Social networking can alleviate drug shortages

From mid 2010 on, reports of chronic shortages of medication in the U.S.  (see here and here) and Canada (examples here and here)  particularly Generic medication – surfaced in the online press as well as conventional media (newspapers and TV) reaching unprecedented near-panic levels. Two years later, this structural problem of the pharmaceutical industry is still not improving.

There are many reasons for the drug shortage crisis but I believe we can point to two main issues:

• The main reason is industry consolidation. When one Pharmaceutical company buys another, there follows a process of rationalization of capacity, aimed at eliminating redundancies. The main casualty of this process is the structure of the Supply Chain. Duplicate products are eliminated forcing demand to shift from one brand to another; and products made in one Plant are transferred to another Plant, according to Global policies. Transfer projects are not straightforward and are difficult to plan, sometimes not completed before the incumbent Plant stops producing the product being transferred. These changes disrupt the flow of supply to the market partly because the source of supply changes; and partly because these switches are not transparent. When these structural changes occur at a large scale, the impact on market supply is brutal.

• The second major factor to cause shortages is increased regulatory scrutiny. In recent years, two things have changed: regulatory agencies – namely the U.S.’s FDA and Health Canada – have stepped up their scrutiny of pharmaceutical plants; in response to this increase in scrutiny and the threat of heavy punishment for non compliance, Quality groups inside Pharmaceutical companies have changed the way the rules are interpreted and implemented. Essentially, a possible offense to the rules represents a clear business risk which pushes Pharmaceutical companies to become overzealous in the way these rules are applied, interrupting supply by holding up many batches of medication, the majority of which end up being released eventually. In some cases, the impact of increased scrutiny is that plants stop operating. But almost everywhere the flow of supply is systematically interrupted and slowed down.

These issues are deep and structural and such societal problems don’t get solved quickly. Consolidation won’t stop and, if it did, the damage has been done. The strict enforcement of GMP rules by the FDA and Health Canada and the excessive interventions of Quality Assurance groups inside Pharmaceutical companies are too entangled with political and financial issues to be toned down to a more rational and even scientific level of pragmatism. Hence, one shouldn’t begin addressing this broad social problem by expecting to see these conditions changing in the near future.

The Strategies I favour to help alleviate this terrible situation are based on a few practical observations of the Generic Pharmaceutical market, as follows:

• The industry functions on a Make-to-Stock model which means that manufacturers must forecast what wholesalers – and by extension pharmacies – will order approximately 4 months in advance (4 months being roughly the average total cycle time of the supply chain).

• Forecasting is a flawed practice under most circumstances but with the volatility of demand that is caused by the shortages situation, forecasting is incapable of guiding the supply chain with precision on what it should produce. The result of this problem is that manufacturers are invariably short in some products and carry excess in others.

• The Distribution model of the industry is equally flawed, particularly under the conditions of the crisis. Quite often Distribution Centers (D/C’s) are short of some products in one part of the country and other products in other parts of the country. Available stock doesn’t mirror the needs of pharmacists accurately.

• In broad terms, for many if not most of the therapeutic classes where shortages are experienced, it is my belief that the capacity needed to support market demand exists in the supply chain. The real problem is one of misalignment, caused by manufacturers having to guess long in advance what pharmacists are going to do; pharmacists and wholesalers not providing any guidance to manufacturers on the latter; and the disparity of when and where shortages of any product occur.

Thus, the biggest opportunities to improve shortages, without waiting for the structural issues of the industry to get resolved, are the following:

• Provide visibility to Pharmacists, Wholesalers and Manufacturers of when and where shortages of any product are occurring;
• Provide a mechanism to quickly move stock from areas of availability to areas of shortage;
• Provide the environment and the services whereby the knowledge of pharmacists and wholesalers about consumption can be leveraged to guide manufacturers about what to supply.

People who have been in the Industry a long time think of solutions in traditional terms. As an example, both Pharmaceutical companies and Government institutions have promoted a system whereby the former provide information on upcoming shortages in advance; and that such information be published in traditional Web 1.0 sites. It’s been reported that drug shortages have dropped (or increased less) since Obama’s executive order and that many shortages were averted in the U.S. because of such a system (38 shortages in 2010 and 200 in 2011), so these measures probably improve things.

However, most of the ‘noise’ around drug shortages has been in the area of steriles and particularly cancer medication. Yet, shortages are occurring in many other areas, affecting the quality of life of patients with many other ailments, such as depression and cardiovascular disease. In most therapeutical classes, shortages aren’t as visible as with oncologic products and yet they affect the life style of a vast population of patients.

While Regulatory bodies are struggling with Pharmaceutical companies to obtain information about potential shortages, an undercurrent of activity is unfolding behind the scenes to use other, more far-reaching strategies, to deal with shortages’ emergencies. Pharmacists ‘caught’ in the agony of a shortage of chronic care medication aren’t waiting for Wholesalers and Manufacturers to trigger their extremely slow supply chains to replenish empty shelves with new stock. Instead, they are networking, calling one another and helping one another.

This networking of Pharmacists is what happens when established institutions lack the imagination needed to solve complex social problems. While traditional business people are looking to Manufacturers to solve the problem, in fact the problem is being solved by Pharmacists who are networking in informal communities and collaboration networks.

Today’s solutions don’t have to rely on Command and Control institutions and their Enterprise systems and databases. Today we have a much better source of information and discussion and self-help: it’s called crowdsourcing, using social media.

I believe that social networking of Pharmacists and the phenomenon of crowdsourcing is what will bring a solution to the problem. Static web sites with tables with data are ok. But a vibrant, dynamic community of people with the knowledge and the means to solve these problems, is far more effective – it is faster, cheaper, more flexible and more intelligent.