess Suppliers based on the total value including risk profiles, not just commodity cost. Brand Owners should consider conducting On-Demand remote audits of their Supply Network to ensure that Quality Systems are adhered to at all times, not only during scheduled inspections. They should also employ “trust but verify” strategies to ensure partner’s adherence to quality practices, processes and procedures at all times. Life Science Product Manufacturers should put into practice approaches to gain access to “On-DemandVisibility” across their supply networks. This would enable them to shift from reactive to predictive problem solving and root cause analysis. Additionally they should implement technological, commercial and legal frameworks that promote the exchange of information On-Demand to enable Supplier and Value Networks to become an extension of the Brand Owner’s own facility, using standards-based and interoperable data. Adequate control often requires deep process and product understanding. Therefore, Brand Owners should encourage their Supply Network to collaborate on gaining understanding of key-to-quality parameters and implementing systems to provide visibility to support process control based on actual product attributes, rather than incoming inspection testing. To achieve control outside the corporate walls, Brand Owners should deploy processes and systems that enable them to connect the dots and bridge the gaps, regardless of who made a component or ingredient or where it was made. To this end, Partners and Suppliers should be viewed as extensions of the Brand Owner, providing components to the whole, not as disconnected manufacturing islands providing unrelated parts. Brand Owners should also integrate rigid command and control systems (like ERP and QMS) with web/cloudbased Supply Chain Intelligence infrastructures. Life Science Stakeholders would then be able to take full advantage of Business Intelligence, analytics, and planning software to bring together data residing across different systems and at multiple levels of granularity. Tools such as scorecards, dashboards and event management can enable the Life Science ecosystem to shift from current “reactive” to more “predictive” approaches to support Global Supply Chain optimization, transparency and control.



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This would enable Brand Owners to realize the cost and agility benefits of Global Supply Networks while ensuring product quality and safeguarding brand reputation. A recent report to the President and Congress recommends as an action to mandate the use of Electronic Track & Trace for Pharmaceuticals and Medical Products.xix Continual control and visibility across the Supply Network, beyond the Brand Owner’s own shipping dock would reduce opportunities for counterfeiting, diversion and theft. To this end, all Life Science Product Stakeholders should work cooperatively and diligently to implement standards to support the rollout of Track & Trace systems across the Supply Network (from ingredient to patient). These approaches will enable Brand Owners and Suppliers to close the loop across the complete Supply Chain, by providing visibility, control and actionable intelligence, regardless of supply and manufacturing strategies (in-house, outsourced).



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Collaboration When much of a Brand Owner’s business operations existed within the corporate walls, the need to collaborate with external Partners was somewhat limited. In today’s global environment, isolation makes it difficult to succeed. The Regulators recognize this changing environment and now more than ever are embracing partnership and harmonization initiatives with Industry and other Life Science Product Stakeholders. Industry groups like Rx360 are actively promoting Industry and Regulator collaboration recognizing it as the most viable solution given the scope and costs of securing the Supply Chain. Collaboration also means changing the ways that companies are structured to support the greater demand for cross-functional skills supporting Global Supply Chains. It is no longer just a purchasing exercise to save costs. The Global Supply Network requires a well-balanced team approach to minimize risk, maximize value and ensure product safety, efficacy and quality. It also means changing the ways companies deal with Suppliers seeing the relationship as collaborative, where the interchange begins sooner in the process. It means engaging Suppliers who are willing to collect and share information because they understand it is in the best interest of all Stakeholders.

Collaboration: Current State

60% of respondents are getting raw materials from at least seven or more outsourced locations. 87% of respondents report that at least 25% of raw materials, ingredients or components come from external sources.

A major challenge for the Brand Owners and their Supply Networks moving forward involves defining and implementing conduits and processes to clearly define and communicate requirements and expectations. This would ensure a clear understanding of product and process requirements as well as related practices to support this new paradigm. We asked Industry Executives, “What are their preferred drivers for creating Global

Supply Chain best practices?” The expected response was “Industry Consortia” as the primary driver. The data supports this expectation. What is changing is that Life Science Product Stakeholders are looking for Regulators globally to provide clear Regulatory direction on key Global Supply Chain issues. Clear Regulatory guidance would minimize false starts often associated with the implementation of technologies (such as Track & Trace) or Regulatory practices, which may need to be scrapped because of Regulatory ambiguity or lack of global standards.



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Our research shows that Industry Executives are relying less on internal stand-alone initiatives. Instead, they are seeking out Regulators (US and Global) and trade and Industry Consortia for direction, standards and guidance.

Industry consortium (eg: Rx360, PSCI, GS1, EPICS)

59%

Regulatory mandate

51%

Corporate initiatives

45%

Trade Groups (eg: Phrma, Advamed, Bio)

40%

Individual company solutions

23% 0%

10%

20%

30%

40%

50%

60%

70%

Figure 16 – Preferred Drivers -Axendia Global Supply Chain Study 2010

The research also shows that companies are recognizing the need for changing skill-sets for the people involved in Global Supply Chain management. When we asked Industry Executives about the

functional groups in their organization that are primarily involved in managing the Global Supply Chain, we see the expected traditional groups involved: Supply Chain Management (74%) Quality (71%) Purchasing (65%) Manufacturing / Operations (65%) Auditing (50%) When responding to “Whom they would like to collaborate with”, they recognize that a changing set of skills would be helpful. The data demonstrates that groups not traditionally involved in supply chain management represent the broader more holistic needs of the organization. A major concern for Industry Executives is cost and effort associated with the increased Regulatory focus on Global Supply Chain initiatives (58% of responses indicated this concern). One way to mitigate costs is to share quality and other relevant


Product Development

40%

Product Testing

38%

Marketing

37%

Training

37%

Regulatory/submissions

35%

Engineering

35%

Customer Service

34%

Sales

33%

Finance

33%

R&D

31% 25%

30%

35%

40%

45%

Figure 17 – Changing Skill Sets Recognized-Axendia Global Supply Chain Study 2010


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information on Suppliers, Distributors and Shippers with the complete Life Science Product ecosystem. When asked, “Do you think it would be beneficial for your company to share information on suppliers, distributors and shippers?” 84% said it would be beneficial to share information But (on average): Only 8% currently sharing 63% likely to share 30% unlikely to share This can work to strengthen the global network of quality Suppliers while shedding light on unscrupulous and criminal operations. It would also lower the costs to all involved by eliminating the need for redundant audits by multiple Brand Owners. On a positive note, the majority of Industry Executives reported they started collaborating with key Suppliers during product design/research which speaks to understanding the need for early collaborations.

During product design/research Right before manufacturing begins We don't collaborate (only place orders) Only when we make a change 0%

10%

20%

30%

40%

50%

60%

70%

80%

Figure 18 – When Collaboration Begins -Axendia Global Supply Chain Study 2010

Road Map to Collaboration While the word “partnership” has been used to sometimes describe the relationship between Regulatory agencies and Industry in support of product safety, efficacy and quality, this was often an uneven partnership. The Regulators told Brand Owners what to do and Brand Owners generally complied. While that is still the case, making this partnership a reality in a global environment will not be possible without Industry and Regulators working collaboratively to shape desired practices. These practices have to embody reasonable approaches, which can be broadly leveraged by the Industry and Regulators. The scope of this global reality for an individual company or agency will be impossible to achieve, given the financial limitations in place. Because of the size and complexity of Global Supply Networks, the most viable and cost-effective path to achieve On-Demand-Visibility across the Life Science Product ecosystem involves the sharing of information to ensure the safety, efficacy and quality of products for all involved. The sharing of information can drive the following benefits: Reduce redundant, costly audits for both Industry and those being audited Create a transparency of quality-related information to ensure product safety Improve Supplier, Distributor, and Shipper performance by publishing quality parameters



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Organizations like Rx-360 are leading the charge in promoting this collaborative approach to increase the safety of Life Science Products while cutting costs through the myriad of redundant company practices. Stakeholders must seek to establish common practices and methods that meet the needs of the greater group. The sharing of information will be a complex and challenging goal. Now is the time to begin the journey by adopting current practices and adapting them to meet evolving needs of Global Supply Networks. Cross- functional teams are an integral part of today’s Global Supply Networks. The interactions between Brand Owners and their Supply Networks are shifting from casual exchanges to long-term, stable relationships. Global Supply Networks demand a new collaborative approach to assess the risk of Suppliers and acts proactively to address trends before they become non-conformances. When most business functions are conducted outside the corporate walls, Brand Owners need a crossfunctional team approach to manage the many differing demands generated by cost, safety, quality and performance drivers. With the increasingly global trend to outsource operations, these issues have not disappeared just because a third party is now the Manufacturer. Brand Owner’s reputation and liability are still on the line. Our research supports the recognition that greater functional participation is needed when working with critical suppliers. Brand Owners must expand teams beyond the traditional players such as Purchasing, Quality and Operations. Expectations and requirements of the relationships should be made clear to every member of the Supply Network, especially critical Partners. The Supplier participation is a critical part of creating reasonable working relationships to meet requirements. To establish an honest dialogue Brand Owners and Partners must clearly see the value and impact of the relationship. A key piece of collaboration is the opportunity of the Partner to challenge assumptions and work together with the Brand Owner toward improved solutions, instead of answering ‘yes' to every demand without the ability to consistently deliver. The benefits of collaboration and joint planning between Brand Owner and Supplier are many. Working together for continuous improvement can drive lower costs through improved yields, fewer returns and less rework. These lower costs can allow the Supplier greater flexibility in maintaining profitability while continuing to be a competitive resource for the Brand Owner. Vital to ensure the safety, efficacy and quality of products is creating clear lines of communication between Brand Owners and their Supply Networks to support clear understanding and continuous improvement.



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Conclusion Supply Chain dynamics are driving the Life Science Product ecosystem to seek innovative approaches, which improve product safety, efficacy and quality for enhanced clinical outcomes while at the same time reducing costs and risks, all while ensuring compliance with all applicable regulatory requirements. To attain the sustained benefits of globalization, the Life Science Product ecosystem must implement a new paradigm to manage Global Supply Chains. Brand Owners must implement Global Supply Chain strategies which capitalize on the benefits of globalization and outsourcing while proactively reducing and controlling risks. This calls for changing the business, technology and regulatory models traditionally used in the industry. To support these initiatives, we recommend that the Life Science Product ecosystem implement:

“On-Demand-Visibility” “On-Demand-Visibility” strategies and systems provide the ability to obtain relevant information about the Life Science Product at the appropriate time to enable decisions with a high degree of confidence based on the analysis of contemporary data. On-Demand-Visibility would also enable the shift from “magnifying glass” style inspections, where auditors on the ground scrutinize every aspect of a company’s Quality System for a short (and preannounced) period of time to an “Air Traffic controller” approach to ensuring quality. In the latter, information is available On-Demand, enabling authorized actors to “spot audit” Suppliers by reviewing contemporaneous data and changes potentially impacting product safety, efficacy and quality.

Control over the complete Global Supply Network Life Science Product Organizations must gain tighter control over the complete Supply and Value Chains, from ingredient to patient. Control over the Supply Chain extends well past ingredient and components coming through the receiving dock. Brand Owners are faced with the necessity to maintain control over product once it leaves the shipping dock. Counterfeiting, product diversion and thefts are on the rise and Brand Owners must deploy systems and technologies to provide visibility and control not only in the Supply Chain, but also in the entire Value Chain, from ingredients to the consumer. To attain this goal Brand Owners should consider: Shift from Supply Chains to Supplier Networks Employ risk-based Supplier management strategies



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Implement global, standards based and interoperable Track & Trace strategies The Life Science Product ecosystem must work collaboratively to shape strategies and practices to attain “On-Demand-Visibility” and control over Global Supply Networks. The extent of this global reality makes it impossible for any individual organization or agency to accomplish in a vacuum, given the resource constraints in place today. To succeed, collaboration strategies must embrace reasonable and common sense approaches that can be broadly leveraged by all Stakeholders. Rather than striving for Best Practices, which remain “Best” for a short time, the Life Science Product ecosystem must seek ways to continuously Innovate, Implement and Improve on effective practices from Stakeholders.

Collaboration In today’s global environment success implies collaboration. Life Science Product Stakeholders recognize this changing environment and now more than ever are embracing a partnership and harmonization initiatives. Collaboration is the most viable approach given the scope and costs of securing a Supply Chain. Collaboration also demands a broader set of cross-functional skills supporting Global Supply Chain. The Global Supply Network requires a well-balanced team approach to minimize risk, maximize value and ensure product safety. It also means changing the ways companies deal with Suppliers. Relationships need to be more collaborative, where the interactions begin earlier in the process. It means engaging Suppliers who are willing to share information On-Demand because they understand it is in the best interest of all Stakeholders. Collaborative approaches across the ecosystem can: Drive reduction of redundant, costly audits Create a transparency of relevant information to ensure product safety Create and publish standard measurable scorecards to drive improved performance and mitigate risks. These approaches support the transition to a viable and sustainable path for On-Demand-Visibility, Control and Collaboration across the Life Science Product ecosystem where information is shared and readily available to ensure the safety, efficacy, and quality of products for all involved. We hope the findings from this research provide actionable advice that will enable the Life Science Product ecosystem to capitalize on the benefits of Global Supply Chains while controlling their risks.



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Study Demographics The breakdown of study respondents reflects that of the Industry as a whole, across multiple dimensions. These include size of company, geographic scope of sales, and types of Life Science Products. 112 individuals responded to the survey. They represent 75 different companies from 12 countries around the globe and across the Life Science Product Supply Network 86% percent of those respondents are decision-makers with a title of Manager, Director and Senior Executive and nearly 60% are at the Senior Executive level.

Pharmaceutical

Figure 19 – Respondents Levels -Axendia Global Supply Chain Study 2010

37%

Supplier

21% 13%

Consulting/Services

10%

Diagnostics

10%

Distributor

Director 32%

40%

Biotechnology/Biopharmaceutical

Senior Executive/ VicePresident 25%

Manager 29%

48%

Medical Device

Contract Manufacturers/Assembler

Professional 14%

8% 0% 10% 20% 30% 40% 50% 60%

Respondents’ companies provide a variety of products and services. 47% are involved in Pharmaceuticals, 40% in Medical Devices and 37% in Biotechnology. It is worth noting that 21% are Suppliers while 13% provide Contract Manufacturing.

Figure 20 – Companies Types -Axendia Global Supply Chain Study 2010

Greater than 10B 22%

49% of respondents represent large organizations with annual revenues exceeding 1 Billion US Dollars. There was a relatively uniform spread with 51% representing organizations with revenues below 1 Billion US Dollars.

5B to 9.99B 7%

Under 25M 18% 25 to 99M 14%

100 to 1B to 4.99B 500 to 499M 20% 999M 9% 10%

Figure 21 – Company Revenue -Axendia Global Supply Chain Study 2010



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About Axendia Axendia, Inc. is a leading analyst and strategic advisory firm focused on the Life-Sciences and Healthcare markets. We provide trusted advice to Industry Executives on Business, Regulatory and Technology issues. Axendia professionals offer a unique combination of deep hands-on industry experience coupled with strategic vision. Axendia serves the complete ecosystem including Life-Science and Healthcare Organizations, Technology & Service Providers and the Investment community. Our clients range from startups to Fortune 100. We contribute to our client’s success by providing long-range visibility and helping them navigate the increasingly complex landscape in the Life-Sciences and Healthcare markets. For more information, visit www.axendia.com or contact us at [email protected]. To stay informed on the latest Industry trends, read Axendia’s Life-Science Panorama, a Journal for Industry Executives, at http://lsp.axendia.com or follow us at www.twitter.com/axendia

About the Research Sponsors About Camstar Systems, Inc. Camstar is a leading innovator of software solutions that advance product quality in the manufacturing industry, enabling its customers to deliver the highest quality products on time, the first time, every time. The Camstar Enterprise Platform advances product quality throughout the product lifecycle, from design to planning to sourcing to manufacturing to customer product experience – all in a closed-loop learning process that allows future products to be designed better and manufacturing processes to be leaner and more efficient. Camstar is the largest in its market, providing solutions for manufacturing execution, process planning, enterprise quality management and supply chain intelligence. For over 20 years, Camstar has served hundreds of satisfied customers worldwide, including Abbott, AMD, Amkor, Arcelor, BAE Systems, Beijing SE Potevio Mobile Communications, BIOTRONIK, Boston Scientific, Canadian Solar, CIBA Vision, Cisco, Emcore, Ericsson, Hitachi, Honeywell, IBM, Intevac, Kodak, Life Technologies, Luvata, MiaSole, Motorola, Nortel, Noven Pharmaceutical, NP Medical, NXP, Panasonic, Q-Cells, Roche, SanDisk, Siemens, Stryker, Xilinx, Zeiss and ZOLL. For more information, visit www.camstar.com.

About IBM Business Analytics IBM Business Analytics software delivers complete, consistent and accurate information that decision-makers can trust to improve business performance. A comprehensive portfolio of business intelligence, advanced analytics, financial performance and strategy management and analytic applications gives you clear, immediate and actionable insights into current performance and the ability to predict



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future outcomes. Combined with rich industry solutions, proven practices and professional services, organizations of every size can drive the highest IT productivity and deliver better results. For further information on IBM solutions for life sciences or to reach a representative: www.ibm.com/Cognos/lifesciences

About PricewaterhouseCoopers PwC provides industry-tailored advisory, tax, and assurance services to create business value and build public trust for the world's leading companies. We bring the experience and critical thinking of 163,000 professionals in 151 countries across our global network. We work with pharmaceutical, biotech and medical device companies to address a wide range of manufacturing and supply chain issues including meeting the critical challenges they face in productivity, quality, risk-management, and regulatory compliance. To learn more visit: www.pwc.com/pharma or www.pwc.com/medtech

Legal Disclaimer The opinions and analysis expressed in this research reflect the judgment of Axendia at the time of publication and are subject to change without notice. Information contained in this document is current as of the publication date. Information cited is not warranted by Axendia but has been obtained through a valid research methodology. This publication is not intended to endorse the sponsors’ products and should not be attributed as such.

Copyright Notice © 2010 Axendia, Inc. All Rights Reserved. This publication is copyrighted by Axendia Inc. and protected by United States copyright laws and international treaties. This document may not be reproduced or posted on another web site beyond the sponsors’ or their authorized representatives without prior written consent of Axendia. Unauthorized reproduction of this publication or any portion of it by other parties may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent necessary to protect the rights of the publisher.

Published October 2010



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Endnotes i

Life Science Products include Pharmaceutical Drugs, Medical Devices, Diagnostics and Bio-Pharmaceuticals Brand Owner is the company authorized to market the Medical product. Simply put: the company whose name appears on the product package. iii Industry Executives: For ease or readability, we refer to respondents to the quantitative survey component of this research study as Industry Executives. Please refer to Study Demographics for a complete breakdown of research respondents. iv Life Science and Medical Product ecosystem encompasses all Stakeholders, including Brand Owners, Regulators, Suppliers, Distributors, Contract Manufacturers, Healthcare providers and consumers. v Report to Committee on Appropriations on FDA’s Approach to Medical Product Supply Chain Safety http://www.fda.gov/downloads/Safety/SafetyofSpecificProducts/UCM184049.pdf vi U.S. Census Bureau, U.S. Imports by 5-digit End-Use Code 2005 - 2009 vii Embassy Briefing: Office of International Programs USFDA, December 1, 2009 http://www.fda.gov/downloads/InternationalPrograms/InternationalCommunications/EmbassyBriefings/UCM203 191.pdf viii Ibid VI ix Pfizer and FDA share perspectives on Supply Chain Security. http://axendia.com/blog/2009/08/26/pfizer-fdaon-supply-chain-security/ x “The Current State of Supply Chain Security: An FDA Perspective, http://biopharminternational.findpharma.com/biopharm/article/articleDetail.jsp?id=684957 ii

xi

http://www.rx-360.org/News/Rx360News/Rx360NewsMay62009/FDAUncoversaShowandShadowFactoryRelatedto/tabid/127/Default.aspx

xii

Ibid X 2010 Special 301 Report, April 30, 2010 http://www.ustr.gov/webfm_send/1906 xiv 21 CFR 200.10 (b) The Food and Drug Administration is aware that many manufacturers of pharmaceutical products utilize extramural independent contract facilities, such as testing laboratories, contract packers or labelers, and custom grinders, and regards extramural facilities as an extension of the manufacturer's own facility. xv 2010 Special 301 Report, April 30, 2010 http://www.ustr.gov/webfm_send/1906 xiii

xvi

http://www.whitehouse.gov/sites/default/files/omb/assets/intellectualproperty/intellectualproperty_strategic_plan.pdf

xvii

Standards for Securing the Drug Supply Chain - Standardized Numerical Identification for Prescription Drug Packages http://www.fda.gov/RegulatoryInformation/Guidances/ucm125505.htm xviii http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/UniqueDeviceIdentifiers/default.htm xix

http://www.whitehouse.gov/sites/default/files/omb/assets/intellectualproperty/intellectualproperty_strategic_plan.pdf



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