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In Pharm Exec’s 2013 end-of-year supply chain roundup, we began with a three-word vision of the immediate future that left little room for ambiguity: “Serialization is coming.” With the impending laws regarding “track and trace” promising to alter the way pharmaceuticals are packaged and shipped, we outlined how global pharma was gearing up to deal with the effects of serialization, and how companies needed to review their own internal practices and those of their outsourcing partners, as the need for technology solutions for both sides of the outsourc
In Pharm Exec’s 2013 end-of-year supply chain roundup, we began with a three-word vision of the immediate future that left little room for ambiguity: “Serialization is coming.” With the impending laws regarding “track and trace” promising to alter the way pharmaceuticals are packaged and shipped, we outlined how global pharma was gearing up to deal with the effects of serialization, and how companies needed to review their own internal practices and those of their outsourcing partners, as the need for technology solutions for both sides of the outsourcing relationship became more evident.
Of course, that message still stands, and it is arguably even more urgent if we are to believe Ian Haynes of 3C Integrity Consulting, who unnerved many in the audience at London’s recent FlyPharma 2015 conference when he said that pharma is still not ready to meet the obligations of track and trace. But since 2013, a number of other concerns-some equally as transparent, others less immediately visible-have emerged to stand alongside the move to serialization as potentially major disruptions in the way the industry operates. Indeed, as we head into 2016, one industry insider believes the pharma supply chain is facing a confluence of challenges “the likes of which it has never seen before.”
Alan Kennedy, director at PartnerSave, pulls no punches when he outlines the litany of challenges that he sees confronting the pharma supply chain over the next five years. He points to “the escalating good distribution practice (GDP) demands on the industry (and the need for greater harmonization); the pressures from the marketplace for cheaper medicines; shifting consumer expectations, with the trend towards more specific, personalized medicines; and rocketing costs.”
The crises are already starting to hit. Kennedy says: “A lot of pharma companies are waking up to the fact that they need to sharpen up their act in terms of compliance with the regulations. But while a lot of the need for change is regulatory driven, it’s also competitive. There’s a lot of lip service paid to the need for reform, but the problem is translating the intention into action.”
One of Kennedy’s “perfect storms” on the horizon is gathering around outsourcing from, and supply to, emerging markets. As these are the markets “where growth is coming from,” he stresses that pharma companies must be better integrated and work more closely with their partners if they are to continue to expand in developing countries. “They’ve got to make sure that the best practices that apply here also apply there. There’s no use having a state-of-the-art facility in the US but not in, say, India or Latin America, where you’re doing business; products have to be reliably protected from start to finish.”
John Menna, UPS vice president of global strategy, healthcare logistics, often observes companies “doing a fantastic job of maintaining the efficacy of their products from manufacturer all the way to the destination country.” But when the products get to their destination, where there isn’t the same commitment to rigorous procedures, “they end up not being stored at the proper temperature, in the right environment, and with the right protocols.” And companies may be unaware of this, Menna adds. “If a vice president of supply chain at a big Pharma company flies out to the destination and sees how products are being stored there, they may be in for a shock. Companies need to take a hard look at their supply chain endpoints, and at the providers that they’re using.”
Fast-growing firms must establish their emerging market networks in a “much smarter, more flexible way,” Vitaly Glozman, partner at PwC, told Pharm Exec. Traditionally, big Pharma’s “huge, static networks” have been difficult to change or use effectively. Glozman believes that a “hub-and-spoke” model could provide the key. “By investing in a hub in, for example, Dubai and then outsourcing the hub’s ‘arms and legs’ to local distribution warehouses across the Middle East, a company can minimize its CAPEX investment and achieve flexibility,” he explains. “Or, if things go south, it has the ability to reduce volumes and spend, kind of like transitioning its CAPEX to its OPEX.”
As companies gear up to expand into more countries with more products, however, there will be, accordingly, more threats to data and product security. “A lot of companies are going to be selling so-called drug-device combination products that include data collection capabilities. These products will enable the patient to communicate the results. How that data will be transitioned back to the pharma company or provider presents a big challenge. Companies will not only have to deal with product security but also patient information security,” says Glozman.
The patient ‘pull’
Certainly, pharma seems somewhat unprepared for the supply chain demands of an increasingly patient-focused future. This is largely a result of the healthcare supply chain remaining, says Menna, a “push supply chain, where manufacturers, wholesalers and distributors push products into the channel and downstream to the hospitals, doctors’ officers and ultimately to the patient.”
But things are moving to a point where patients are pulling products through the supply chain for their own consumption. “This is similar to a retail environment; to take an extreme example, it’s like an online purchase of audio-visual equipment to be delivered to the home.” With more personalized medicine procedures being done outside the institutional setting and closer to the patient- either in an outpatient facility or even patients’ homes-logistics solutions will need to start providing for the sending of alerts to patients, allowing them to determine when and how a product is delivered, and facilitating the transportation of critical specimens from the patient to diagnostic labs.
Data: Key cog in chain
As the pharma supply chain evolves from “push” to “pull,” analytics will become a more vital part of the process. Much has been written about analytics and big data, but now more than ever, leveraging the data that pharma has been collecting and investing in predictive and prescriptive analytics will be key to maximizing the promise of data, for issues ranging from temperature tracking to warnings of drug shortages and recalls.
“You’ll start to see companies making more use of big data to develop better therapies and leaner supply chains in the next five years,” says Menna. The challenge of analytics begins with determining the different business questions you want the data to answer, Glozman says. “Otherwise, analytics is a very strategic tool that can be misunderstood and misused.” He goes on: “You need bright, capable people managing your supply chain. You don’t just want people who say, ‘Let’s do some analytics.’ They need to say, ‘Wait a second, what is the specific problem we need to understand better? Let’s identify the data attributes and then define our analytics.’”
For Kevin Pegels, VP, global supply chain management – PS Biotech, Bayer HealthCare, there are ongoing issues around end-to-end data availability and decision-making that also need addressing. “There is a gap right now in pharma with regard to the visibility of data concerning suppliers’ capacity and inventory and customer inventory,” he says. “What inventory do customers have? What is patients’ consumption? This information is critical for an efficient supply chain.”
Pegels formerly worked in the consumer packaged goods business, which he says “is about 15–20 years ahead of pharma in terms of best practice supply chain management” He points out that as soon as consumption is seen, for example, at a Walmart store, that immediately drives orders to the suppliers for replenishment shipments to the Walmart warehouses. “Pharma is long way from that kind of end-to-end visibility, but it is catching up, says Pegels, “because we are finally realizing that the supply chain can add a lot of value.”
Outside of consumer packaged goods, which other industries can pharma look to for lessons on optimizing the supply chain? Alan Kennedy notes that one industry that has been a big advocate of supply chain integration for the last two decades is construction. “The construction industry has the disadvantage of having one of the most complex supply chains out there,” he says. “Every project is a one-off, every project needs a different supply chain, and every one is organized in a different way, all for relatively short periods of time. Construction has all sorts of challenges that are driving real, close collaboration.” The automotive industry’s supply chain management also “is right at the forefront,”says Kennedy, along with retail and electronics.
But while best practices from other industry supply chains can be adopted by healthcare, “it is very important to note that healthcare is different,” says Menna. “The first thing to remember is that at the end
of the healthcare supply chain is the patient, whose quality of life will be affected, and hopefully improved, by the treatments he or she receives. So there is a certain level of urgency, because we are talking life or death, or at least quality of life.” Second, the sensitivity of the products and the regulatory environment surrounding their movement and storage “are unlike anything in any other industry.”
Own innovation is vital
Given those dynamics, pharma still needs to find its own solutions for its own supply chain challenges. The “big answer” for Kennedy is that companies have to start integrating more successfully. “An integrated supply chain is more than just a collection of collaborative organizations,” he notes. “If you look at it as a box, within that box you’ve got all the network controls and tools: quality management, shipment visibility, inventory management, regulatory compliance, network communications, education, and training. A properly integrated supply chain addresses all these issues as a unified network.”
For Glozman, cost will become key. “I believe there’ll be a push for the lowest common denominator in terms of cost. I don’t think companies have yet begun to address this issue properly. Bending the supply chain cost curve is going to be critical.” Glozman also sees more focus on collaborating with regulators. “The industry still currently deals with the regulator as a separate entity rather than as a collaborator,” he says. But with so many changes looming over the next five to 10 years, certainly as far as manufacturing technologies are concerned, “the industry will change to have a much more collaborative relationship with regulators.” Similar to what has taken place in other regulated industries, Glozman sees pharma companies “actually co-locating a regulator staff member within their facility and working with them on new product development.”
The industry “is currently about 30-35% over capacity and it will take a little while to subsume this, because some of this capacity is not ready for the future,” Glozman adds. There will be “a lot more flexible, single-use manufacturing, particularly for complex and biologic products where companies want to minimize the cross-contamination risks.” For more high-volume manufacturing, he adds, “I think we are going to see continuous manufacturing become more of a standard over the next five years.”
Better leveraging of end-to-end data and decision-making will shorten lead times within the pharma supply chain, says Kevin Pegels. He also sees supply chain management gaining more stature within pharma companies. “You may see a chief supply chain officer reporting to the CEO in the next five years,” he says. “With all the competition and downward pressure on pricing, the supply chain needs to play a bigger role to maximize cost efficiency. And just to be part of the game with customers, companies have to have reliable and predictive supply. Pharma is realizing that it has to start investing now.”
Against the clock
The time the industry has to re-engineer its supply chain is hardly in abundance. Is such a revamp of current practices achievable in such a relatively short time? Despite his concerns for the future, Alan Kennedy, for one, is confident that “there’s always someone to take the lead, and some companies will do that. Once that happens, they will see a big competitive advantage coming in their direction. They will see quality improvements, profitability improvements-all the advantages that come with better integration.”
Maybe then pharma’s supply chain reaction will start in
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