Many drugmakers' manufacturing and distribution operations are inefficient, under-utilised and ill-equipped to cope with new medicines, cost pressures and health reform expectations, a new report warns.

While firms have responded to industry upheaval by trying to discover, develop and market medicines more efficiency, they have invested relatively little effort in reconfiguring their manufacturing and distribution operations. Yet the supply chain is just as important - it is the link between the laboratory and marketplace, says the report, from PricewaterhouseCoopers (PwC).

PwC identifies the following six trends which, it says, will fundamentally change the way drugmakers produce and distribute their products: 

- government emphasis on health outcomes as a basis for payments, which will require drugmakers not only to manage the manufacturing and distribution of medicines and companion diagnostics but also combine product offering with data and supplemental services that add value through improved outcomes and efficiencies;

- new types of products - biologics, bioengineered vaccines and advances such as stem cell research and nanotechnology will diversify company portfolios with products that have shorter shelf lives and require more complex manufacturing and distribution processes than shelf-stable pills and conventional medicines;

- incremental product launches which alter the sales curve - with both the US Food and Drug Administration (FDA) and the European Medicines Agency (EMA) showing interest in limited label approvals, granting "live licences" contingent on ongoing testing versus the "all or nothing" Phase I-IV approach, companies will need  more adaptable cost structures which can preserve gross margins at each stage of the product lifecycle;

- greater use of electronic health records, e-prescribing, mobile health applications and remote monitoring, which are moving healthcare delivery into homes, communities and direct to patients, will mean that drugmakers need real-time information to manage wider distribution networks and demand-driven manufacturing and distribution processes;

- the growing importance of emerging markets, which will require manufacturers to understand patient needs and preferences in the developing world and modify the cost and design of their product offerings accordingly; and

- great public scrutiny, as globalisation, foreign sourcing and manufacturing of regulated products, plus greater volume and complexity of imports, will increase the need for supply chain control to identify the risk of contamination and fake medicines.

"In a world where outcomes count for everything, health organisations need to acquire a much deeper understanding of patients and their healthcare needs. Information is the new currency, and the data behind the product may soon be as valuable as the production itself," says Wynn Bailey, head of supply chain strategies at PwC.

Over the next decade, PwC forecasts the pharmaceutical supply chain will undergo three key changes. It will become: fragmented, with different models for different product types and patient segments; a means of market differentiation and source of economic value; and a two-way street, with information flowing upstream to drive the downstream flow of products and services. The management of information transferred between the company, the patient and the healthcare provider will become as important as the movement of product.

Examining how drugmakers might seek to restructure their supply chains, the report suggests that firms which focus on specialist therapies might exit manufacturing altogether and outsource the entire supply process, or alternatively they could position themselves as service innovators, building supply chains capable of manufacturing and distributing complex treatments as well as managing multiple suppliers of integrated, value-added health management services.

Mass-market producers, on the other hand, could position themselves as high-volume, low-cost providers, or they could turn their supply chains into profit centres that combine economic manufacturing and distribution of satellite services such as direct-to-patient delivery, secondary packaging or distribution to hospitals and pharmacies, and then franchise it as a stand-alone offering for both internal and external customers, it suggests.