ANALYSIS &

STUDY OF
“WHEN
SUPPLY IS
OF PUBLIC
INTEREST:
ROCHE &
TAMIFLU” –
A SUPPLY
CHAIN
MANAGEME
NT
PERSPECTIV
E

Professor In-Charge:
 1. Discuss the reasons Roche decided to develop its oral drug Tamiflu and not a
vaccine for dealing with the influenza pandemic. What forecasting and delivery
approach did it follow to cater to worldwide demand and what specific challenges
did it face in this process?
Answer
Roche decided to develop an oral drug and not a vaccine for dealing with the influenza
pandemic due to the following reasons:

a) Development delay – While vaccination is well established as the most effective means
of preventing influenza, vaccine development against a particular influenza strain could
start only once a pandemic had begun and the strain has been identified. Then it could
take another six months or more for mass production of the vaccine to satisfy the
quantities needed. Therefore, virus-specific vaccines were unlikely to be available during
the initial wave of a pandemic which could lead to huge death rates
b) Limited Manufacturing capacity – Manufacturing capacity for vaccines was limited; it
was estimated that capacity was roughly 85 million treatment courses per year. In
contrast to vaccines, Tamiflu was designed to be effective against any strain of Type A or
B influenza. Thus, there was the potential to establish a preparedness plan based on
creating a stockpile of the drug in conjunction with an appropriate plan for distribution to
the affected population
c) Stockpile capacity – Many models for US and EU predicted that if a stockpile covering
29% of the population was used to treat people who fell ill (within one day after onset of
symptoms), death rates could be halved. If a larger stockpile, covering 100% of the
population was used to treat people who fell ill and to protect “all” of these people’s
contacts (to contain the spread of the disease), the death rate could be cut by over 80%
d) Greater shelf life – With respect to its vaccine counterpart, oral antiviral has a shelf life
of 5 years from its encapsulation and thus greatly increases the reusability of the product
even if one or two of the flu seasons turn out to be mild
The forecasting for the upcoming demand was done by using historic data of the past seasonal
(winter) flus and influenzas. However, this varied from country to country as only 1 out of 2
people were like to go to the doctor in US and EU and 1 out of every 2 of those people were
likely to get the right medication for it. This made the demand in US and EU very low even
though the number of cases and the mortality rate were pretty high.
Delivery was handled by Roche through various qualified sellers and distributors of their
products all over the world. The lead time was also reduced from 8 months to 6 months to tackle
the speed so that infection patients and people all over the world get the medicine at a faster rate.
As building new plants would have taken more time, Roche started contracts with various
manufacturers all over the world to ramp up their production. This would also, in turn, lead to a
faster distribution on their own soil.
Challenges faced by the organization were:
i. During the pressure phase, companies that ordered the drug first would be catered first
and companies that would order last would get it last. Due to this, the wait time would go
upto a year depending on the demand. Some responded to the prospect of a lengthy wait
by putting pressure on Roche – in areas where they had significant leverage such as
pricing and regulatory approvals
ii. There was a PR backlash on Roche due to them not being able to supply to the demand
properly
iii. Government and people started pressurizing Roche to sell the intellectual property rights
to better cater to the demand. This would have turned out to be quite a dip in their profits.
iv. There was no final commitment by countries; even US, because of whom Roche changed
their Supply chain to meet the demand had given no final word on how many they would
buy
v. Roche relied on a relatively rare Chinese spice, star anise, to make around two-thirds of
the acid that was used to prepare the vaccine. The spice, grown in the mountains of
southern China, was in increasingly short supply
vi. Some countries, such as China and India, demanded access to the license to manufacture
Tamiflu themselves
vii. While various factors suggest that this strain could be the cause of the next pandemic, it
is unknown when it will occur, whether it will be caused by H5N1 or another new virus
or how severe it will be
 2. Assess Roche’s supply chain network strategy to deal with the huge demand of
Tamiflu when the pandemic hit USA and the global world.
Answer
It was identified by Roche that in case of an avian flu pandemic vaccination would be the best
treatment in controlling its spread but since it would take time to identify the strains of the flu
and build a vaccine accordingly, antiviral drugs such as Tamiflu would be instrumental in
stopping the spread of the pandemic. As per the recommendations provided by WHO, the
countries were advised to prepare for the pandemic by stockpiling on resources to face the avian
flu. Scientists group started preparing models for emergency preparedness in case of a pandemic
that made recommendations on how many resources countries should stockpile on depending on
their population and the risk associated with the spread of the disease.
As a result of this it was observed that in 2005, 15 countries had a national stockpile at hand
while few other orders were also received from countries facing high risk of emergence of
pandemic. Roche also donated 3 million treatments to WHO to aid in stopping the spread of the
flu. During this time Roche observed an increase in demand for stockpiling from governments as
a result of cases of avian flu reported during 2003-2005. These requests from governments did
not imply any obligation to buy, but looking at the time take in production factoring in the
production cycles and time take to respond to firm orders Roche had to anticipate demand and
produce at risk. Responding to a surge in demand became a mammoth task especially looking at
the complex production processes hence Roche put in the first come first serve rule for
governments based on when firm orders were placed. This resulted in long wait times of about
year or two for some countries.
Roche had made decision of increasing the production capacity in small increments during 2004-
2005; simultaneously it was working with the US govt. in preparing a pandemic preparedness
plan. After the hurricane Katrina Us govt. placed an inquiry to Roche for production of 200
million treatments which was four times more than Roche’s annual production capacity with all
of it being manufactured on US soil. This became a turning point for Roche it started taking
substantial steps for increasing its production capacity.
The team decided to ramp up the production to about 300 million treatments in a time of 18
months. Although most of the production was to be done in US, it would be available for
purchase all over the world. The team started searching globally for existing facilities and
infrastructure that could be integrated into the Roche network. It also made a decision which was
unusual for a drug manufacturer to not use qualified suppliers continuously or at all. However
the qualification of the supplier which implied the capacity of the supplier should be used if the
need arises. Following these steps Roche team had set the timeline for 8 months which was very
aggressive considering the process which could have taken almost 24 months. Although Roche
received a lot of criticism and negative coverage from the media but their proactive and
transparent communication strategy helped them circumvent the negative publicity.
As the next phase in 2007, Roche started working on two goals simultaneously – first was to
build, register and test the network and second, to execute a production plan that can clear the
backlog.
Moreover, it needed the supply network to be qualified at a global level. Roche built a list of
potential suppliers consisting of both internal and external to it, and included one extra supplier
for each step as a contingency. Fortunately, Roche could qualify all the suppliers and expanded
from a network of 12 entities to a network of 28 entities. Some companies also performed more
than one production step. There were challenges in increasing the capacities in Shikimic acid and
Azide steps. To increase the capacity of Shikimic acid, Roche transferred a fermentation process
to a food chemical manufacturing company. For Azide, Roche funded a start up who had the
capacity of a rapid technological transfer. The health authorities also co-operated with Roche’s
fast approach and accelerated the approval process for the Tamiflu product.
During 2005-2006, Roche worked with Government bodies and the WHO on preparedness
planning and tackled issues of affordability, access and coverage. Stockpile planning
announcements of 25 countries were made public. China and India wanted license to
manufacture Tamiflu themselves for which, Roche granted a sub-license to HEC and Shanghai
Pharmaceuticals in China and Hetero Pharmaceuticals in India. According to the agreement,
these companies had the right to manufacture the drug and sell to any country that did not follow
US patent laws and was asked to pay a token royalty in return. Further, Roche had a technology
transfer agreement with an African company and Thailand did an encapsulation in-country.
Taiwan finally decided to buy from Roche. This was how countries started to gain access to the
antiviral drug. The affordability of the drug was ensured by a multi-tiered pricing structure which
depended on the country of sale. Additionally, Roche donated 2 million courses of treatment to
the WHO in support of Southeast Asian and African countries. To ensure convenient
administration and coverage for young children, Roche developed three kinds of formulations –
powder, API and syrup.
 3. Elaborate on the elements of the New Supply Chain process Roche put in place with
respect to new suppliers. Identify any key bottlenecks in the process and what do
you think it could have done to better improve its supply chain network?
Answer
Since scaling internal facilities was time consuming and demand for vaccine was high, Roche
decided to explore external suppliers, that had the potential to be used as manufacturing facility
for Tamiflu vaccine. Roche decided to examine external manufacturers based on capacity,
technical capability, quality and speed at which capacity could be scaled up. Also, only qualified
manufacturers who had regulatory permissions were chosen for capacity expansion. Once the
facilities were identified, modifications to infrastructure were made and technology was
transferred to them. Since a major portion of the manufacturing costs were from fixed costs,
using the external facilities also ensured that total costs did not increase drastically. Roches
network increased from 12 entities to 28 entities in a short span of 16 months. This reduced the
lead time for manufacture from 8 months to roughly 6 months. A major problem with this could
have been the additional transportation costs and delays, however Roche ensured that the
transportation did not create a bottleneck by expediting air shipping and by opening up facilities
that were used for manufacture of other products. The result of this careful execution was that
Roche was able to quickly improve network and implement a production plan to quickly work
off the backlog. Roche also focused on affordability by using a multi tired pricing structure for
developed, lower middle- and low-income countries.
A key bottleneck in the process is the Azide step because of the unique problems associated with
the process. Although Roche identified a supplier that was previously not in the pharmaceuticals
business to improve step 3, the plant capital requirements are still high. Since plans to remove
Azide step were already discussed, Roche could have allocated more resources and by
collaborating with governments the time required to find an alternative to this step could be
reduced. By providing an alternative process, Roche could have significantly reduced the plant
requirements needed for the processing of Azide and also provide an alternative to this process
which could be run parallelly with the existing method. By doing so Roche could have
significantly reduced the bottlenecks that exist in the new supply chain network.
 4. Imagine, If Roche is now called to respond to the present Covid-19 situation, what
would its supply chain network strategy be? Should it be similar to what it adopted
during the influenza pandemic or radically different one? Elaborate your answer
with justification/data as necessary.
Answer
ASSUMPTION - Tamiflu will be used as a suppressant for the symptoms of coronavirus and we
are not considering that Roche will start making/researching vaccines.
1. DIFFERENCES BETWEEN INFLUENZA AND COVID-19
 Influenza has a shorter median incubation period (the time from infection to appearance
of symptoms) and a shorter serial interval (the time between successive cases) than
COVID-19 virus.
 Children are important drivers of influenza virus transmission in the community. For
COVID-19 virus, initial data indicates that children are less affected than adults and that
clinical attack rates in the 0-19 age group are low.
 Mortality for COVID-19 appears higher than for influenza, especially seasonal influenza.
While the true mortality of COVID-19 will take some time to fully understand, the data
we have so far indicate that the crude mortality ratio (the number of reported deaths
divided by the reported cases) is between 3-4%. For seasonal influenza, mortality is
usually well below 0.1%.
2. CURRENT SCENARIO
 Total cases of COVID-19 are 55.6M; active cases are 18.46M and there have been 1.34M
deaths.
 COVID-19 has spread in around 218 countries.
 There are also many countries which have totally or partially restricted cross-border
movement of people and goods causing major disruptions in the supply chain.
3. OUR PROPOSAL
The current strategy for meeting the demand for TamiFlu in the current coronavirus pandemic
will be a more aggressive version of the strategy adopted during the 2005-06 Influenza pandemic
preparedness period. Due to higher mortality and higher spread of COVID-19 (currently in 218
countries) , the objective for the supply chain is to maximize production and minimize lead time
keeping in mind the need to provide medicines on a city-wise/region-wise basis, based on
occurrence of hotspots, within a short time-frame of 2-3 days.
This would require the following steps:
 Stockpiles of tamiflu within every country's borders to cover at the very least 25% of
their population.
 There should also be a massive stockpile of tamiflu in a central location with thorough
connectivity options(air, road, rail , sea etc) for every geographic boundary like Europe,
 South East Asia, Asia Pacific. This stockpile should be under the auspices of a global
organization like WHO or UN to ensure that regional politics do not add an additional
delay.
 As the scale for any pandemic can never be accurately forecasted Roche would need to
further expand its own production capabilities and bring in regional partners to offload
production, bringing down the burden on its facilities while also speeding up the
production and distribution.
 These partners can either be absorbed/acqui-hired or they can be allowed to manufacture
the drug by paying a royalty for the duration that they make the drug.
 An additional advantage of bringing in manufacturing partners is the agility that is
brought in the supply chain. The region which has lower cases of the disease can lower
the production keeping only a small surplus for any emergencies while the high-risk
regions and hot spot areas can keep production at max level possible. In case of sudden
outbreak, the surplus from nearby countries/locations can be put into use.
 Another key point is the sourcing of raw materials. Most raw materials and most active
pharmaceutical ingredients are made in Asia, either in China or India. So, the supply
chain must spider all the way across the world from Asia. Wherever possible alternative
raw material sources must be recognized/cultivated to avoid disruption in intake of raw
materials due to supply chain disruptions like lockdowns, closed borders etc.
Using above system, we will be able to achieve the six rights of supply-chain Management:
Right product, Right quantity, Right condition, Right place, Right time, Right cost
 5. Examine the role played by WHO (World Health Organization) in dealing with a
pandemic situation. Assess its organizational capability and influence to manage the
supply-demand crisis of any oral drug or vaccine in the world in the face of a
pandemic situation.
Answer
The Role of WHO in a Pandemic
Self-described as “The Global Guardian of Health” the WHO is at the heart of every health crisis
that has broken ever since its inception in 1948. The WHO is responsible for ensuring any public
health crisis is handled with utmost care, ensuring availability of quality healthcare for each
human life.
At the first sign of any potential threat of a pandemic, the WHO monitors and classifies any and
all emerging influenza strains. This is so that information of any of these influenza strains can be
given to the public health officials to immediately start work on a potential vaccine. This was last
done in 2005 when the WHO released a lot of “10 things you should know about pandemic
influenza” for the very same reason as mentioned above.
The WHO has a vast network of health experts and scientists in its employ whose sole aim is to
ensure the public is aware and prepared against a pandemic. To do this, these health experts take
into account:
 Benchmarking the virus against a similar strain in the past,
 The method of spreading of the virus in order to cull it
 Assessment of current medical infrastructure in order to be better prepared in-case of
multiple waves of the virus
 Debunking any false myths and “miracle cures” in the age of today’s fake news world.
 Actively updating any guidelines or recommendations with regard to the virus so as to
push out the true and verified information on tackling it.
In short, the WHO monitors all aspects of any potential pandemic actively ensuring each life has
the tools required to stay safe from its harms.
Managing a Supply Demand Crisis
With constant monitoring of the pandemic situation, the WHO is usually well aware of any
supply demand crisis in advance. However, due to its sheer size and several external factors it is
simply not possible for a behemoth such as the WHO to mitigate all supply chain issues which
arise from a pandemic worldwide.
In the event of a supply demand crisis the WHO immediately issues guidelines across its value
and supply chains with utmost transparency. This is done after thorough assessment of the
shortage of the medical equipment in whatever form. All data from the cost of the healthcare to
the data used is disclosed to the results of the clinical trials undergone. Apart from this, various
operational costs such as production costs, supply chain mark-ups and material and
procurement cost are
released. The WHO works in collaboration with leading scientists, businesses and public health
organizations to ensure a rapid response to any pandemic situation which may arise with a focus
on immunizing patients as much as possible before a fully working vaccine is released the
public. Once a vaccine is available, the WHO works on ensuring access on a priority basis with
the most impacted and affected.
As part of its Strategic Preparedness and Response Plan, it has launched a supply chain task force
to support the shortage of essential supplies including clinical support equipment, supplies,
therapeutics and vaccines. The organization plans to deploy a hub and spoke distribution chain
including international consolidation hubs in and regional staging areas located along primary
corridors for distribution. It also boasts of airlifts capabilities to transfer cargo between
international and regional hubs and onward to countries. With these services in place, WHO has
shown strong organizational capabilities with preparedness to supply any essential drug or
vaccine to countries during the time of need.