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Heparin, Swine Flu, and the Essential Supply Chain Data

Here we go again.  A recent Bloomberg article once again cited the potential shortage of Heparin, a critical blood-thinning medication.    Attached is the recent article, as well as a case study/excerpt from my book, “Single Point of Failure:  The 10 Essential Laws of Supply Chain Risk Management”.   Once again, the importance of collecting, monitoring and managing critical supply chain data by the products/value you produce comes front and center.  Over the past decade, I’ve worked with more than 50 organizations to design, apply, improve, and deploy activity-based risk management.   Contact me @ gary.lynch@theriskproject.com  if you’d like to learn more.

Latest Article

Deadly Pig Disease Sparks Fear of a Heart Drug Shortage

EXCERPT FROM MY BOOK (currently being revised as 2nd edition)

 

A case study demonstrates how a critical supply chain can be more vulnerable

than anyone thinks. The drug heparin is derived from animal liver cells and

is a vital anticoagulant (formula C12H19NO20S3). It prevents blood clots and is

used to treat acute coronary disease, a trial fibrillation, thrombosis, and pulmonary

embolism; clinical trials for the treatment of arthritis, asthma, cancer, and

even organ transplants are promising. It is also used in bypass and other heart

surgery operations. In other words, it is a vital drug. David Strunce, president

of Scientific Protein Laboratories, Baxter Lab’s main supplier of heparin, says

that the Yuan Intestine and Casing Factory is not in his company’s supply

chain. Scientific Protein can’t trace its supplies in China in as much detail as it

can in the United States. “We’re all dealing with the China collection system,”

Mr. Strunce reported.

China is the world’s largest heparin exporter, shipping more than $100 million

of the substance a year. China’s lack of consistent oversight of its heparin

industry highlights a regulatory gap that’s opening as drug makers increasingly

go shopping globally for ingredients. The raw heparin made by China’s myriad

small producers ends up in the hands of about 50 export companies, which sell

to customers overseas. In the first half of 2008, more than 85 percent of these

heparin exports went to the United States, Austria, France, Italy, and Germany,

according to an industry trade group.

An ideal system for tracing heparin back to the barnyard would involve

tagging individual pigs, then keeping files detailing each animal’s record of vaccination,

feed, and overall health. That record could follow the animal to the

slaughterhouse, providing a paper trail that a drug company or the FDA could

later tap into. Many heparin processors, including Changzhou Scientific Protein

Laboratories (SPL), the plant that supplies Baxter, are registered as chemical or

agricultural-byproducts companies and weren’t checked by health authorities.

Abraxis Pharmaceutical Products, or APP Pharmaceuticals, Baxter’s main rival,

says its Chinese supplier, Shenzhen Hepalink, is able to trace refi ned heparin

back to individual pigs. Shenzhen Hepalink also says it requires suppliers of raw

heparin to follow rules designed to minimize the chances of contamination.

The agency did, at most, 21 inspections of Chinese drug-making facilities

annually in fiscal years 2002 through 2007, according to the U.S. Government

Accountability Office (GAO). That represents a fraction of the 714 Chinese facilities

that, as of the end of fiscal 2007, the GAO says were involved in making

drugs or drug ingredients for the U.S. market. FDA Commissioner Andrew von

Eschenbach has said he would like to station inspectors in China.

Because heparin is derived from living tissue, companies that purify raw

heparin follow a range of steps—filtration, heat treatments, and other processing—

to reduce the risk that it may contain active viruses or bacterial toxins. Since

(continued)

192 Single Point of Failure

mid-2006, China’s pig herds have suffered serious outbreaks of porcine reproductive

and respiratory syndrome, a viral illness commonly known as blue-ear

disease. Sick animals are supposed to be rejected by slaughterhouses, but

enforcement can be lax. Also, infected animals may be slaughtered before

symptoms are recognized.

Some drugmakers say it’s important to be able to trace back to the pigs that

served as raw materials. That way, if patients have adverse reactions to a drug,

the root problem can be discovered and other possibly tainted batches can

be pulled from the market. Many Chinese heparin manufacturers say this is a

very difficult standard to meet in China’s business and agriculture environment.

Wang Shengfu, manager of another raw-heparin maker in China’s Shandong

province, Linyi Meiyuan Seasoning Co., notes that unscrupulous business people

and middlemen can easily “provide buyers with fake records.”14

By 2010, China is expected to produce nearly 25 percent of the world’s

pharmaceutical ingredients, according to a recent study by the investment firm

Credit Suisse. “If you haven’t been in a plant for the last two or three years,

you don’t have any clue what’s going on in those places,” said a congressional

source familiar with investigative work into the FDA by the House Commerce

Committee’s subcommittee. “They could be running monster truck rallies on

the plant floor, and we wouldn’t know about it.”

“The computer infrastructure is outdated, it’s not stable, there is insufficient security and capability,” said Dale Nordenberg, a Science Board member

who specialized in the computer systems. “The FDA is still relying on

an amalgamation of paper-based records and poorly integrated electronic

platforms.” The two main FDA databases cannot agree on how many foreign

companies are subject to FDA inspection. One claims the number is 3,000,

the other 6,800. Compounding the confusion, the FDA uses corporate

names, rather than identification numbers, to track production plants and

registration information. For an agency monitoring the operations of companies

in dozens of countries worldwide, this creates confusion. Indeed,

Scientific Protein’s China operation slipped through the FDA’s inspection

regimen primarily because of confusion over the company’s name. But

Nordenberg is hardly encouraged by the agency’s admission this was at the

root of the FDA’s failure to inspect the plant. “That’s just another heparin

timeline,” he said.15

One expert says as much as 70 percent of China’s crude heparin—for

domestic use and for export—comes from small factories in poor villages. One of

the biggest areas for these workshops is in coastal Jiangsu Province, north

of Shanghai, where entire villages have become heparin production centers.

In a village called Xinwangzhuang, nearly every house along with a narrow

street double as a tiny heparin operation, where teams of four to eight

women wearing aprons and white boots wash, splice, separate, and process pig

Law #6: Managing Production Risk Is a Dirty Job 193

intestines into sausage casings and crude heparin. The floors had large puddles

and drainage channels; the workshops were dilapidated and unheated;

and steam from the production process fogged up the windows and soaked the

walls. There were large ovens to cook ingredients and halls lined with barrels

to store enzymes, resins, intestines, and wastewater. “This is our family-style

the workshop,” said Zhu Jinlan, the owner of one heparin operation, who stopped

sorting pig intestines and invited visitors to a back room, where she lives with

her husband and child. “We’ve been doing this for about ten years.”

Experts say the small, unregulated factories could pose dangers because

they do not have the same controls and rules as large slaughterhouses, which

also produce crude heparin. “If you don’t control the incoming source, it’s very

hard to get rid of the contaminants,” says Liu Jian, a heparin expert at the

The University of North Carolina. Mr. Strunce of SPL says his company never buys

directly from the crude-heparin producers, only through its wholesalers, which

he called “consolidators”—Changzhou Techpool, its Chinese joint venture

partner, and Ruihua. His company, he said, has records documenting all the

transactions. But in Rugao, producers of crude heparin tell a different story.

A sales manager for a major supplier, Nantong Koulong, said he sells directly

to SPL without going through either of the two wholesalers. “We provided crude

heparin to Changzhou SPL,” said the sales manager, Chen Jianjun. Some of

Koulong’s stock comes from the unregulated workshops, he said. The owner

of one such workshop, Ms. Zhu in Xinwangzhuang, said she sold to SPL two

years ago. She also sells to Koulong. “We are really a traditional family-style

plant,” she said. “We have no certificate.”

After an outbreak of blue-ear pig, the disease swept through 25 of China’s 31

provinces and regions in 2008, prices soared and many drug suppliers had to

look to the small workshops. The epidemic said Cui Huifei, a heparin expert at

the Shandong University School of Medicine, “made those biotech companies

inevitably purchase from the family-style plants, for cheaper prices.”16

By Gary S Lynch

I am the Founder and CEO of The Risk Project, LLC a risk, uncertainty and opportunity advisory firm. As a management consultant, business developer and market analyst at Booz Allen Hamilton, Gartner Group and Marsh, I was responsible for defining market strategy, commericalizing capabilities, and developing businesses. I've helped dozens of organizations create new revenue streams. I've also held the position of Risk Executive, CISO and Global Leader - Office of Business Continuity at JPMorganChase, Prudential and Prudential Securities.

Throughout my career I worked with senior leadership from startups, academia and government agencies to life sciences, hi-tech and financial institutions. I was a founding member of the US Dept of Commerce's Advisory Committee on Supply Chain Competitiveness, Advisor to the WEF Global Risk Network and Sr. Research Fellow at the RH Smith School of Business, University of Maryland.

I've authored three business risk books and been a featured at the WEF, APEC, WCO, NIST, NACD, AIAG, RIMS, MIT CTL, Robert H. Smith School and the Desautels School of Management/McGill University.

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