The world is changing and so is pharma. From new, innovative products, and the focus on value and services, to a shift to more community and home-based healthcare, there’s a lot to consider. And in all of this, the supply chain is the often-forgotten player – indeed, much of pharma’s future success will come down to optimising the supply chain to meet these changing demands. “The pharmaceutical industry is entering a stage of great change, not only regarding the launch of new, innovative medicines and new distribution channels but also from an overall supply chain perspective,” says Professor Constantin Blome, professor of operations management at the University of Sussex, in a report on the topic. “Supply chains are increasingly stressed by demand variability and lower margins.”
In light of this, experts, such as Blome, are increasingly emphasising the need for pharma to rethink its supply chain. According to a PwC report, “most pharma have complex supply chains that are under-utilised, inefficient and ill-equipped to cope with the sort of products coming down the pipeline”. And according to fellow consultancy AT Kearney, 40 percent of pharma lack clearly defined systems to keep complexity in check. PwC says pharma has invested relatively little effort in reconfiguring their manufacturing and distribution operations to date, resulting in a supply chain that is neither flexible nor cost-effective. “Yet the supply chain is just as important,” the consultancy says. “It’s the link between the laboratory and the marketplace. Unfortunately, it’s a link that frequently doesn’t work very well.” PwC claims a “radical overhaul” is needed.
Of course, this is easier said than done. Blome notes the challenge of marrying reduced complexity with a geographically dispersed system that is, at the same time, both agile and dynamic, and still satisfies customers’ needs. Yet, PwC notes in its report that some companies have started to refine their supply chains. For instance, between 2004 and 2009, overall equipment effectiveness in packaging increased from 36 percent to 51 percent, while quality also improved, with the percentage of rejected batches falling from 1 percent to 0.74 percent over the same period. But PwC notes most measures are short-term sticking plasters to address immediate challenges like the rationalisation of larger manufacturing networks as a result of acquisitions. As a result, few companies have supply chains capable of meeting tomorrow’s needs.
New developments
Added into the mix are new developments that have the potential to further impact the pharmaceutical supply chain over the coming years. Blome and a team of researchers identified 12 such developments. The most impactful on the industry’s supply chain was the introduction of compliance and risk management measures, followed by expansion into emerging markets and the availability of detailed patient data. Other developments predicted to have an impact included the shift to patient centricity, integrating medical devices and healthcare services into the supply chain, incremental licensing and launching, and environmental pressures, among others.
Blome’s research reflects a 2014 survey by logistics firm UPS, which found that 60 percent of respondents cited regulatory compliance as a main concern for the supply chain, with 78 percent claiming this was a top trend driving supply chain changes. Some of the most pressing of these regulations impacting the supply chain are those around serialisation and track and trace requirements. For instance, the EU’s Falsified Medicines Directive, in a bid to help fight counterfeit and substandard medicines, requires strengthened record keeping and added authenticity features on packaging. While such anticounterfeiting measures will affect the supply chain process it will also improve visibility across the chain, which becomes increasingly important as supply chains stretch across more continents and often involve complex networks and outsourcing. “Companies will need to find effective measures to safeguard drugs and their operations by improving risk management and compliance mechanisms,” says Blome. In addition, the expansion into emerging markets heaps extra regulations and compliance pressures, while at the same time there may be weak infrastructure, poor distribution and poor quality control and monitoring, adds Blome. “Regulation in emerging markets needs to be carefully considered as many new policies are being introduced, yet there is a lack of careful monitoring to other parts of the world.” As a result, pharma companies will need to consider how to select the right supply partners, how to manage quality, product safety and delivery risks, and how to ensure intellectual property is appropriately protected, Blome says.
Besides the challenges geographic spread provides there are further distribution challenges and new routes to market that pharma will be forced to consider. Specifically, the shift away from hospitals and surgeries to healthcare delivered in the community and in the home will pose enormous challenges for pharmaceutical supply chains, Blome says. “Pharmaceutical companies will have to distribute their products to many more locations and even to patients’ homes.” UPS’ survey found that this fact was causing 21 percent of respondents to consider supply chain changes, while AT Kearney notes there is even doubt over the survival of the traditional pharma wholesale model. Furthermore, patient-centric healthcare is increasing, which will create a more demanddriven supply chain. And, indeed, according to a study by AT Kearney in 2014, 52 percent of respondents see a supply chain with greater customer centricity as a top priority.
Another change that will impact the supply chain will be the shift to live licensing (limited marketing contingent on safety and efficacy) and phased launches, says Blome. “Instead of large upfront investments into supply chains designed to cope with peak volumes, new product launches will require supply chains that can be rapidly adjusted as licenses change. Thus, in light of gradual licensing and adapted launching processes, pharmaceutical supply chains will have to reach new levels in agility and responsiveness and react to rapid changes.” This will not be straightforward, he warns, when regulatory and marketing processes differ in different regions.
Supply chain opportunities
But Blome also says the industry is well equipped to tackle these upcoming challenges, believing there are many developments that will also create opportunities for the industry. For instance, detailed patient data can have a positive effect on the supply chain. If this is collected in real time, Blome says, it will enable pharma companies to gather targeted information that can be fed back into the supply chain, which allows for higher efficiency and more precise demand forecasting, which is essential for keeping inventories low. Indeed, he adds, access to patient data may start a revolution in inventory management as it has the potential to prevent shortages and expensive emergency orders. “Moreover, such data will help companies to build demand-driven supply chains in which healthcare packages for different patients are assembled at ‘super hubs’ before being delivered to their homes,” he notes.
Emerging technologies pose another opportunity for pharma’s supply chain, which may help to manage and streamline it, as well as adding the flexibility and responsiveness that is needed. Blome points to e-devices and the internet of things as examples. The PwC report states: “Timely access to various emerging technologies will help pharma companies manufacture and distribute its products more efficiently. Some of these technologies will enable it to build quality into its manufacturing processes, while others will enhance its throughput or facilitate collaboration to realise economies of scale.” For instance, the development of oral biologics will eliminate the need for cold chain distribution for these therapies, computational modelling will enable pharma to design and validate manufacturing processes virtually using Quality by Design (QbD) principles, while advanced tracking technologies will enable the monitoring of products from factory to patient and allow end-to-end visibility of performance.
Collaboration, too, is a word that is circulating as a solution to the supply chain challenges pharma is facing. This may involve a more outsourced model – becoming virtual manufacturers – or one based on partnership with other companies, such as sharing manufacturing and distribution resources. The focus, however, will be on developing a more agile, flexible and compliant supply chain in line with demand forecasts, Blome says. PwC predicts that pharma, device companies, healthcare services and care pathways will integrate, which will provide more end-to-end visibility, more accurate demand forecasting, and improved costeffectiveness. This will also allow the development and supply of integrated product-service packages, critical in the outcomes era, PwC says.
Embracing a more collaborative approach is not without its concerns, however. Virtual manufacturing, for instance, touches on issues of supply integrity, quality and compliance, as well as increased complexity, notes the PwC report. “But any company that decides to operate a virtual supply chain will still have to maintain sufficient in-house expertise to choose the right partners and monitor them constantly” and “ensure they have access to realtime data from every stakeholder”, the consultancy adds.
As the industry and the healthcare environment changes and pharma enters a new era, more focus will be placed on the supply chain and how it can meet the new demands. Making changes will be inevitable, says Blome. “Making the right decisions that are sustainable in regards to strategic supply chain management and the design of global supply chains is more important than ever,” he adds, “as it will distinguish companies that lead from those that lag behind in terms of both their profitability and overall success”.
