Jeff Laplante: Pharmaceutical supply chains face some of the most demanding challenges in modern business. Supplier relationships must balance compliance with FDA regulations, cGMP requirements, and quality standards while delivering efficiency and cost-effectiveness. The complexity of these networks means that even minor missteps can quickly escalate into significant risks for operations and patient safety.
To help us unpack these issues, I’m joined by Charles Thomas, a seasoned pharmaceutical consultant with decades of experience in healthcare procurement. Charles has worked inside some of the most complex supplier ecosystems in the industry and has a unique perspective on where the real challenges, and opportunities, lie.
Charles Thomas: Thanks, Jeff. I'm happy to be here to dissect this critical topic. Procuring and managing suppliers in the pharmaceutical world isn't just about cost; it’s about precision, compliance, and strategy. More often than not, the devil is in the details, and I’m eager to shed some light on those details today.
Jeff: Let's jump right in!
Identifying Blind Spots in Post-contract Execution
Jeff: Charles, to kick things off, let’s get your take on where the big blind spots usually arise after contracts are signed. Some things I’ve seen include vague service-level expectations, unclear ownership for tracking contract compliance, and poor visibility into real-time spend versus negotiated terms. What are the areas that you’ve seen pharmaceutical companies overlook?
Charles: Great question. While pharmaceutical companies often pour time and resources into negotiating detailed contracts, it's the follow-through where things tend to fall apart. For example, contracts often include key performance indicators (KPIs), but in many cases, they aren’t enforced. Suppliers may not be held accountable for deliverables, and procurement teams, focused on their next contract negotiation, move on too quickly.
The result is what I call "microleakages." These are small lapses or omissions, such as minor pricing errors or unmonitored changes in supplier catalogs. Individually, they seem insignificant, but cumulatively, they can quietly erode budgets and result in millions of dollars in financial leakage before anyone notices.
Jeff: "Microleakages" — I like that term. Can you share an example of how these occur in a real-world setting?
Charles: Absolutely. I once performed an audit for a pharmaceutical client that utilized a supplier-managed catalog. Over time, small, unmonitored price hikes of a few percentage points occurred. It didn’t seem like much at first. However, when we tallied it all up, these incremental increases added up to thousands and thousands of dollars in overpayments. The problem? No one consistently reviewed the invoices against the agreed pricing terms.
Jeff: Sounds like a perfect example of how seemingly small issues can snowball into significant losses. This makes me wonder. Does the way organizations structure their procurement teams contribute to these challenges? I see that Procurement is starting to evolve from being a transactional back-office function into more of a strategic role, but I still see gaps in many companies. Sometimes they are stretched too thin, often without the right tools or visibility. Is that part of the problem?
Structural Inefficiencies in Procurement
Charles: Absolutely. Procurement in pharma is often split across multiple layers. Regional or country managers negotiate large-scale supplier agreements, while separate transactional teams handle the day-to-day purchasing. This siloed structure creates inefficiencies because information isn’t always shared across teams.
Additionally, supplier catalogs may only get a full review once a year, while pricing changes can happen dynamically — sometimes even daily. Without real-time validation of transactions against agreed terms, errors inevitably creep in. This creates a recipe for inefficiency, leading to further erosion of value over time.
Jeff: It sounds like these inefficiencies also make it harder to maintain consistency at a regional level, even with centralized agreements.
Charles: Exactly. When you’re managing thousands of stock-keeping units (SKUs), it's impractical to manually verify every transaction against contract terms daily. Instead, most companies rely on periodic audits — maybe quarterly or even semi-annually. Unfortunately, by the time discrepancies are caught, they’ve typically compounded into larger problems, making recovery efforts more difficult and time-consuming.
Addressing Hidden Leakages in Supplier Networks
Jeff: Let's shift to solutions and how pharmaceutical companies can proactively tackle and stay ahead of these issues. A great starting point is conducting a robust supplier optimization project. This involves analyzing spend data and purchase orders to identify where the organization is getting the most value. By consolidating spending with pre-vetted, preferred suppliers, companies not only tighten controls but also strengthen their supplier relationships.
Charles: Pharma companies deal with a diverse range of supplier categories: raw materials, IT suppliers, facilities management, and more. Each category requires tailored oversight to ensure contracts deliver ongoing value rather than just initial savings.
Jeff: That sounds like a significant undertaking. What practical first steps would you recommend for companies new to this?
Charles: First, forecast your project spend for the next three to five years. This gives better visibility into future needs and enables strategic alignment between procurement and business stakeholders. Regular meetings between these groups are essential to fostering alignment and understanding of upcoming priorities.
Additionally, companies should emphasize proactive audits and contract administration. Routine checks can help close gaps that might otherwise go unnoticed. Reinforcing procurement’s value by tracking and communicating savings is another key step, as it underscores the department’s strategic importance.
Partnering with External Compliance Experts
Jeff: Many large pharmaceutical organizations already have internal procurement teams. With that in mind, where does a third-party compliance partner like Revenew come into the picture? Internal procurement teams often face capacity constraints or may lack the specific expertise needed to identify certain issues. That’s where we come in.
Revenew bridges those gaps. For example, we specialize in auditing pricing drift to recover savings that might otherwise be missed. Pre-contract, we help strengthen agreements by suggesting stronger terms and enforceable KPIs. Post-contract, we monitor deliverables, track milestones, and conduct audits tailored to uncover off-contract spending or compliance lapses. Companies can then use those recommendations for future contract frameworks.
We can also add value in improving collaboration across departments like Procurement, Finance, and Legal. By connecting these dots, companies can focus on their core mission, developing life-saving medicines, while knowing their supplier network is optimized and compliant.
Closing
Jeff: It’s clear that effective supplier management isn’t just about cost-cutting; it’s also about fostering relationships, ensuring compliance, and driving strategic value. For companies in the pharmaceutical space, this approach is becoming less of a competitive advantage and more of a necessity.
Charles: Completely agree. Pharmaceutical companies stand to gain so much by moving beyond transactional procurement to strategic oversight. Ultimately, when you gain visibility into your supplier relationships, you mitigate risks, protect margins, and uncover hidden opportunities for growth.
Jeff: For our readers, as you reflect on your current operations, take a moment to ask yourself if hidden inefficiencies might be quietly impacting your bottom line today. And more importantly, what steps could you take to secure those lost profits? With partners like Revenew, you don’t have to go it alone.
Charles, thank you so much for your time and for sharing your expertise.
Charles: My pleasure. It’s all about turning supplier management into a true strategic asset.
Jeff: Absolutely. Thanks again, Charles. Here’s to better supplier management and even stronger growth ahead!