Outsourcing

Vendor Management in the Clinical Supply Chain

Outsourcing

14:00, January 25 2017

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James Krupa, Director and Clinical Supplies Team Lead, Shire, presents lessons learned for effective vendor management and oversight

The current landscape concerning ‘clinical supplies’ is that virtually all of Pharma, both big and small, has outsourced most if not all of the unit operations that define the clinical supply chain. That is, from bulk drug product manufacture to the reconciliation and documented destruction of finished drug product. Why is that? The main reasons for this ‘outsourcing’ are cost containment, reduction of waste, and reduced cycle time. On paper, it appears fairly straightforward that the CMO is doing all the work to get Investigational Material Product (IMP) ‘out the door’ on time to the global clinical sites. Nothing could be further from the truth! In my 36 plus career, this is the most challenging and difficult model that I have worked in because you just can’t go down the hall to production or downstairs to the packaging and labelling areas or warehouse. In giving up this ‘control’ which is analogous from driving a car to having the pilot fly the plane, you must seek, then establish and manage your CMOs for your clinical supply fulfillment activities described above.

For the timely availability of quality clinical supplies, employing the Shire ‘virtual’ model is a challenge that has effectively been met after successful negotiations with our CMOs. This was accomplished largely by the establishment of a ‘partnership’ with the maintenance and documentation of proper oversight of the CMO's performance.

Exploring the identification and selection of vendors when employing the ‘virtual’ model, ensuring your partner is the best fit

Understanding a potential vendor’s capabilities, expertise, commitment, and reliability is a must. Conduct financial and compliance assessment, spend and market analysis. Help facilitate identification of potentials. Furthermore, ask what is their Technical Capability is. Conduct vendor assessment/feasibility by internal SMEs and external experts. Evaluate their technical capability, assessing whether or not they have the equipment and infrastructure needed for your project.

Look at experience, staff turnover, and capacity. Bear in mind that the company’s global footprint is needed for logistics and capacity. Also, evaluate their project management strengths and weaknesses. It’s important to understand third party alliances while evaluating the business risk. Therefore, gauge whether they have demonstrated proven and effective change management skills.

Engage early with the QA for GMP and GDP assessment with the goal of approving the CMO for the unit operations needed from ‘cradle to grave’. In our model, that encompasses bulk drug manufacture to the reconciliation and proof of destruction of finished drug product. How are they when conforming to timelines and to budget? To successfully forecast spend and timelines, rely on previous project experience and results.

Engaging your vendor in a virtual setting to ensure your needs are met throughout your trial

Show project commitment by formalizing and executing the Master Service Agreement (MSA). The Statement of Work (SOW) should define business requirements, processes, and deliverables. What’s more, ensure discounts as a function for volume of work in a fiscal tear are documented and leveraged.

  • Development of Robust Contracts/Agreements applicable and favorable to the business using your template according to business strategy
  • IP and discovery protection (Legal), liability, insurance, confidentiality
  • Optimizing value leveraging against other parts of business
  • Preferred financial terms by bundling work

Seek multiple alternatives/quotes when applicable. Ensure requirements are clear and understood through a formalized request process. Ensure SOWs reference established terms and conditions, are within budget, specific, measurable, achievable, realistic, and time-bound.

Maintaining and documenting proper oversight of and measuring CMO’s performance by evaluating KPIs and Metrics from respective CMO SLAs

This is ongoing from the contract being granted through to completion of project.

  • Segment SOW parts into deliverables by PO’s ID if applicable
  • Oversight – Relationship Management
    • Develop relationship governance structure applicable to the scale of work
      • Project-based meetings, which are weekly or regularly scheduled
      • Global operational meetings – regularly scheduled every four to six weeks or quarterly
      • Business review meetings – twice a year
  • Communication/Escalation plan for both partners and not just for the CMO
  • Enhanced collaboration is a two-way street
  • Develop metrics that are meaningful. Establish KPIs that are specific, practical and reasonable to ensure project success
  • Pay invoices on-time and promptly escalate invoice errors as well as not receiving timely invoices
  • Review of SOW/PO conformance
  • Escalate and troubleshoot non-conformance, issues, challenges, resources, and budget
  • QA engagement for investigations and deviations
  • Documented meetings, milestones, issues, resolutions

Presenting lessons learned to synergize the vendor/sponsor partnership

This is a key aspect where you have to assess what went well and what did not. What have we learned that we can apply to other vendors and projects? Here are some of the lessons learned that sponsors should consider:

  • I guarantee you are paying thousands of dollars a month for storage of IMP, components, ancillary items that are either expired or no longer needed. The storage fee is usually ‘doubled’ if it is a controlled substance that is stored in a vault or your IMP is stored in the cold chain under refrigerated or frozen conditions. Clean up the warehouse, so to speak, initially, and then on a monthly basis, so the disposition of inventory will be made that much easier
  • SOWs are required to go through legal review even if you are amending the original SOW/PO with more packaging and labelling campaigns. Thus, do a better job of estimating and documenting additional campaigns. If you feel certain that you will need three campaigns, don’t just have the vendor quote for two campaigns. Have the SOW for the three campaigns. Getting a higher Delegation of Authority (DOA) to sign off on the Purchase Order is a small price to pay
  • Examine invoices carefully and check against the SOW. Why do we sometimes get a monthly Project Management fee for ‘storage’ at some third party depots, but not at others? Is this in the Master Service Agreement (MSA)?
  • We usually underestimate the distribution costs because we don’t take into account the thousands of dollars it costs to ‘transfer’ IMP from one region to another, such as the US or UK to Israel. Also, if you don’t have a lot of IMP, you are going to distribute fewer units, but more frequently. Must build this in to the overall costs of distribution
  • Have your vendor provide an estimate of monthly charges by the third week of the month as well as estimated charges for the month afterwards. This will help you with your ‘monthly accruals’ being in compliance with the Sarbanes-Oxley Act of 2002. Why are accruals needed every month? Well they are needed to record the expenses and liabilities, which were incurred during the month, but the transactions had not been recorded in the accounts as of the end of the month

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