Risk - Pharmaceutical Case Study
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The University of Tennessee, Knoxville *
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Course
421
Subject
Information Systems
Date
Dec 6, 2023
Type
docx
Pages
3
Uploaded by ProfessorKnowledgeRook221
Risk in the Pharmaceutical Industry:
The Case of Orion
Orion is a large manufacturer of pharmaceuticals.
One of its products is a pill for the
patients with high cholesterol called OrionsBelt.
Demand is about 500,000,000 pills a
year in the United States and another 600,000,000 pills worldwide annually.
Demand is
currently increasing, as the drug has only been available for 4 years and has been well
received on the market.
The company estimates that a delay in one day of demand costs the company
approximately $3 million (U.S.).
The drug is taken orally, and is not in a capsule.
It must
meet all guidelines from the U.S. Food and Drug Administration or the relevant
regulatory agency of the country it is sold in.
These regulations include non-
contamination from foreign substances or the environment and the pills meeting the
specified formula that was approved by the FDA.
Orion still has exclusive rights to
manufacture the drug, as it was developed by their Research and Development
department that is located in the United States (although they are in the process of
opening another facility in Shanghai, China).
A competitor named Zeus is currently in
Stage 2 of FDA testing on a drug that would directly compete with OrionsBelt, and the
company estimates the likelihood of this product gaining approval in the next 2 years is
pretty low but will increase in the following years.
The drug is by prescription only, and is packaged in batches of 30 in sealed plastic
containers with a label that contains drug information and batch identification.
The
containers are sourced from Indonesia and the labels are printed in Shanghai, China based
on a file sent by the focal firm.
The raw materials for the pill are procured from the
Philippines, the northern coastal and inland regions of China, and southwestern Russia.
The pills are then manufactured and packaged exclusively by a 3
rd
party in Shanghai,
China using machines, processes, and quality control processes that were agreed to
contractually between the supplier and Orion.
The final product is required to be shipped by an approved 3
rd
party carrier on pallets to a
distribution center that is owned by Orion, but the manufacturer is required to contract
with this 3
rd
party carrier.
The distribution facilities are regionally located, with 10 in the
United States, 1 in the UK, 4 in continental Europe, 1 in China, and 1 in Japan.
The
distribution facilities are owned and managed by Orion, but operationally are run by a 3
rd
party warehousing company.
The final product is shipped to customers from the
distribution facilities using a 3rd party LTL contracted directly with Orion.
1.
Identify 6 – 10 risks in the supply chain that could cause potential disruptions
-
Contamination of Drugs (FDA approval)
-
Hurricane in the Philippines
-
Tariffs/Embargo’s on China
-
War/Instability in Russia
-
Formula Errors
-
Label Printing Errors (3
rd
Party)
2.
Categorize these risks as to their probability of occurrence and potential impact if
the disruption did occur
-
Contamination of Drugs (Severe, Moderate Likelihood) if the drugs were to
become contaminated then the costs of producing those specific pills would have
to be lost. Potentially even more cost incurred on recalls.
-
Hurricane in Philippines (Severe, Moderate Likelihood) if a hurricane were to hit
the Philippines, then Orion would likely need to find a new supplier of the
ingredients needed to make the new medicine.
-
Tariffs/Embargo’s on China (Moderate, Moderate) tariffs could make the cost of
goods go up dramatically for Orion
-
War/Instability in Russia (Moderate, Moderate) war makes doing business more
difficult because of tensions between nations and government regulations.
-
Formula Errors (Severe, Unlikely) if the formula for their medicine were to have
an error, then similar to the contaminations, costs would be incurred for a product
that could not be sold.
-
Label Printing Errors (3
rd
Party) (Severe, Moderate) if the labels were to be
printed incorrectly Orion could have to pay hefty FDA fines.
3.
Develop potential mitigation strategies for each risk you identify.
-
Efforts will be maintained to ensure no contamination in the final product.
Something such as testing every 10,000
th
pill for contaminants could help prevent
such a mistake before it becomes a major issue.
-
Find a supplier other than the one in the Philippines in case of such a natural
disaster. By having two selected and equipped suppliers, we can ensure we are not
over reliant on any specific location.
-
Like the last mitigation strategy, find alternative manufacturers in the case that
doing business in China becomes too expensive.
-
Like the last mitigation strategy, find alternative manufacturers in the case that
doing business in Russia becomes too dangerous or something your firm no
longer feels ethically comfortable to do
-
Efforts will be maintained to ensure the formula has not been compromised
during production. Using a similar method to contamination, we can check every
10,000 or so pill and ensure the formula is exactly what the FDA has approved.
-
It is essential to have the correct labels for medicines, failure to correctly label it
could result in death. For this reason, I would partner with a local label maker as
well. This way if any of the labels you receive from overseas has errors, we have
a supplier willing to take the order in a place that limits the amount of
transportation time.
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