While it’s irrefutable that some things are beyond our control, it’s equally true that you can minimize the possibility of something going wrong by planning and knowing where the greatest risks lie.

That is the essence of effective supply chain management.

Just how much an organization needs to focus on supply chain fundamentals—how much you can allow the balance to teeter between “must haves” and “nice to haves”—is determined by what is in the supply chain and what the organization must do to move goods from the furthest part of the chain to the market.

If you are a small- to mid-sized therapeutics company looking to bring improved medicines to market, particularly before a competitor does, there is a significant amount riding on being right the first time. If you are unsuccessful, or even simply encounter significant delays, you risk your reputation, your customer base, and perhaps your funding.

Small and medium pharmaceutical enterprises, particularly those with small profit margins, always face the temptation to go it alone and attempt to manage the entire supply chain. But doing that means foregoing the expertise and experience a strategic partner can bring in terms of providing access to an extensive, qualified active pharmaceutical ingredient (API) partner network, market intelligence and regulatory services, and global drug product development and manufacturing facilities.

The right partner can ensure you observe best quality practices, get your product to market on time, and do it all at the best overall cost to you—a cost that factors in short-term expense and long-term risk.

Putting the focus on quality

Any consideration of outsourcing your API procurement and supply chain management must begin with the cornerstone of quality and ensure quality practices are followed through the entire supply chain.

The importance of great research cannot be overstated when it comes to determining if your prospective API supplier gives priority to quality—both in their own operation and for those suppliers they deal with further up the supply chain. Look for certification of Current Good Manufacturing Practice (CGMP), and check for red flags such as warning letters, alerts, recalls, or similar issues in the databases of EudraGMP and the FDA. Ask if the company has been audited by the FDA and if they have not been, inquire if they are open to a quality audit. There is no substitute for assessing quality at the source. In-person inspections eliminate the possibility of fraud and create opportunities for honest and lasting supplier relationships, leading to more fruitful negotiations down the road. They are simply a good, if not essential, step in the pre-qualifying process. 

Use your on-site audit to validate the claims that have been made. Look for signs that they are properly controlling quality systems including their production environment, training their staff, and ensuring data integrity in the ways they have described on paper. While it adds complexity and often cost/time to the manufacturer selection process, seeing a facility first-hand is the best way to ensure you are putting your trust in a responsible, quality-driven manufacturer.

Examine the Quality Management Systems the company maintains by inquiring about the standard operating procedures, environmental monitoring, and the procedures they follow for qualifying their suppliers. Ask to review staff training programs and procedures for handling customer complaints, deviations, and investigations. Look into their data integrity standards, including their record of software validations and back-ups.

Request access to their Drug Master File (DMF) for your API or, if they do not have a valid DMF for your API, determine if they have approved DMFs that have been referenced in other regulatory submissions to ensure they successfully can support a DMF for your API. On its own, a DMF should not be a binary “go/no go” indicator, but if one does not exist it presents an excellent opportunity to determine if the prospective partner has the capability, knowledge, and experience to develop and deliver the API and regulatory documentation/support you require. The ability to scale is critical, so you need a thorough understanding of issues like spare capacity, average capacity utilization, and future expansion plans. Can they fulfill orders through every one of your anticipated project phases, particularly if those phases move quickly? Can they move and scale as quickly as you will need them to? To avoid a painful bottleneck, discuss these questions before sealing the deal.

As part of that binding agreement, a strong quality agreement lays the groundwork for quality assessments by defining roles and responsibilities, and by establishing the frequency and format of communications between you and your manufacturer. What quality-related documents will you expect to receive, and how frequently? How often can you conduct subsequent on-site audits?

A strong service/supply agreement can complement your quality agreement by outlining the terms of your business arrangement, preventing expensive misunderstandings. Use it to define your work orders, establish pricing thresholds, and forecast your expected year-over-year demand. This is where you formalize those scale-up discussions, laying out your expected requirements in detail and attaching costs to each phase of growth.

The payoff of a good service/supply agreement is improved clarity, which you can maintain by updating your forecasts on a regular, pre-determined schedule. Using the terms defined in your supply/service agreement, you can discuss these shifting needs while there’s still time to co-develop a proactive strategy.

The power of partnership for API procurement

While strong agreements like those that help guarantee quality can bind organizations together, any productive partnership is based on bringing together two parties that complement each another. Whether you are an established generic drug company or a Biotech/Pharma start up, if you are looking to form a relationship with an API procurement partner, you need one that can adapt to fit your needs.

One strength that an experienced partner can provide is opening doors that might otherwise be closed to a company your size, or one that is relatively new to the sector. A partner with an established reputation in the API supply chain can help ensure manufacturers return your calls, agree to meetings, and respond to requests for special arrangements, like small or large batch sizes or materials with unique specifications. By partnering with a procurement specialist that is a good fit, even a small biotech start-up can negotiate with the influence of a much larger and more mature pharmaceutical company, leading to better pricing, improved timelines, and more flexibility.

Access to the big players in the API supply chain is one thing, but many companies need services of a different sort; the kind that only niche API manufacturers with a modest customer list can provide. These suppliers, which are less well-known but no less qualified, have the agility and bandwidth to partner with biotech firms looking to control their costs through API lifecycle management, for example, or develop unique APIs or different salt forms. In a crowded market, these innovative suppliers can be hard to find. Once found, they can be hard to distinguish from less reliable lookalikes.

A procurement specialist can help because they already have evaluated and qualified suppliers that can meet your needs. This means you will be connected with suppliers nimble enough to meet your project’s needs, yet small enough that you are treated not as one customer among many, but as a priority partner with important objectives.

Beyond those types of reputational benefits and connections, to ensure your supply chain functions smoothly it helps to have an API partner who has the so-called “soft skills” that are required to navigate difficult waters. These types of intangible qualities can prove to be significant in terms of building trust or providing wise counsel when it’s required.

Measuring the true cost

Finally, when you are weighing your options, it is important to look at short-term cost benefit versus long-term risk and explore all the aspects of your potential long-term relationship. How flexible is your API procurement partner? What type of larger scale pricing can you negotiate? What will the long-term support and relationship be?

The choice of making a narrow-focused decision based on the price of your near-term needs without considering the longer-term benefits of the overall partnership can actually cost you money. It may be that you can continue to purchase cheaper API supply, but your manufacturer lacks flexibility, so you face delivery delays down the road. The cost of not having product on the market is much more expensive than if you were to pay a bit more for your API and have the opportunity to work with a manufacturer who truly values you as a partner and is willing to work with you and make sure you never have gaps in supply.

Without understanding the long-term needs of your own program, you are likely to make short-sighted decisions. That can lead to challenges not faced if you select an API partner that provides you with a quality product, has an exceptional commitment to quality, and can pass any regulatory agency inspection required.