37 TWENTYFOURSEVENBIOPHARMA Issue 1 / March 2026 LGM PHARMA now requires diversified sources, safety-stock planning and tight forecasting. Avoid single points of failure: The risk of failure from factors beyond any company’s control is much higher in today’s unstable global climate. Supply chains built around a single critical point of failure – most often the API – face the greatest risk, especially for generics, where thin margins and a single offshore source are common. Given extended lead times and intermittent raw material shortages, MAHs/NDA-ANDA holders and their manufacturing partners should size API safety stock by risk, qualify multiple suppliers and, when practical, diversify across regions. It’s worth noting that sourcing an API from two different suppliers does not meaningfully reduce risk if both rely on a key starting material from the same source or geographic region. In that case, an underlying supply chain vulnerability remains. Where only one viable source exists for a specialised or complex API, a more deliberate supplier relationship can help sustain production over the product’s lifecycle. Early visibility to production forecasts, premium payments for exclusivity and potential royalties or shared upside terms tied to end-product sales are examples of mechanisms sponsors sometimes use to reinforce continuity. It is best to make these arrangements proactively rather than waiting until discontinuation occurs. Any loss of a critical API supplier leads to a rush to qualify a new source, slowing time to market or disrupting commercial availability. Building a strategic partnership is particularly important for companies that represent only a small share of an API supplier’s market; a supplier may reduce capacity or even discontinue API production if it loses a major customer, regardless of smaller customers’ needs. Rising GDUFA facility and DMF maintenance costs amplify this risk, so it’s prudent to assess supplier economics and long-term intent as part of routine supplier risk reviews. Evaluate safety stocks The Covid-19 pandemic taught the pharmaceutical industry the importance of maintaining safety stocks of critical raw materials and components. Many firms now maintain six-to-nine months of safety stocks compared to only three to four months before the pandemic. Large buffers, however, tie up working capital and can limit investment elsewhere, so targets should be risk-based. Ideally, your supplier should also have a robust safetystock program, maintaining a three-to-six month supply of the raw materials needed to produce your API. You might also negotiate with them to maintain a safety stock of the API itself. It’s wise to conduct quarterly rolling demand forecasts for the upcoming 12-18 months, sharing regular updates with your suppliers so they can proactively plan for your needs. This way, your combined safety stocks provide critical back-up in case of a shortage and support longer supply continuity. Qualifying API suppliers Thorough supplier qualification is a cornerstone of supply chain risk management. It identifies potential vulnerabilities early, supports consistent quality and reduces disruption risk. API supplier qualification always starts with quality. Quality agreements should be put in place early to clarify responsibilities and notification windows. There should be an obligation for suppliers to disclose adverse regulatory findings, including import alerts, warning letters, Form 483 observations, VAI or OAI findings and corrective responses. A comprehensive paper audit by a qualified quality professional should assess the supplier’s quality management system (QMS), SOPs and performance
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