Is COVID-19 THE Long Overdue Wake-up Call for Pharma Supply-Chains? (Part 2)

Author: Hedley Rees, Managing Consultant, PharmaFlow Limited

Update : 31st Decemeber, 2020 Read PDF Version

Part 1 revisited

In Part 1, the many supply chain issues identified during CoVid-19 were attributed to an over-emphasis on regulatory data creation and collection during product development. The work of building supply chains that are responsive to spikes in demand, cost effective and resilient in the face of unanticipated events, seems to be overlooked.

The conclusion was that only a new model for product development could reverse the situation. Part 2 aims to flesh out the basics of that new model, which involves a paradigm shift for the industry, then present the principles and practices of strategic supply-chain management (SSM).

Only a paradigm shift will do

For readers of a more sceptical persuasion, I should say something about the nature of a paradigm shift, as explained by Thomas Kuhn :

Scientific practice alternates periods of normal science with periods of revolutionary science. In normal periods, scientists tend to subscribe to an interconnecting body of knowledge, methods, and assumptions (the reigning paradigm). In the search for answers to “puzzles” in the field, certain solutions become regarded as exemplar.

As an example of ‘the reigning paradigm’ and ‘exemplar approaches’, we only have to turn to the auto industry for enlightenment. In the 1950s and 1960s, the reigning paradigm in the West was based on high volume production of one-size-fits-all automobiles, where quality occupied second place to cranking out the numbers. All that time, the Japanese revolution in production systems was taking place – resulting in a paradigm shift that permeated the industry globally, resulting in a steely focus on customer value, 6 sigma quality standards and dramatic productivity improvements.

I suspect the sceptics will not be convinced that a similar shift could happen in pharma. If you are one, who would blame you! However, please try to reserve judgement until the end.

So, let’s begin with some real-world evidence, by taking medicines back to the future – 1928 to be exact.

Penicillin leads the way

The penicillin story is well known. For those that need reminding, the mother of all antibiotics was developed by Alexander Fleming. On his return from holiday in August 1928, he noticed that bacteria had not grown in one of his culture dishes. He obtained an extract from the mould in the dish, naming it ‘penicillium‘. The rest is history…or is it?

Not according to Robert P. Gaynes, author of Germ Theoryii , and the article The Discovery of Penicillin—New Insights After More Than 75 Years of Clinical Use.

In his book, Gaynes states “Due to its importance in medicine, the story of penicillin’s discovery has become shrouded in legend and distorted truths.” Gaynes’ article explains the distorted truths, summarised below:

Fleming did not have the wherewithal to properly identify the mould strain or make it in any quantity. It took a team at Oxford University, headed by a gentleman named Howard Florey, to purify enough penicillin to run pre-clinical (1939) and clinical (1941) studies. They were a great success, but they didn’t know how to make sufficient quantities to supply the market.

In 1941, Florey and a fungal expert, Norman Heatley, visited the US to mull over the problem. The scenario was put to a microbiologist named Andrew J Moyer, an expert in the manufacture of moulds, working at USDAs Northern Regional Research Laboratory in Peoria, Illinois. He and his team came up with the idea “to culture the penicillin in a mixture of corn steep liquor and lactose, thereby greatly increasing the yields and production rate.”

Moyer applied for a patent in May 1945, which was awarded three years later.

So why did the myth persist?

An article in The Times reported the breakthrough in Oxford but failed to mention Fleming or Florey. Fleming’s boss wrote to The Times, extolling his virtues and Fleming talked freely to the press at the time. Florey didn’t say a dicky bird to the press. So, the real account of it was never told.

To summarise, the whole story goes like this:

  • Fleming discovered strong evidence penicillium was killing bacteria but was not able to isolate or purify the active ingredient.
  • Florey’s team in Oxford isolated and purified enough to make test quantities, which produced even more evidence, but were not able to manufacture it in more than gram quantities
  • A J Moyer’s team devised the commercial process and supply-chain to make penicillin in exponentially greater quantities and he was awarded the patent.iv

Takeaways from past medical breakthroughs

There are three important takeaways from the above. Firstly, if Fleming, Florey’s team and Moyer’s team had been together when that initial discovery was made, it would have taken less than four years from start to finish, instead of the fifteen years it actually took – cutting the time to market to one quarter of what it actually took.

Secondly, Fleming was a physician as well as being a microbiologist. As a healthcare professional, he was looking for new medicines that could cure conditions he was very familiar with in his day-to-day work.

Sir Frederick Banting, famous for his work to isolate insulin in the early 1920s, was similarly qualified as a physician, as was Edward Jenner, who brought the smallpox vaccine to the world.

Jonas Salk, who famously refused to patent his polio vaccine, was a virologist who choose to do medical research instead of becoming a practicing physician. He was, never-the-less, a medical expert in the disease, carrying out the development work personally along with his team.

The final takeaway from penicillin, and from each of the medical breakthroughs above, is the degree of evidence that was assembled on the safety, efficacy, and manufacturability of the compound PRIOR to moving into a working supply-chain. They effectively created prototypes before exposing any more than handfuls of patients to the medicine. Some even tested for safety on themselves when confidence levels were sufficiently high.

Solving the puzzle of COVID-19

Returning to COVID-19, we see that it has presented us with the ‘puzzles’ necessary to call for a paradigm shift. These include the absence of validated tests and therapies for viral infection, complex and tactical relationships among the various supply-chain actors, heavily skewed sourcing of raw, starting materials and PPE in China, and little apparent scenario modelling to develop robust global inventory policies. In summary, today’s prevailing paradigm has been proven desperately inadequate as the tragic events have unfolded – time to shift the paradigm gear?

A new paradigm for medicines development

As mentioned earlier, a paradigm is made up of a body of knowledge, methods, and assumptions. A shift therefore must involve new and improved knowledge, methods, and assumptions. For example, there is a deeply ingrained assumption in the industry that resources allocated to development programmes should be minimised at early stage development, only to be increased in stages if the project survives to the next endpoint. No wonder the failure rates are so high!

Figure 1 below is a simple representation of on the proposed new paradigm:

Figure 1: Proposed new model for drug development

Instead of the current three step process of discovery, development, and production, we move to a two-step process – prototyping and production.

Prototyping is used in almost every other industry, except medicines. In aviation, it is wind tunnels and flight simulators, using the full weight of STEM – Science, Technology, Engineering and Maths.

At the core of STEM is integration of all the skills required to bring products to market. ‘TEM’ is the missing ingredient we want to put back in the pot.

So, with a mix of learning from the earlier takeaways and knowledge of modern-day production systems, the following approach is suggested as a starting point:

  • Include all the required disciplines at the beginning (to reduce time-to-market by up to 25% of what it is today).
  • Engage with a representative number of healthcare professionals (HCPs) with deep knowledge of the indication PRIOR to pre-clinical work.
  • Construct a Voice of the Customer (patient and HCP).
  • Consider therapy and diagnosis together (precision medicine).
  • Integrate ‘discovery research’ and ‘development’ functions into a single responsibility area titled DESIGN.
  • DESIGN develops small-scale prototypes, tested for safety, efficacy, and manufacturability by relevant team members, with maximum use of ex vivo methods (eg organ-on-a-chip), potentially in the hospital setting.
  • A single group will hold responsibility for pre-clinical, clinical, and commercial supply chains, using SSM principles and practices to design manage, and improve the supply-chain.

The principles and practices of SSM post COVID-19

Readers may be thinking this is all well and good, but where does SSM fit?

The answer is simple – when the Fleming myth is scotched, we begin to realise that ‘discovery’ is only the starting grid of medicines development, not the chequered flag. Drivers and their support teams wanting to occupy pole position, and ultimately win the race, must plan, and prepare themselves for the gruelling contest ahead…

…but what is new about that in the world of developing products and services for demanding customer markets? Nothing of course, but sadly, the Fleming myth created the false impression that developing medicines is different to any other sector, such as semi-conductor, aviation, aero-space, and electronics.

So, from here on, we will assume medicines development can follow the same principles as any other business sector, beginning with the work of a legend of business and competitive strategy, Harvard Professor Michael Porter. Porter is the most cited author in business and economics, and his work on value chains, as described in his book Competitive Advantage, is the perfect starting point for the study of SSM.v

Figure 2 below shows Porter’s Generic Value Chain for any firm:

Figure 2: The Generic Value Chain, Professor Michael Porter

In simple terms, firms must engage in multiple activities to create value that ultimately must be greater than the cost of those activities, so that a firm can make profits – value minus cost equals margin.

Value is the money that customers are willing to pay for your product or service. Cost is the cash leaving the firm in running the business. These two parameters must move in opposing directions to deliver and maintain competitive advantage consistently.

Porter’s model categorises a firm’s activities into two types: primary and support. Primary activities are involved directly in conversion, demand generation, and placement of physical goods into customers’ hands. Support activities are necessary to help facilitate value generation and delivery to the customer.

Figure 3 below is an adaption of Porter model to help identify the supply-chain relationships within. The primary activities are drawn down into the physical supply chain covered by the firm in question. That will then link up with the other physical supply chains, from other firms, into an end-to-end supply chain, beginning with raw materials and ending with patients.

Figure 3: Porter’s model adapted

Each firm in the joined up, end-to-end chain, will have some, many, or all of the primary and support activities above, organisationally structured in a way that works for them (or possibly not!).

To understand the strategic element, we need to reference a crucial element of the Porter model, which states that competitive advantage is achieved through effective linkages, or destroyed if linkages do not work effectively.

Porter describes linkages as “the relationship between the way one value activity is performed and the cost or performance of another.” For example, if the firm’s procurement activity identifies and secures superior quality materials that significantly reduce scrap rates or down time in operations, we have a positive impact on competitive advantage. Conversely, if a lower price material is procured that interferes with the throughput rate in operations, there is a negative impact.

Porter defines two types of linkage - those within the value chain of a firm, and linkages between upstream and downstream firms. Within a firm’s value chain, or between upstream and downstream firms, linkages can be primary–primary, primary–secondary, or secondary–secondary. The example above is primary–secondary, and readers may like to think of other examples of linkages within their own organisations.

This is of profound significance to the relevance of SCM in business strategy and is the foundation of SSM.

Figure 4 shows an outline structure, based on the adapted Porter model, that provides the SCM holistic.

Figure 4: The SSM holistic

Linkages can and should operate on value and cost along with the rest of the constituents in the organization carrying out the activities in the value chain.

The important point to remember is that each process has the potential to operate in powerful ways. However, it is the manner in which they are integrated (through linkages) that is the vital ingredient.

Without a clear understanding of the mission and purpose of each process set, strong individual processes can work against each other, producing lower-quality results when compared with those of less sophisticated ways of working.

Throughout the supply chain, these processes may be being practiced by other organisations at different tiers in the supply chain. It is important to consider how these mesh together in the overall end-to-end supply chain as a facilitator of organizational linkage formation.


In conclusion, COVID-19 has been an eye-opener for an industry that has defied gravity for decades. Part 1 highlighted the issues locked into the supply-chain during development and hopefully readers of this journal have a particular interest in seeing it put right. For many watching from the side-lines, and QPs in particular, the frustration of not being able to impact things must be intense.

Hopefully, Part 2 outlines a way forward, but it will need a monumental disruption to make it happen. I personally believe that disruption could be kickstarted by surgical changes to patent law, to restore the balance of risk and reward to an industry that has increasingly turned to patent monopolies to earn their crust.

If that were to happen, then SSM could be the vehicle by which time to market is dramatically reduced, attrition rates are cut to a fraction of where they are today, me-too drugs become a thing of the past, and most importantly, safety becomes everyone’s responsibility.

i The Structure of Scientific Revolutions, 3rd Edition by Kuhn, Thomas S. Published by The University of Chicago Press
ii Germ Theory: Medical Pioneers in Infectious Diseases, Robert P. Gaynes, ASM Press, ISBN: 978-1-555-81529-5
iii Patented May 25, 1948 METHOD FOR PRODUCTION OF PENICILLIN Andrew J. Moyer, Peoria,
iv Gaynes R. The Discovery of Penicillin—New Insights After More Than 75 Years of Clinical Use. Emerg Infect Dis. 2017;23(5):849-853
v Porter, M. E. The Competitive Advantage: Creating and Sustaining Superior Performance. NY: Free Press, 1985. (Republished with a new introduction, 1998.)

About the author:

Hedley Rees, Managing Consultant, PharmaFlow Limited

Hedley Rees is the Managing Consultant at PharmaFlow Limited, a UK-based consultancy specialising in operations in supply chain management within the pharmaceutical and life sciences sectors. Prior to this, Hedley held senior positions at Bayer UK, British Biotech, Vernalis, Ortho-Clinical Diagnostics and OSI Pharmaceuticals. Hedley is a zealous advocate of the regulatory modernisation frameworks of the FDA’s 21st Century Modernization and ICH Q8–Q12. He graduated from the University of Wales as a production engineer and holds an Executive MBA from Cranfield University School of Management.