Supply Chain Management

Supply Chain Integrity

Ensuring our high-quality medicines are available wherever and whenever patients need them is one of our top priorities. We work to maintain the safety and integrity of our medicines, beginning with the procurement of materials and extending throughout the production process. For both Lilly-owned facilities and external suppliers, we aim to manufacture our medicines in an efficient, effective and safe manner. The Lilly Quality System is the foundation for our quality standards and processes throughout the product development life cycle, including auditing and assessing third-party risk.

In addition to our efforts internally, we promote strong health, safety and environmental (HSE) practices with our suppliers and contract manufacturing organizations (CMOs). We also work to mitigate counterfeit medicines and illegal compounding to protect patient safety. A significant portion of our environmental and social impact is embedded in our supply chain, and we are committed to supporting our suppliers and CMOs as they work to improve their operations.

Supply Chain Oversight

Our external supply chain augments our operations, and we seek to work with like-minded suppliers who bring shared principles to how we operate together. We support the United Nations Global Compact (UNGC) principles, adhere to human rights and labor laws, comply with anti-corruption practices, endeavor to support small and under-leveraged businesses, and promote sustainability efforts designed to minimize our environmental footprint.

We utilize both a risk-based and proactive approach designed to prevent product shortage so that patients have access to the right medicine at the right time.

Our external suppliers and contract manufacturing organizations are an integral part of how we deliver medicines to patients, including those that supply research and development materials, active pharmaceutical ingredients (APIs), and final drug products. We work to ensure these partners meet the same quality, safety, and ethical standards we apply within our own operations. As our internal network expands to support increasing demand, our external partner network is expanding alongside it, and we apply consistent oversight across both. Together, our internal sites and external partners form a diversified network of capabilities, and we manage that network with the goal of ensuring patient access is not compromised by disruption at any single supplier, facility, or geography.

We continue to strengthen efforts for risk-based monitoring of our supply chain for quality and HSE events. Both quality and HSE considerations are integrated into Lilly’s process for evaluating potential new contract manufacturers, and formal assessments are conducted routinely for existing contract manufacturers.

In alignment with our Supplier Code of Business Conduct, we expect that our suppliers will source their materials responsibly and abstain from procuring materials from all conflict areas or sources including the Democratic Republic of Congo. We expect that our suppliers conduct their own due diligence regarding the source of any materials they provide to us in order to ensure those materials are obtained from areas that are conflict-free.

Supplier Engagement and Industry Alignment

We have taken steps to educate and engage our suppliers directly on HSE issues and help them build expertise around HSE topics. This includes our ongoing work as part of the Pharmaceutical Supply Chain Initiative (PSCI), a nonprofit business membership organization founded in 2006. PSCI and its member companies, created and maintain the Pharmaceutical Industry Principles for Responsible Supply Chain Management (the PSCI Principles), which provide our industry with consistent supplier performance standards in the areas of ethics, labor, health and safety, the environment and related management systems. At Lilly, we have aligned several codes, policies and procedures with the PSCI Principles.

Assessing & Auditing Supply Chain Participants

To meet the expectations of the Lilly quality system, our Global Quality Auditing and Compliance team conducts risk-based audits to oversee both internal manufacturing sites and external third-party operations. We use the results of these assessments to inform audit plans and identify areas for improvement.

Our manufacturing sites conduct internal risk assessments of purchased material - including raw materials, APIs, intermediates, packaging materials, and GMP consumables - based on quality standards. The risk assessments evaluate the supplier, complexity of the supply chain and how the material will be used to determine an overall risk classification, which helps inform the actions needed to approve a new supplier, and the ongoing requirements to manage the relationship. We oversee contract manufacturers’ conformance with regulatory requirements and quality expectations, including performing quality audits as needed.

For managing HSE risks, our manufacturing procurement contracts ask suppliers to support the PSCI Principles. We include additional HSE expectations in our Lilly Supplier Code of Business Conduct. Standard contract language also requires that manufacturing suppliers, if requested, agree to submit to audits assessing compliance with our expectations. For our suppliers with the highest HSE-related risks, we conduct assessments approximately every three years. We also engage with key suppliers on environmental sustainability topics such as climate change (greenhouse gas emissions), waste reduction and other relevant opportunities to seek to minimize the environmental footprint of our supply chain.

Third-Party Risk Management

We engage with third parties to access external expertise, streamline operations, and focus on our core strengths. However, working with third parties may increase potential risks such as service disruptions, data and security breaches, reputational harm, penalties and fines.

With leadership from an internal center of excellence, we have established a third-party risk management program focused on identifying and managing potential risks posed to the organization by working with third parties. The program has five foundational components: governance and delivery, policies and standards, management processes, tools and technology, and risk metrics and reporting. It focuses on risk areas including anti-corruption, cybersecurity, privacy, information systems quality, customer information quality, animal welfare, business continuity, and financial due diligence, with additional risk areas expected to be phased in as the program evolves. The program covers the full lifecycle from pre-contract due diligence through ongoing monitoring for the duration of each engagement.

Partnerships and Leadership

We are an active member of external associations and consortiums aimed at enhancing the security, quality and safety of pharmaceutical supply chains. Members of our global quality auditing and compliance group actively participate in Rx-360 and International Pharmaceutical Excipients Council (IPEC) working groups to provide input into industry guidelines and standards and align our processes with our peers. We currently hold a seat on the board of directors at Rx-360 and participate in several of the consortium’s working sub-groups to help ensure we stay informed of and help set industry best practices.

Resources

• Lilly Supplier Code of Business Conduct

Related Topics

• Patient Safety

• Ethics and Compliance

• Climate

• Supplier Development

• Supply

• Patient Safety

• HSE Governance

• Human Rights