DCAT Archives: Programs & Events




Pharmaceutical Supply Chain Initiative: A Case Study
Michael Velez, Sourcing Director, Global Procurement, Merck & Co., Inc.

Presented on Wednesday, November 4, 2009 at the Hyatt Regency Hotel,
New Brunswick, NJ.


Velez described how Merck’s Guiding Principles and commitment to corporate responsibility directly influence the company’s approach to risk management and it participation in the Pharmaceutical Supply Chain Initiative (PSCI). The PSCI was created in 2006 by a group of pharmaceutical companies. The organization’s Pharmaceutical Industry Principles for Responsible Supply Chain Management (The Principles) are designed to address responsible business practices in the areas of ethics, labor, health, safety and the environment and related management systems.

As part of Merck’s comprehensive Risk Management Program the company includes a Detailed Supplier Ethical Assessment (DSEA) Program that addresses general ethics, ethics down the supply chain, labor issues (forced/child), as well as custom-trade partnership against terrorism and security, supplier diversity and financial solvency.

A timeline showed the evolution of Merck’s risk management program, beginning with procurement reengineering efforts and safety and environmental evaluations of key suppliers in 1994. Over the years the focus shifted to global procurement, increased external manufacturing and the need for additional risk management systems, which continue to evolve today.

Velez reviewed the components of Merck’s external manufacturing GSE evaluation program, which include governance structure, communication of expectations, initial risk assessment, performance assessment/audit, knowledge management and ongoing monitoring.

With Merck’s supply strategy driving increased contract manufacturing, audits are focused on new and high risk facilities, as well as critical suppliers.

Common audit issues found, include: 
    Inadequate pharma compound industrial hygiene assessments 
    Inadequate process safety management 
    Inadequate hazardous work procedures 
    Lack of assessments of facility discharges and emissions 
    Security program gaps

So what has Merck learned through this process?
Velez outlined lessons learned and pitfalls to avoid: 
    Ensure senior leadership sponsorship before implementing program. 
    Clearly define governance structure. 
    Make PSCI program part of comprehensive risk management program. 
    Physical audit requirements require additional resources-contracted externally. 
    Don’t try to audit every supplier; take a risk-based approach.