Third-party risks in the pharmaceutical supply chain

The pharmaceutical supply chain is confronted with various risks that can significantly affect both operational efficiency and public health outcomes. Our Point of View (PoV) provides information on key issues such as bribery and corruption, emergence of counterfeit medications, environmental factors and damages, supply chain manipulation characterised by fraud or misrepresentation of products and theft, and diversion of pharmaceutical products, whether occurring during manufacturing, transit, or at distribution points, demonstrated through our experience in conducting risk assessments for clients and outlines the regulatory requirements of the industry.

How can pharmaceutical companies mitigate risks in their supply chain?

In order to manage the risks within supply chain, pharmaceutical companies must put appropriate measures in place to monitor and control the supply chain’s operational activities. Due diligence plays a major role in mitigating these supply chain risks – financial, operational, ESG (Environmental, Social and Governance), reputational, quality control, legal and compliance, regulatory, concentration, among other risks.

Regulatory compliance: a mandatory requirement to mitigate supply chain risks in pharmaceutical industry

In recent years, the healthcare and pharmaceutical industry has undergone significant changes driven by stringent regulatory requirements in disclosures, technological progress, the growth of remote care, shifting consumer habits towards innovative products, the effects of the COVID-19 pandemic, and the emergence of new competitors in the market.

Acknowledging the opportunity for expansion, governments across the world have initiated efforts to regulate the pharmaceutical industry. The pharmaceutical industry is heavily regulated by country-specific regulatory authorities. Considering the potential risks such as legal, financial, operational, and environmental risks, it is imperative for pharmaceutical manufacturers to have a thorough understanding of the regulatory authorities that oversee their operations in order to mitigate the risks associated with non-compliance.

Regulatory approvals are mandatory in the U.S., Europe, and other regions across the globe for the introduction of new pharmaceuticals and medical devices into the market, as well as at each stage of the supply chain including raw material supply, manufacturing, distribution, and marketing, etc.

Pharmaceutical companies are increasingly depending on supply chains to tap into specialised expertise, cut costs, speed up product delivery, and manage logistics more effectively. However, throughout the supply chain stages, the third-parties have violated several regulations set by regulatory authorities. This reliance on supply chains exposes them to various risks, including regulatory, reputational, and operational risks.

Pharmaceutical companies depend on third-parties for various reasons, including gaining specialised knowledge and resources, reducing costs, and managing logistics.

Adhering to regulatory standards is essential and cannot be compromised in the pharmaceutical industry. Regulatory agencies formulate guidelines and regulations governing all aspects of the pharmaceutical process, including research and development, manufacturing, distribution, and marketing.

Regulatory risks within the pharmaceutical supply chain may encompass instances of non-compliance with established regulations, potentially resulting in delays in shipments or rejection by customs authorities.

Due diligence on their supply chains can help to identify and assess potential risks, which can assist pharmaceutical companies in effectively mitigating these risks.