Case study

Question 1

Issues

Answer 1

1. Supply chain risk
2. Product recall risk
3. Regulatory risk

Question 2

Company Facts

Answer 2

♠ Global company
♠ Manufactures and sells injectable pharmaceutical products
♠ Uses third parties too
♠ Sells products through distributors
♠ Organized into three business units
♠ World-wide manufacturing operations teams
♠ Global R & D team

Question 3

Matrix organization

Answer 3

a company structure in which the reporting relationships are set up as a grid, or matrix, rather than in the traditional hierarchy. In other words, employees have dual reporting relationships - generally to both a functional manager and a product manager.

Question 4

Supply chain risk - identified issue

Answer 4

Dependence on sales of these 5 drugs - funds for all their R&D

Question 5

Specific Concerns supply chain risk

Answer 5

♠ Facilities ill prepared for natural disasters
♠ Risk assessment above the companies risk appetite
♠ Company did not have adequate view of the necessary raw and intermediate products critical to the suppliers to company.

Question 6

Potential exposure

Answer 6

$500 M – $2.2 B

Question 7

Key Findings supply chain risk

Answer 7

♠ Puerto Rico plant
♠ 30 day supply backup of key ingredients for blockbuster drug
♠ No backup production source
♠ No actual knowledge of location of many of its suppliers and tier 3 suppliers.
♠ Lack of business continuity plan
♠ Several manufacturing facilities has no disaster response plans.

Question 8

Steps the company took when managing these 3 risks (supply, recall, regulatory)

Answer 8

1. Identify issue
2. Specific concerns
3. Assessment
   - specific findings
4. Response
5. Monitoring

Question 9

Response to supply chain risk

Answer 9

♠ Database of suppliers and tier 3 suppliers developed and periodically updated.
♠ Two year supply (cost - $1 M) of critical ingredient is purchased and stockpiled / warehoused.
♠ Second redundant production line for specialized unit is considered and head of unit is assigned to look at feasibility / cost and develop contingency plan for existing unit disruptions (alternative power supplies for example).
♠ Plan is developed for Puerto Rico plant contingency - reinforce roof / develop capacity elsewhere in not hurricane / earthquake prone areas.

Question 10

Monitoring of supply chain risk

Answer 10

Company established teams at all levels of organization to monitor and evaluate responses plus new risks / issues.

Question 11

Product recall risk identified issue

Answer 11

Company has massive exposure to recall

Question 12

Assessment of product recall risk

Answer 12

Cross section of employees from key areas assembled rate product recall risk as high in impact and likelihood.

Question 13

Specific Findings product recall risk

Answer 13

♠ Lines of responsibility for decision making
were unclear because of the company’s organizational matrix structure.
♠ No one playbook regarding product recall
♠ Processes and procedures unclear - when should a product recall be initiated?
♠ Gaps in coordination among corporate entities and local / regional / global headquarters.
♠ No communication strategy on who to notify? When? How? Who is responsible for actually notifying clients.
♠ What are the parties’ contractual duties and obligations?
♠ Lack of crisis management response coordinated plan - e.g. working with medial community and patients.

Question 14

Response to product recall risk

Answer 14

♠ Revamped product recall process.
♠ Used global terminology - educated global partners.
♠ Clarified roles at global / regional / local level.
♠ Initiated training at all levels of company.
♠ Established clear decision hierarchy - that facilitated - flow of information / involvement of proper employees / expedited decision-making.
♠ Established clear responsibility for communication with stakeholders - medial community / patients / regulators
♠ Established at global level with responsibilities from each region (addresses cultural issues) with access to local employees.
♠ Established tools for analysis after the event - consider date / event preservation etc.

Question 15

Regulatory risk facts

Answer 15

♠ Company has several new drug applications pending.
♠ Used six different clinical research organizations
to administer the “phase 3 trials” - in eight different countries.
♠ CROs used different data submission processes - electronically and paper.
♠ Company’s regulatory team worked off of two different platforms.
♠ Regulatory team short on staff - long time employees retired / RIF’ed.

Question 16

Issues Identified regulatory risk

Answer 16

Major vulnerability because not all CRO data is expressed / considered in data application submissions.

Question 17

Assessment regulatory risk

Answer 17

♠ Delays due to inaccurate or incomplete data
is high in both likelihood (probability) and significance (exposure) - minor revisions to NDA creates delay of 3-6 months / major revision to NDA created delay of over a year or longer.
♠ Cost of delay - $ 100 M and up.
♠ Public perception cost - Incalculable.
♠ Loss of creditability with regulators.

Question 18

Specific Findings regulatory risk

Answer 18

♠ IT systems integration needed.
♠ IT system validation needed.
♠ Need to implement independent benchmarking.
♠ With regard to CROs, need for better training on company policies and procedures / require electronic submission of all data / implement new audit system to review CRO performance and validity of data submitted.
♠ New internal controls needed.
♠ Realign regulatory affairs within company - most employees had no real concept of the unit in which they worked as to the overall performance of organization.

Question 19

Response to regulatory risk

Answer 19

♠ IT systems harmonized globally.
♠ Improved audit procedures.
♠ Work flow and responsibilities reviewed.
♠ CROs - provide better training / required electronic submission of data (better ability to review).
♠ Company-wide training provided / re-aligned regulatory affairs within company operation - elevated to appropriate status.

Question 20

Monitoring of regulatory risk

Answer 20

♠ On-going review of IT systems /data submissions.
♠ Additional time built into CRO data process to permit audit and correction if necessary before FDA submission - eliminated where possible unnecessary time constraints.
♠ Better / more effective coordination - offers opportunity for earlier data submission / FDA approval and initiation of sales to public.