In this exclusive Q&A we delve into the complexities and evolving trends within the active pharmaceutical ingredients (API) market. Ahead of CPHI North America we spoke with industry expert Jack Stine from Savendor on the challenges, strategies, and the growing importance of secondary sourcing—particularly to U.S. based and supplying companies. This tension of course has only been heightened by the uncertainty around Catalent’s sale implications and the recent news regarding the BIOSECURE Act. Savendor is one of 15 start-up companies taking part in the CPHI Start-up Market. These are companies that are transforming pharma in North America with new ideas, new innovations, and novel scalable solutions. CPHI North America is at the heart of pharma and will be hosted at the Pennsylvania Convention Center in Philadelphia, PA from May 7-9, 2024. The event is designed to maximize connections across the end-to-end supply chain.

Can you provide us with some background on Savendor and your role within the company?

Jack Stine: Absolutely. Savendor is dedicated to enhancing API sourcing teams by handling the collecting of pricing, certificates of analysis, and qualification information for various APIs. These services are designed to provide pharmaceutical companies with an up-to-date market view for their APIs and are updated annually. By second sourcing all APIs, we empower our clients to respond swiftly to supply disruptions, giving them a competitive edge in the market.

It seems there is a trend towards diversifying supply chains away from China. Can you share your experience with this in the API industry?

Jack: There is a level of uncertainty for U.S. companies who source their APIs from China that is not perceived as present when purchasing from other countries. The geopolitical relationship between the U.S. and China makes companies concerned that there may be trade barriers for APIs between the countries in the future. When I speak with API companies in India about a new API request, a question I have been asked more than once is, “Is this quote for a new primary supplier or is this for a secondary supplier to a Chinese company?” This tells me that there is work being done by drug manufacturers to get back-up sources for their China-based suppliers.”

How are pharmaceutical companies navigating the process of qualifying new suppliers?

Jack: The process of qualifying new suppliers is a strategic endeavor that requires careful consideration. Companies are employing both proactive and reactive approaches to diversify their supplier base. Proactively seeking out and qualifying new sources allows companies to anticipate potential disruptions and ensure a stable supply chain. This involves conducting thorough assessments of supplier capabilities, quality standards, regulatory compliance, and financial stability. Reactively, as existing supplier relationships evolve, companies are exploring new options to maintain flexibility and mitigate risks. Collaboration with regulatory authorities, industry associations, and third-party auditors plays a crucial role in the supplier qualification process.

Considering the complexities of the API market, what are the key considerations for pharmaceutical buyers when evaluating potential suppliers?

Jack: When evaluating potential suppliers, pharmaceutical buyers must consider a range of critical factors beyond cost. Quality assurance is paramount, ensuring that the supplier meets stringent regulatory requirements and maintains high-quality standards. Reliability and consistency in the supply of APIs are crucial to avoid disruptions in manufacturing processes. Additionally, the long-term sustainability and financial stability of the supplier are key considerations to ensure a lasting partnership. Factors such as production capacity, technological capabilities, geographic location, and the supplier’s track record in the industry also influence the evaluation process.

What role does proactive supplier management play in ensuring a stable and diverse supply chain?

Jack: Proactive supplier management is a cornerstone of ensuring a stable and diverse supply chain in the pharmaceutical industry. It involves continuous monitoring of supplier performance, anticipating potential risks, and building collaborative relationships. By actively engaging with suppliers, pharmaceutical companies can address issues promptly, optimize supply chain efficiency, and ensure continuity of the drug manufacturing process. This proactive approach enables companies to identify opportunities for improvement, implement corrective actions, and foster innovation within the supplier network. Moreover, it establishes a foundation of trust and transparency, laying the groundwork for successful long-term partnerships.

What are the distinctions between secondary qualified and secondary identified suppliers, and how do these distinctions impact pharmaceutical companies?

Jack: In the context of secondary sourcing, understanding the distinctions between secondary qualified and secondary identified suppliers is crucial for pharmaceutical companies. Secondary qualified suppliers have undergone rigorous evaluation and meet the necessary criteria to immediately contribute to the production of finished drugs. These suppliers have successfully completed audits, demonstrated compliance with regulatory standards, and exhibited the capability to meet quality requirements. Pharmaceutical companies can confidently integrate secondary qualified suppliers into their supply chain, reducing dependency on primary sources and enhancing flexibility.

Secondary identified suppliers, on the other hand, are suppliers that have been identified as potential alternatives but have not yet completed the qualification process. While these suppliers may show promise and meet initial criteria, they require further evaluation and testing before becoming fully integrated into the supply chain. Pharmaceutical companies gather information on secondary identified suppliers, assess their capabilities, and maintain them as backup options. This distinction impacts companies’ risk management strategies, with secondary qualified suppliers offering immediate backup solutions and secondary identified suppliers serving as contingency plans for future needs.

Is the shift from China to India as a primary API supplier a realistic expectation for pharmaceutical companies, considering the challenges discussed?

Jack: While the desire to shift away from China is growing, it’s essential to recognize the complexities involved. China remains a dominant force in the API market due to its scale, cost-efficiency, and quality of products. Transitioning to India or other regions requires careful planning, significant investment, and time. It’s not a simple switch but rather a strategic consideration that companies are evaluating. The shift, if it happens, will likely be gradual, driven by factors such as risk mitigation, geopolitical considerations, and the need for a more diversified supply chain. Pharmaceutical companies must weigh the benefits and challenges of such a transition, considering factors such as regulatory frameworks, infrastructure, technological capabilities, and the overall business environment of potential sourcing regions.