At Informex 2013 in Anaheim last February, the Rx-360 consortium held a panel conversation on supply chain security and auditing that featured speakers representing companies with a cumulative $100 billion in pharma revenues. The participants were Scott Watson of AMPAC (moderator), David McCarthy of Pfizer, Kim Cauchy of Mylan, Tony Wiederhold of Eli Lilly & Co., Tom Beil of SAFC, and William Reiss of Amgen. Informex and Rx-360 were gracious enough to share the transcript of the panel with Contract Pharma. The following is an edited version of their conversation. For more information about Rx-360, its mission and its membership criteria, please visit www.rx360.org

—GYR

---

Scott Watson, moderator: We have two goals this morning: One is to provide you some content about what these people find important, what’s keeping them up at night, and so we hope you walk away from here with at least one nugget of information where you say, “Hey, I wasn’t aware of that coming in here.”

Second, you see a pin on all of these gentlemen (including myself) — we’re all members of the consortium of Rx-360. We hope to share with you some information about the consortium and how some of these concerns that some of these guys have are mitigated by Rx-360 both now and in the future. So we’re grateful for Informex for hosting the panel.

And with that I’m just going to give you a brief introduction:

• Kim Cauchy leads procurement for Mylan.
• Bill Reiss is a very interesting addition to our industry. He was head of Procurement, leading procurement efforts at Coca-Cola and also Cott, a beverage company that has a lot of drinks that you drink, but you don’t know you drink.
• Tom Beil leads Quality for SAFC and has also worked at J&J, so he has both the vendor side and the pharma side.
• Tony Wiederhold is with Lilly and he’s been doing his job for about 10 years in the procurement area, primarily around small molecules.
• And we have Dave McCarthy, senior director of Procurement with Pfizer.

So, let me ask: Does anyone farm or garden or have a vegetable garden at home? Isn’t that the simplest supply chain you can imagine? You get a seed, you put it in the ground, air and wind and all the things God does, and later you pick up your broccoli and you eat it. That is a simple supply chain.

And then we think about 30, 40 years ago, when a company like Abbott completely vertically integrated, they would get some raw material chemicals. You basically took a few things on one end and hand it to the Lilly organization and out came the medicine.

So, still complicated because we’re making pills and injectables, yet you could go down the hall and knock on the door of the guy that’s messing up your supply chain, back in those days. And now we have this global supply chain, and as Bill mentioned this morning; he walked into Informex and he sees all these multi-cultural, international people. There are literally 3,500 API suppliers, and then you have the contract manufacturers. . .

So you have this completely difficult and protracted supply chain with regulatory issues and government issues and the fact that we’re not making widgets. Anything we make could be something you take to cure yourself (or your wife, or your daughter or your son), so it becomes a very complicated and also a very important supply chain. So what I’ve asked each one of these guys to do, and we’ll start with Kim, is we’re going to walk through some of the things that are making his head hurt so that he can’t sleep at night; and then we’re going to talk a little bit about that and we’re going to have a little conversation about that. First, I’d like to ask each of our participants, why are you here?

Kim Cauchy, Mylan: Why am I here? Well, especially pharma companies like Mylan tend to have a very broad portfolio, so for example we have over 600 API cart numbers, over 250 approved suppliers on a global basis from more than 39 countries. So any organization that helps foster supply chain integrity is of great interest to myself and to Mylan. So we’ve all met, in our company, with Rx-360.

It started with our quality group, having an interest in the shared, joint audit program that Rx-360 innovated and sponsors and now it’s expanded into the supply chain function for obvious reasons.

William Reiss, Amgen: I came here for a combination of reasons. Amgen has been a major supporter of Rx-360. I see tremendous value in it; I’ll talk about it more, as the session goes on, from a procurement standpoint.

At Amgen we have more than 4,000 raw materials, a couple hundred suppliers, and we’re in 30+ countries around the world. So again, the Rx-360 sharing of information and the process where we work together like this is excellent.

Tom Beil, SAFC: We all want to make sure that $100 billion in pharma revenues figure goes up, not down. Part of that challenge is finding the opportunity for efficiencies. As Scott said, I’ve worked both as a supplier and a manufacturer; I’ve worked in procurement and quality. And over the years I’ve realized there’s a whole lot of redundancy.

We all learn from buyers/sellers. How can we share that? How can we leverage that, to together move the industry forward and to focus on the areas most critical?

For me, this is just a tremendous privilege to be part of the conversation with all of you and all of the gentlemen here on the panel. There have been a lot of changes in our industry over the last 10 years and we as companies have made a lot of changes. And it’s just a great opportunity to hear what your concerns are and what your reactions have been to that.

David McCarthy, Pfizer: Similar to all my panelists and peers, we are a very large company with a very large, complicated supply chain. We source from more than 30 countries as well. We have 150 to 200 large API intermediate suppliers and 2,000 items.

As Scott mentioned, at the heart of it: we’re not vertically integrated companies anymore. It’s not in our backyard as suppliers. We don’t have that control anymore. We have very large, complex supply chains. So we’re all looking for ways (to see) how can we collaborate. We actually all need each other to be successful in the supply chains that we are all part of, so the word today is transparency — collaborating to actually influence regulators and influence the environment and chart our own destiny. And that’s actually some of the benefit that we’re deriving by being a part of Rx-360, as well. I think it’s a good forum to accomplish that.   

Scott Watson, Moderator: Good, thank you. So Kim, let’s start with you. What is something that’s giving you a headache right now, a reason you’re not sleeping very well?

Kim Cauchy, Mylan: One of the bigger things that keeps me awake at night is a supplier of our suppliers. I’ll be specific to API because everyone at Informex is very focused on API and their intermediates. Whether it be government auditors or your own company auditors, but problems with the intermediate suppliers (those suppliers of your suppliers), those are more difficult to detect. And so, surprises can happen in that supply chain. It can be a shortage situation, it can be a quality problem, it can be a compliance problem.

I recently saw it in Asia (I don’t want to name any names or anything, but this one is going to impress you in a little bit), where there were GMP issues, where a governmental regulatory body inspected an Asian key study material and stopped all supplies from that to different API producers. It impacted a number of different companies on a number of different products. So you may conclude that, if you don’t have a second source, if all of your intermediates are coming from that same supplier, there is a great risk there.

One thing that keeps me awake at night is site closures. Where the whole world has a better understanding of environmental issues and concerns; as third and second world countries come up to first world standards, their population starts taking an interest in who is in their backyard. And so you could end up with a supplier, if they are in the middle of a city or in some other area that’s not zoned industrial or something like that, you could get a surprise to where your supplier is made to shut down that site.

The government may decide to just shut things down rather quickly — I’ve seen it in Hungary, I’ve seen it in Spain, I’ve seen it even more in China, where there may be less due process in China — and so you’re left out in the cold with a supply chain problem. If you have a supplier that’s in the middle of a city, I would suggest you have a second source ready to go because they get most of the regulatory or environmental issues that could come up and give you a rude awakening.

Scott Watson, Moderator: Thanks. We’re going to camp on that for just a minute. We are fortunate to have in our midst Martin Van Trieste, the founder of Rx-360, who is also the senior vice president, Quality at Amgen. Martin, there is a story that Amgen has where a supplier of a supplier did something that. . . wasn’t optimal. Can you tell us about that?

Martin Van Trieste, Amgen: Well, there is more than one of those stories, of course. I would say in my daily job that people come to me with a crisis. I would say at least half of the crises that come to me, that consume my 24 hours a day, seven days a week, are something related to the supply chain. And of course we have suppliers that we work with and their suppliers. But I won’t use an Amgen example because I probably won’t be able to sanitize my language and we’re talking to a mixed audience, so let me use a Boeing example.

Boeing couldn’t make its Dreamliner 787 because it couldn’t get aluminum screws. And it wasn’t because the guy who made the screws couldn’t make the screws; they couldn’t get the kind of aluminum they need for aircrafts. And it’s a classic story of “beware what you ask for.”

There wasn’t really a shortage of aluminum, but Boeing created the shortage of aluminum, and so their suppliers couldn’t get the aluminum to make the screws. So Boeing changed the way they do their supply chain now.

What Boeing did, there was a risk of an aluminum shortage, so they told all of their suppliers there was going to be an aluminum shortage and please acquire enough aluminum so that you can make fasteners so we can still make our airplanes. They had at that time about 32 aluminum fastener companies that went out and hoarded all of the high-grade aluminum in the marketplace. Then some of their suppliers couldn’t get any more aluminum because of all of their suppliers who had hoarded it couldn’t make it fast enough. What Boeing found out, by them sending out the alert and not managing appropriately, was that their suppliers hoarded.

But the suppliers who hoarded the most made the fewest screws. So the guys who made the most critical components couldn’t get any aluminum. And it took Boeing a long time to figure out where all the aluminum was. What Boeing does today is they manage its suppliers; Boeing buys all the aluminum and allocates it to its fastener suppliers.

That is one example of suppliers’ suppliers. And you see those things in our industry all the time: the Beijing Olympics and Hurricane Ike are examples of things that unexpectedly affected supply chains and caused shortages of key materials & resources. Unforeseen things happen everyday in the supply chain and we just don’t know about it. And those are the things that keep me up at night.

How do I continue to supply patients, knowing that the supply chain is so globalized and so unknown and the consequences of things like volcanoes and tsunamis? I never thought I would have to worry about that when I got out of pharmacy school and got into the pharmaceutical business. But it’s a different world now.

Scott Watson, Moderator: Thanks, Martin. Tony, this is a common theme within the group. What are some of your concerns, especially about suppliers of suppliers?

Tony Wiederhold, Eli Lilly: Well, I think Kim covered a lot of the same concerns — convergence early in the supply chain, if your strategy is to dual source or multi-source.

What we’re trying to do is always improve our understanding such that we can be intentional about the decisions we’re making and are fully aware of the risks that we’re accepting. And that’s gotten a lot more complicated in the last 10 years because now more people are involved in the supply chain, as you mentioned.

The number of resources involved then to provide appropriate oversight — what does that mean and what is appropriate oversight? What’s the right touch? For different types of materials, different types of suppliers — I guess I sleep pretty well; these aren’t things that keep me up at night, but this is what I worry about.

Scott Watson, Moderator: Bill Reiss brings a different perspective. You’ve only been in our industry six months, right, Bill? Here we’ve got a guy who has done procurement for Goldman-Sachs, Coca-Cola, Cott.

Bill, before you kind of go into your sleepless night, tell the group here what you’ve noticed in your six-month learning curve coming from your other industries, where you’ve had an “a-ha” moment or maybe a best practice from Coke that we need to apply to Amgen.

William Reiss, Amgen: It’s been pretty interesting, the learnings since I’ve been here. The key differences I see in the various industries would be, when I look at our supply chain, it’s very tight, very well run.

That said, we built a lot of redundancies within the system to make sure we have the appropriate supplies and key protection where we need it. But that comes at a cost on both our side and the supplier side. So I see this opportunity to review that and say, “How can we be more efficient with redundancies that we’ve built in to the supply chain?”

Another key difference that I see with our industry: the lead-time is several years from when you start the concept and get an approval. And in some other industries, like the cosmetics industry, you have a high level of innovation and you have typically a two-year life cycle of a product. You have a high number of SKUs, fast turnaround of products and that also requires you to manage your supply chain very differently from our industry, which has much longer lead times with the whole product life cycle. So, I definitely feel there are some learnings there, as I talk about redundancies that have been built into the system itself.

Another opportunity I want to touch on as we talk is about the supplier’s supplier. In some of my prior industries, we did a lot of work partnering with the suppliers to really understand who their supply base is because we felt it was important from a quality standpoint for supply continuity and how we can work together. Typically there could be some areas where the supplier is buying some materials — other materials — where maybe we can partner from a supply standpoint to have a more efficient supply chain solution.

So we at Amgen are doing a lot more in the upstream to really work with our partners and say that we want to further understand your suppliers’ suppliers and how does that affect things ultimately. We also really want to understand further, how that affects process variation as we look at the different supply bases at this point.

Scott Watson, Moderator: All right, comments?

Tom Beil, SAFC: From a supplier’s standpoint and again that’s just looking at quality and operational, but our biggest are doubts is probably the balance. There are different expectations in the business of pharm and biopharm and yet we supply both. So we try to get into an understanding that, yes, you are all special when we talk to our customers, but you’re not all that unique in what your expectations are.

The challenge gets into how much information is shared between the two. We talked about supply being transparent, but if there’s a bigger upcoming demand or a three-year projection, what are the quality expectations, what are the volume expectations, what are the supply chain linkages? That’s what we, as suppliers, need to know and want to know so that together we can work on that relationship and fulfill that requirement.

The other part I go back to is Rx-360 and its value — it is within the information that we can share and learn from each other. I told this story many times this last year, but at SAFC, we posted more than 400 customer audits in 2012. I don’t know how many you all do or how much you all are audited, but to me that’s a substantial amount of time and energy to do what I call a routine of quality. I don’t know how many times I sat with our customers to talk about our training systems or water system or change control systems. What do you need from the change control, right?

Let’s talk about that. Let’s talk about the details of the product, the volume, the expectation, and the Rx-360 opportunity will leverage that knowledge so now the partnership can go on another level to get to us to what is truly important — not just box-checking on a audit.

We don’t want to diminish that the audit is very important, but what are trying to do is to leverage that part of it so that we can step to the next level of a true strategic relationship. That’s kind of the balancing of the two objectives we’re doing here today.

William Reiss, Amgen: And again, going back to the point of being new to the industry, I really do feel Rx-360 — which I didn’t have available to me in the other industries — has tremendous value in that. Going back to the point of shared audits, you know that it has to be better from a supplier standpoint so you have less interruption in your business.

It also changes the discussion.  We will have less discussion around quality and more discussion around technology, innovation, and partnership and things like that that we want to do.

As a key buyer at Amgen, as I look at our supplier community that’s going to be really important for me because I see tremendous value in that. I hope that the suppliers also see the same value in time.

With that one other point on where I lose sleep at night: the shortage in key raw materials. Martin touched on some of that, but you know I’ll give it a specific example that happened not too long ago with phosphates.

The market can provide a key raw material to consumer products companies, food companies — much larger buyers out there than we are. So what can happen is when you get a tightness of supplies you know they’ll have favorable treatment versus small buyers, and that is a major concern.

Rx-360 is a good example of how to handle this. They came out with warnings to members saying that there could be a supply shortage for whatever reasons. As a member, check your supplies to make sure it’s not going to affect you. That type of information is really the key — it is where I would lose sleep at night.

Scott Watson, Moderator: OK, that’s great. So here’s the deal, if you’re in the audience and I know your name, you better be nervous because I’m going to ask you a question. I have found that people are afraid to ask questions, but I want to ask Wes because many of you may not know how the Rx-360 audit program works. So Wes, I would like for you to just give a two-minute overview.

I see Wes Schmidt in the audience. We is director of Quality from AbbVie. He’s also on the board of Rx-360 and was integral in the development in the Rx-360 audit program. So can you give the kindergarten version of the Rx-360 audit program?

Wes Schmidt, AbbVie: You can time me; after three minutes I’ll sit down. The audit program is really divided into two main programs: joint audits and shared audits.

The joint audit is when two or more companies get together and they hire a third party and the third party goes out and audits a company that the other two companies have sponsored.

The shared audit program is where we as a company share our audit reports with each other, and it’s very important for AbbVie. We can’t cover everything. No matter what size company you have, you can’t determine what risks are going to hit you. The regulators (I keep thinking about the time I sat in staging rooms and inspections) will say it publicly too — you can’t outsource your responsibilities, ultimately. So we have to cover as much as humanly possibly with the feet we have on the ground; we have to check on suppliers.

I’ve been auditing for 22 years. In the last five years the number of times that I’ve said, “Thank God we went there and qualified this supplier,” is really way beyond what I would have expected. Now it’s, “Thank God that we went there and thank God I can share and can also sponsor the joint audit program.”

Was that less than three minutes?

David McCarthy, Pfizer: Thank you. Let me chime in here as well, and sort of piggyback on that. At Pfizer we are heavily involved in Rx-360 and what really keeps us up at night, in addition to quality, and wanting all of our suppliers to have high quality materials, is supply chain security.

The regulators now, as Tony said, expect us to know our suppliers and our suppliers’ suppliers and we’re accountable for all the materials in our supply chain. Any kind of contamination or adulteration to materials affects the confidence of the supply chain we have today. Especially in the pharma industry where it’s happened — there are cases where either contaminants or adulterated materials are in the supply chain. Regulators expect that we’re on top of that, that we’re managing our supply chains and that we’re accountable.

This year, Rx-360 is really progressing and getting a lot of traction in its role as a forum for figuring out transparency. How are we going to efficiently protect our supply chains and not do it alone?

If Pfizer goes out and devises it all on our own we’re going to have a lot of redundancy and a lot of cost for all of us we don’t want that. But it’s coming in the industry. You see serialization from California. Its about track and trace; you need to know down to the SKU and item level where our products came from. And you need to figure out how to do it without overlaying costs and make it so that we all can continue to grow and prosper.

Many of us may not sleep well with that fear of that unknown element of the supply chain that we don’t have our hands on.

Tony Scott, Moderator: The chairman of the board of Rx-360 (which is a volunteer organization/volunteer consortium) is one of Dave’s peers at Pfizer, Brian Johnson. He and his team have done a lot of work on supply chain security. We’re mostly talking to suppliers in the room here, Dave, so can you talk a little bit about how that work on supply chain security that Brian’s team’s done and that the world you live and breathe in? Tell these folks how that might be applicable to their daily life.

David McCarthy, Pfizer: Well I think what will be applicable and relevant is selection criteria going forward for today and for future years. Besides the quality of your own supply chain, it means being able to demonstrate that it is secure. Within the U.S., there is a program for securing goods coming into the country. In all the other countries now, it is looking to demonstrate that your own supply chain is secure.

What has hit you is that there will be criteria now. If you really can’t demonstrate that you have that knowledge, it will be a disadvantage to you — that is how it really hits home.

On the flip side, being able to demonstrate that you have that understanding of your supply chain will be a competitive advantage for you, and those are the kind of relationships that we want. Again, these types of rules are getting figured out within this forum.

Tom Beil, SAFC: How many suppliers are throughout the audience? Are you members of Rx-360 as well?

[Hands rise, answers of yes.]

Tom Beil, SAFC: Okay, so one of the challenges from the supplier’s standpoint was always that trust factor. Does the supplier buy or share my information that gives me less of an advantage or do you go around me? Is that still out there? That’s kind of the challenge we all face as the suppliers — or as the companies revealing that information.

Our company has gotten past that because it is truly an expectation in the industry to understand your supply chain. There is value for that and if you don’t share that information, that becomes an impediment to getting a stronger relationship.

It’s one of those deals where we need to engage and manage or the walls will go up and decisions will get made beyond our control as a supplier. In my opinion, I don’t know if that helps but that’s been my evolution over time to say, as an active participant and as a founding board member, this is how the industry needs to change. These are the relationships we need to build, and together it’s a more partnered relationship than a transactional one. When you’re in a transactional one, you will start shopping around.

If I can, one more one thing is the dual-sourcing opportunity and the balance with change management. We found that we try to minimize change, yet dual source — that’s what I hear from customers. So what are those requirements and how can we make sure we meet those requirements to qualify our vendor or to be a qualified vendor in that dual-source opportunity?  My request may be on behalf of the suppliers — allow us to help you in that qualification process and share that information so that we can get into what is truly critical and truly important.

I have to admit, not everybody is knowledgeable about the components and the products that they’re buying. For suppliers, we do know our products and we do know our critical manufacturers’ products. We can help in that — helping you to understand why things are important. We can also help project what could cause that problem in your manufacturing process.

It’s a really interesting point to try to understand from a supplier’s standpoint: what are you looking for? The buyer truly has opportunity if we are both working the right way. When we are both sharing information, it will allow us to be more efficient with how we manage our business, and that will allow us to partner even closer together.

When it comes to audits, my understanding is that there’s a huge value in being able to quickly qualify a vendor. Rx-360 sponsors audits when that order takes place — if you want to limit who that is distributed to, or even hold up on that, you can do that. When I heard that, I thought, what’s really the downside? I only see the upside from the supplier’s standpoint so I’d like to hear more, and if there are concerns from the suppliers’ standpoint let’s talk about it. It gives us the chance to address that dynamic, again, as the buyers.

Question from Audience — Michelle Johnson, Consultant, Former Supply Chain for Merck: I have a question with regards to upfront planning for your starting materials, or your suppliers of suppliers and so forth. My question is really about upfront planning for your supply chain: this is a great discussion and I think it’s really critical, but what about upfront, when products are in development and you have got scientists in the lab who are selecting starting materials and you know what the chemistry is going to look like for your APIs? What kind of partnership do you have upfront with them so that we can do these other things once we get the commercial side of the supply?

William Reese, Amgen: I know that right now there are certain areas that we are seeing as part of team leadership meetings, that we decided as a company, where we see that we need to get the suppliers involved.

They need to be involved starting at the molecule level all the way to the supply chain. We sort out opportunities and then we pull the suppliers in halfway into the process, and at that point it has became a lot more difficult for both the suppliers and for us. At Amgen, we have very specific conditions that we’ve been talking about for the last two weeks. It’s to really get the suppliers involved at the molecule level and certain areas as we see value in it.

Tom Beil, SAFC: Like what is said in those meetings, there are discoveries that happen. Why do you think so many products that we make aren’t designed for the use that many companies end up using it for at that early development stage?

So yes, that conversation sooner is whole lot better than much later, because that puts you in the reaction mode and it will be a lot more difficult to change then.

Tony Wiederhold, Eli Lilly: We have an extremely tight relationship with our customers, as well as our suppliers. With today’s approach towards custom complexity, there is no other way to do that.

David McCarthy, Pfizer: Yes, I was going to say we do, too. At Pfizer, we are like many other large companies, including Merck. We do have that relationship, but I’d also say we can do it better. I’m on the commercial side and we often work with our scientists, so we still have the opportunity to gauge more. We want them to understand this forum.

So when I talk about the supply chain security, our manufacture/supplier organization is being pulled into the loop. We are pulling them in for understanding.

Can I really say that all of our chemists and upfront people really share that same understanding and knowledge? The answer is no, but we’re working on that. It is an area of opportunity, but I think that it’s a really good point, it’s probably something even to bring back into our Rx-360 group for discussion — it’s an opportunity.

Tom Beil, SAFC: Good point. For the suppliers I give talks to — including our sales team and our marketing team — I do it so that they understand what that is. Quite often you’re talking to a researcher who will ultimately give his research to university, but it might be a different endgame than the researcher at a Pfizer or Wyeth, or whatever. So our conversation is getting our sales forces to be more educated to ask these questions and make sure we get it escalated to the right people.

Question from Audience member #1: We are working in a situation where you know it’s a joint effort. What about when you are caught in the middle by a new supplier and there is the quality and sourcing team? What happens when the quality team is auditing that supplier, but they are also auditing that suppliers’ audit program and how they audit their suppliers? We are looking at how to minimize those suppliers’ supplier risks.

Then on the sourcing end, we’re looking at do they have one supplier for key starting material or do they have 10? If its animal-based products, then is it traceable? So there are all kinds of things you can do in that supplier’s supplier relationship when you’re starting out new with a supplier in an auditing program.

Question from Audience member #2: I have a question, how many of you use supplier quality agreements for your raw materials suppliers? Has their been talk of the supplier of Rx-360 trying to standardize those agreements as the supplier gets them?

David McCarthy, Pfizer: I think it’s a great idea.

Tom Beil, SAFC: We have talked about that in the supplier questionnaire, as well. We are in the data-gathering phase — or information-gathering phase — so that has been on the agenda.

Comment from Audience: It seems like a good opportunity, to bring it to the forefront and say, “We’ve seen this before via shared audits.” It can be ready before you even have to start.

Kim Cauchy, Mylan: It’s another great topic and it’s a great type of topic where you’re participating in that dialog. The example I have is that I just had a discussion with our quality leaders. There are some suppliers that are just a very small piece of our businesses, but we still have to come in and say, “Here’s our half-inch-thick quality agreement that we want you to sign.” The answer is then either, “yeah, sure,” or “no”, and so we completely need to have a quality-driven document to bring it to light.

Our requirements are as simple as, please don’t change anything without telling us — that’s what it really comes down to. So we’re actually starting to internally say, “Hey let’s have different types of quality agreements.”

Wouldn’t that be great as an industry if we got down to one standard quality expectation? Then everyone knows what the expectations are and we all become more efficient. Maybe it’s not your quality agreement or my quality agreement, but it is a great idea to find an agreement in general.

Scott Watson, Moderator: Let me chime in, and this is a great thing about Rx-360. I don’t know the answer, but I know where the answer is. It’s sitting right here and it’s about quality supplies for raw materials.

Wes Schmidt, AbbVie:  If you go onto Rx360.org we have a quality agreement template that you can look at. A lot of work in sub-committees have input, and it has been a joint effort of all of the companies. One of the parts of membership has been contributing to the standard quality agreement, which you can choose to use as is or modify for your own needs. We are trying to say that we are not here to reinvent the wheel.

Audience member — William Pei, Bayer: My name is William Pei I’m the head of the Global Strategic Sourcing office with Bayer Healthcare. Before joining Byaer I led a sourcing career at Takeda, Johnson & Johnson and Pfizer. Now I’m based in China and I have three questions.

First question: as Rx-360 gains popularity in China (mainly API suppliers, despite some reluctance), have you thought of forging strong relationships with the Chinese government? It’s important for us mulitnationally in China, but it is also important for the Chinese government. To that, I wonder if there are any plans for the Rx-360 consortium to build a liaison office in China on the ground working with suppliers or working with third party?

My second question: As China has become a leading prime source of key material to the world, how important will it be to multinational companies to have a very strategic China base with a local sourcing team that can work hand in hand with our political colleagues in the same marketplace?

Scott Watson, Moderator: Before you get to your third question, I just want to make sure we get those answers in.

Bayer is a member of our Rx-360, and we appreciate your membership, so we want to make sure you get those answers. Who wants to talk about the government relations side of this (because this is actually a big part of Rx-360)?

Martin Van Trieste, Amgen: Because of the way Rx-360 operates, we’re not like a lobbying group where we educate and lobby, like so many do. There are many regulators around the world who have viewed Rx-360 as a trusted partner, so actually we can never advertise this, but the US FDA is actually a member of Rx-360. Hopefully today, the MHRA (the British version of FDA) will become a formal member. We have also had a lot of interactions with the WHO and PIC/S.

You do have to remember that Rx-360 is only four years old, and we all do this on a volunteer basis. But, we have just added the Asia-Pacific working group led by Takeda and the goal is to continue to build those relationships in Asia. I’ve had meetings with several key high-level persons at SFDA in China and they are very interested and some of things you just talked about.

We just have to find the people in Asia to do it, because we don’t have enough bandwidth and capabilities on our own. I know Bayer has a large Chinese operation, so it’d be great if Bayer can help with taking the lead in China for us. We’d be very appreciative of that.

Scott Watson, Moderator: We are very aware in terms of where the Rx-360 members are. Our goal is 20% of our new members this year come outside of Europe and the U.S. So we welcome your participation.

Tom Beil, SAFC: We do ask for you to keep putting out that message as well. This is us looking to spread and share and looking for you to engage and be a leader with us.

Scott Watson, Moderator: As Martin mentioned, it is an all-volunteer organization. So the folks we add at Bayer in China were part of the Rx-360 team and you didn’t quite even realize it.

I think everyone in the room would agree about the importance of sourcing from China. We can agree that if you are going to work with China, you better have your eyes and ears on the ground there to work through that and have a good trusted relationship.

Kim Cauchy, Mylan: Absolutely. We have both auditors and people on the ground in China as well as other countries, but we don’t just specify China; we look globally. I know Pfizer and Lilly and others have sourcing offices there as well, because it’s absolutely important to be really close to your supply chain.

I’d like to then quickly bring in the MHRA or FDA or SFDA — a good example would be what might keep some of you awake at night right now, like the falsification of medicines directive (FMD). Many of you are medicine exporters and are working in the EU, and things like this will impact you as an organization. Working with Rx-360 can help you as a clearinghouse to deal with some of these issues.

Scott Watson, Moderator: We recently ran a webinar on this discussion point and we had 160 people from around the world dial in. That’s available on the website and if you listen to it, the replay has real scenarios. If I’m company “A” in country “B” being inspected by company/agency “C,” does that count? The webinar is very useful in terms of offering real-life scenarios.

That’s why I think that’s the final topic we’re going to talk a little bit about; Kim I’m glad you segued into that. Let’s talk about regulatory: how is Rx-360 going to help you if you are not sleeping well? In terms of these regulatory changes that are coming down the pike here at lightning speed; for instance, GDUFA, and the medicines act you just mentioned. What comment do you guys have in terms of how that’s affecting how you’re thinking about your supplier base?

Tom Beil, SAFC: I can field it from a very practical standpoint. There’s so many regulations coming forward, but the premise is about security and supply chain transparency, and that’s why we are here. There are more details for all of that, but that’s the fundamental one of why those regulations are being developed. There are good reasons for that; it hasn’t been secure and it hasn’t been transparent.

So that’s our industry’s collective challenge to keep driving forward. If you can go back to the regs and get more details, that is great, but if we keep that premise for the purpose of this room or this forum, this is where Rx-360 comes in play.

Kim Cauchy, Mylan: I would add that we are going to see more and more of these kind of regulations coming down. For example, FMD only affects API being exported into the EU, but if you have an exported dosage form with who knows what API, that’s not covered under the regulations. So I think they’ll close that gap and you’ll continue to see these kinds of things going on.

Scott Watson, Moderator: We have time for one more question. 

William Pei, Bayer: Well, my final question will be on supply chain security. We have discussed the quality issues behind Rx-360. This year, what about on the political front? I’m stationed in Shanghai, not too far away from disputed islands between Japan and China. This year, what would the panel think in terms of the escalation of the tension? What would that bring to the community of pharma? Because as Martin mentioned, during the Olympics, these restrictions were imposed and so are some restrictions for export. So what would be the impact of the potential of a small clash?

Scott Watson, Moderator: I told you at breakfast that we’d get a question that we were not going to be prepared for, and we didn’t study it. That’s it, and it’s a great final question.

Tony Wiederhold, Eli Lilly: Well, any time we look at Japanese suppliers, we have concern for our Chinese suppliers about that; we want to get their opinion about it.  Certainly with Rx-360 there are ways you have a more unifying fashion or approach, much like we did with the tsunami.

Tom Beil, SAFC: This is an industry organization that forms an ad hoc working group. We pull together when those world events happen, whether it’s weather-related or political shortages — those are on flash reports.

But as a company, we’re monitoring those from a long-term strategy and looking at our dual-source options. We can’t ignore that the world is very dynamic. That’s the whole point of having the business continuity plan for a dual-source opportunity or for a regional opportunity.

I look at world news differently than I used to; what happens on a Wednesday we’re doing something about on a Thursday.

William Reiss, Amgen: And to your question, it really does reinforce the importance of Rx-360 again. The transparency when major world events or any event occurs is different. We are sharing the information very quickly.

Rx-360 is putting things out and we’re sharing what would be our best practices. We want to help people handle it in different ways so then everyone picks up on it. That’s another major advantage for both the suppliers and us.

Scott Watson, Moderator: Thanks, everyone!