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Hurricane Devastation Impacts Health Care Supply Chains

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The destruction caused by Hurricane Maria in Puerto Rico last month has created major disruptions for the island’s pharmaceutical product and medical device manufacturing facilities. Days of interruption and damage to manufacturing plants are affecting international supply chains for products such as cancer and HIV treatments, immunosuppressants for patients with organ transplants, and small-volume bags of saline, which are necessary for patients who need intravenous solutions.

Puerto Rico is the fifth-largest territory in the world for pharma manufacturing and produces about half of the world’s top-selling patented drugs, according to a 2016 report from Pharma Boardroom. Short-term economic losses are being estimated, while concerns persist about the storm’s long-term effect on employees’ abilities to travel to work, the safety and efficiency of the machinery used and the ability to keep the facilities running on generators. In a statement issued by the Food and Drug Administration (FDA) on Oct. 6, Commissioner Scott Gottlieb detailed plans to help Puerto Rico recover its medical product and manufacturing base, which he said “are a key component of the island’s economic vigor.”

“[..]even the facilities that sustained relatively minor damage are running on generator power. They could be without commercial power for months…Moreover, most of the facilities that we know of, that have resumed production, maintain only partial operations. New shortages could result from these disruptions and shortages that existed before the storms could potentially be extended.”

Citing data from the Bureau of Economic Analysis, Gottlieb said that pharmaceutical products manufactured in Puerto Rico “make up nearly 10% of all drugs consumed by Americans. And that doesn’t even account for medical devices.” He noted that the FDA is keeping a close watch on about 40 critical pharmaceutical and biological drug products which, in the event of a shortage, “could have substantial impact on the public health.”

He added, “In urgent cases, when critical products are at issue, we’ve intervened over the last two weeks to help firms secure fuel to maintain production lines, get clearance to move logistical support into the island or finished goods to their recipients.”

The Washington Post reported that more than four dozen FDA-approved drugmaking facilities are in Puerto Rico, including ones owned by Pfizer Inc., Merck, Eli Lilly, Johnson & Johnson, Bristol-Myers Squibb and Amgen. Baxter International Inc., which the Post cited as being the “dominant player” in the IV market, issued a statement acknowledging the impact of the storm on its operations:

Our sites sustained minimal damage, and we’ve initiated limited production activities in all of our facilities. In addition, we are examining all opportunities to leverage Baxter’s global manufacturing network as we continue efforts to restore operations in Puerto Rico.

As it relates to product supply, in advance of the hurricanes, we implemented our hurricane preparedness plan to help mitigate potential impact. We have also been delivering products to customers in Puerto Rico to help address patient need on the island. And we are continuing to proactively communicate with our customers the actions we are taking to minimize potential disruptions, including closely managing product inventory.

Not all facilities have suffered damage, however. Amgen announced on its site that back-up generators are powering its Puerto Rican site and that, “No product nor in-process inventory has been lost, and … the inventory maintained by the Company and its global distribution network is sufficient to meet patient demand.”

Balancing Risk and Compassion: Life Sciences Companies Face New Risks from Expanded Access

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Pharmaceutical companies operate with a singular objective: bring drugs to market. This is how they profit, how they ensure that their products help the most people, and how they maintain the resources to continue innovating.

The lifecycle of drug development can be complex and onerous, despite improvements to the regulatory approval process over the past several years. Now, a trend sweeping the industry is forcing many pharmaceutical companies to decide under which circumstances they’re willing to divert resources from their mission of helping the masses.

Expanded Access, or “Compassionate Use,” refers to the use of an experimental drug not yet approved by the FDA to treat a critically ill patient outside of a clinical trial. The FDA received more than 1,800 requests for access to experimental drugs last year and, over the last five years, it has approved 99% of these requests.

But ultimately, once requests are approved by the FDA, it’s up to manufacturers to provide the drug to these patients, many of whom are children, and many of whom have just months left to live.

Companies are then faced with a choice: to provide an unapproved drug to individual patients, which can delay the process of making the drug widely available, or to deny the request and risk backlash from the public, who see only a dying patient and the pharmaceutical company that could save them. In several cases, the latter has fueled social media campaigns demonizing companies for withholding potentially life-saving medicines.

How a company handles expanded access requests can affect its reputation and financial stability. Pharmaceutical executives often operate under a microscope, where patient outcomes are the key to keeping investors on board. As expanded access patients often do not qualify for clinical trials, they may be higher-risk candidates, so reporting their results to the FDA could potentially prolong approvals and market availability. On the other hand, a company that denies an expanded access request can face significant reputational damage and even legal action if investors believe that management decisions hindered the company’s progress.

Small and mid-size life science firms in particular may fear that they don’t have the resources to navigate expanded access cases. But requests for experimental drugs are on the rise: the FDA saw a 92% year-over-year increase in requests in 2014. Companies need to prepare their approach and policies before they find themselves in the throes of a difficult decision with pressures mounting from both sides. Here are four ways they can set themselves up to make informed decisions about balancing risk with compassion:

Monitor the Regulatory Environment

Over the last year, the FDA has been working to simplify the process for physicians requesting access to experimental drugs on behalf of patients. In February 2015, the agency streamlined the application form, which now requires physicians to submit just eight types of information, as compared with 26 types in the previous form.

The FDA has also been working with life sciences companies to find alternative solutions to expanded access when needed, such as designing expedited open-label trials for these patients.

Additionally, as of August 2015, 24 states have introduced right-to-try bills, which allow physicians to request experimental drugs without going through the FDA’s application process.

With both federal and state governing bodies paving the way for easier access to experimental drugs, the decision to provide these drugs falls squarely on the shoulders of corporate leadership at pharmaceutical companies. These firms also ought to keep in mind the need to prioritize building and maintaining relationships with the FDA, which can be key in developing a creative solution.

Update Your Crisis Management Plan

Crisis management plans are sometimes written in broad strokes. In preparing for expanded access cases, risk managers need to bring together leadership from various departments—senior management, investor relations, finance, human resources, etc.—to weigh in on the specific risks associated with experimental drugs. Many firms will seek outside counsel to guide the process.

At a basic level, a crisis plan should map out vulnerabilities across all risk areas. For example, companies need to consider the process for securing their facilities, fielding press inquiries, addressing social media backlash, managing investor concerns and navigating potential lawsuits.

Most importantly, companies need to develop the principles that will guide decisions in crisis situations. Rather than scrambling for direction in the heat of public scrutiny, companies should establish a clearly-stated policy and set of guidelines for participation in expanded access programs. This will serve as the foundation of a response if an issue arises. Management must then be prepared to defend that position to all stakeholders, including employees, investors, patients, physicians and potentially press.

Evaluate and Re-evaluate Your Insurance Policies

Organizations need to consider which financial risks they can transfer to their insurance policies. Not everything will be insurable, but a strong policy can provide protection if an expanded access case threatens a company’s financial stability.

This starts with a comprehensive review of a company’s insurance portfolio with the issue of expanded access in mind. Oftentimes, risk managers revisit their policy language through the lens of a specific issue and realize that their expectations for coverage don’t accommodate current events. This can be the case with expanded access.

When reviewing their policies, companies need to understand the intent of the language relevant to expanded access and work with their broker to make sure the coverages are as granular as possible.

Lead the Way

This year, Johnson & Johnson created a Compassionate-Use Advisory Committee composed of doctors, bioethicists and consumer advocates to evaluate expanded access requests and make recommendations to the company’s clinicians. While many have hailed this as a creative solution for maintaining ethical standards, smaller companies with fewer resources cannot as easily take such an approach. These firms have an opportunity to set the standard for managing expanded access cases by developing thoughtful policies, collaborating with regulators and academics and, of course, addressing risks to business from the onset.

Five Questions with a Food Fraud Expert

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Food Fraud

BALTIMORE—After his Food Safety Summit session on food fraud and economically motivated adulteration, I caught up with Doug Moyer, a pharmaceutical fraud expert and adjunct with Michigan State University’s Food Fraud Initiative. Here are a few of his insights into top challenges for the supply chain, and the biggest risks to be wary of as a consumer.

What are the riskiest foods for fraud?

The most fraudulent are the perennials: olive oil, honey, juices and species swapping in fish. Most people underestimate the amount of olive oil adulteration, but the amount of what is labeled “extra virgin olive oil” that Americans buy is more than Italy could ever produce. I buy certified California olive oil because I’ve sat down with that group and I know that their industry is really concerned about standards and have established a rigorous certification process. I am also really concerned about species swapping in the seafood industry. I love sushi, but I have a lot of concerns eating it, and they are not always about health. I don’t like feeling duped, and a lot of companies now have to contend with that reputation issue after so many studies have found that the odds can be incredibly low that you are eating the fish that you think you ordered—as little as 30% in some sushi restaurants in Los Angeles, for example.

Adulteration has been getting a lot more attention recently, from consumers and regulators. How old of a phenomenon is food fraud?

Food fraud actually dates back to the antiquities. In the industry, we refer to it as a 2,000-year-old problem. There are actually ancient jugs used for oil or wine that feature art that is misleading about the origin or quality of what came inside.

Why are we seeing more food fraud in the U.S. now?

In the United States, we have the real luxury of solid supply chains and active food safety protectors in the form of regulators and advocates. But, as the supply chain lengthens, strangers and anonymous players get introduced, and that’s where the system is most endangered.

What is the worst case of food fraud you’ve ever seen?

Melamine in Chinese infant formula is definitely one of the worst, and especially sinister. In the ‘80s, there was also a truly horrible case with olive oil in Spain. Many people hear about olive oil adulteration now and say, “What’s the harm, if it’s just another oil?” In that case, though, it was adulterated with industrial grade oil. Over 1,000 people died, and some are still infirm and in hospitals today.

What are the biggest culprits in pharmaceutical fraud?

Male enhancement, by far, is the top victim. Patients may be too embarrassed to see a doctor about their symptoms, so they log online and order from a rogue pharmacy—which may not even be a pharmacy at all. But if they were too embarrassed to get the medication to begin with, they will probably be too embarrassed to report the issues, too. Anti-malarials are also a big culprit abroad. In countries with a lot of demand for medications that fight malaria, many counterfeiters see the opportunity to fill that need before legitimate providers can. Poor populations gravitate toward these cheaper products, and access to doctors may be limited by a long, expensive trip—when you are already sick, or cannot afford the trip, it’s easier to go to a street vendor who rips off a sheet of what he says will help. It’s a particularly heinous crime because counterfeiters will trick customers with a little bit of aspirin in the pills that lower fevers and help with the body ache. That kind of deliberate attempt to keep people from getting better, to me, is more heinous than food fraud.

Managing Reputation Before The Product Exists

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We talk a lot about reputation risk around this parts. A tarnished brand has increasingly been identified as a leading threat and as BP and Toyota have seen, it can have long-lasting drawbacks to the company.

At this point, most have come to realize the importance of reputation and brand recognition. So while this isn’t really about risk management or protecting the brand, I thought this Freakonomics post about how pharmaceuticals strategically create brand names for their drugs that include the letters X and Z would interest you.

“Reflecting their infrequent occurrence in English words, x and z count for 8 and 10 points in Scrabble, the highest values (along with j and q) in the game. So names that contain them are likely to seem special and be memorable. ‘If you meet them in running text, they stand out,’ is the way one industry insider explained.” The trend, however, is relatively recent, which Stepney attributes to a couple factors. “I suggest that this phenomenon arose because of the fast rate at which new products were being introduced, the fact that the difference between many “me too” drugs was more apparent than real, the immense rewards that were seen to accrue from innovative marketing, and the fact that the ploys available for use in the naming of drugs are so restricted.”

You think this would work for insurance?