Weilian Poder Global Consulting


Themes in International Interactions

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Drug Recalls: A Supply Chain Case Study

Irbesartan, one of the Chinese-made medications affected by the most recent recalls.

Irbesartan, one of the Chinese-made medications affected by the most recent recalls.

Recalls always make an impact in any industry. This is especially the case when safety is involved.

That is why the series of pharmaceutical recalls affecting popular blood pressure medications (most notably Valsartan) is a serious business matter to examine and understand in light of current supply chain issues.

For the pharmaceutical industry, this example is just the latest of many which highlight the high costs of operating and profiting in that business. Although the Valsartan contamination episode is merely a supply chain and distribution safety matter, the field is always conscious of how such lower level mistakes can metastasize into deeply problematic public relations crises. In this way the politics and public opinion pressures of the early 1980’s tainted Tylenol scandal continue to live on.

How Does This Happen? Analysis of a Contamination

This is a question of what and where, as both the source of the problem and its cause are intertwined.

In the case of Valsartan, a known carcinogen, N-nitrosodiethylamine (NDEA), was introduced into blood pressure medication tablets. This chemical is normally used in creating liquid rocket fuel.

Where these contaminated products were sourced is equally illuminating. These tainted pills originated in plants located in China and India, world leaders in emerging market growth, population, and product sourcing.

The Crisis of Quality Control in international sourcing

Pharmaceutical companies frequently face the majority of difficulties in international supply chain effectiveness today. Crises such as the Valsartan contamination highlight these challenges and underscore several critical aspects which cause quality deficiencies. These include:

  • A general lack of transparency into pharmaceutical supply chain processes and quality control standards;

  • Challenges in being nimble enough to connect unpredictable drug demands and properly equipped/trained suppliers;

  • Navigating several layers of complex bureaucracy in multiple countries just to get the proper approval for shipped drugs;

  • And ensuring the proper scientific calculations and practices are made to manufacture and deliver a worthy product.

Political Impacts in Light of “Trade War”

In the case of U.S. pharmaceutical companies and their impacted manufacturing operations in China, recent trade policy news may change the magnification of the current contamination scandal.

If the U.S. and China are in fact ending their recent series of confrontational trade policy acts, it could indicate that cross-border efforts to increase medication safety could be emerging.

For both sides, a quick resolution to these supply chain maladies would be in their best economic interests. American pharmaceutical companies have come under increased pressure as of late due to rapidly rising prices for some important drugs. For the public to feel that such products are simultaneously diminishing in quality would incite greater public anger. China also has an incentive to make timely changes, as the country is both a major exporter and the world’s second largest market for consumer prescription drugs. This means that cleaning up contaminations in drug production has clear benefits in both the economic and public health sectors of that country as well.

Personal Observations

In my experience, gaps in culture and language often lead to serious miscommunications. In my work supporting and negotiating quality control programs in China, this frequently translates to a gross under-communication and/or misunderstanding of standards.

For much of the post-1980 period in which China has supplied the world with goods, the consequences have been economically dire but not socially so; if a product was damaged it could easily be discarded. Even workplace safety standards are more easily addressed because employer and colleagues alike can see the benefits of keeping employees healthy first hand.

This series of pharmaceutical contaminations, on the other hand, is different. The impacts are much more serious to society as a whole, yet they emerge much farther downstream in the supply chain. And because the products involved are much more complicated to formulate than common consumer goods, this increases the risk for error.

In addition, this negative news hits Chinese business at a time when many foreign suppliers - especially Americans - are concerned about the future of profitability in sourcing products from China in light of contemporary trade tensions and China’s own economic development. Many are considering lower cost alternatives, namely in Southeast Asia.

This leaves one question as food for thought: Will decreasing quality standards from Chinese-made goods be the impetus that drives significant numbers of US suppliers towards other countries?

I welcome your thoughts. Please feel free to respond in the comments or to email me at info@wpglobalconsulting.com to discuss further.

William VogtComment