Emerging markets influence changes in global pharma distribution – Pharmaceutical Commerce
F.J. Quinn | July 12, 2012
As pharmaceutical companies rapidly expand into emerging markets abroad, observers say they are running into complex challenges. Distribution issues are arising due to increasing security concerns, country-specific regulatory compliance, and limited scope of infrastructure. But this has not stopped third-party logistics providers (3PLs) from developing a range of strategies and services to ensure Rx drugs are delivered safely and cost-effectively.
“This is an exciting, yet challenging and complex time for the pharmaceutical industry, and there’s never been a better opportunity to create value through the supply chain,” declares Bill Hook, vice president of global strategy, UPS Healthcare Logistics (Atlanta, GA). “Companies are looking to the supply chain to create a competitive advantage, and they’re turning to 3PLs like UPS to deliver quantifiable value.”
A 2010 study compiled by Harris Interactive (New York) for UPS shed light on the many distribution issues affecting pharmaceutical firms worldwide. Four in five healthcare companies surveyed are doing business with at least one country outside the US, despite a range of factors being cited as potential barriers to global expansion. The report found nearly half of the companies surveyed intend to expand into emerging countries through 2012, with the likes of Argentina, China, India and Brazil among the top areas targeted.
“Growing and emerging markets like India and China, as well as within the BRICM countries and Turkey, are the places where this sector sees the most opportunity,” reports Angelos Orfanos, president, life sciences and healthcare, DHL Global Forwarding (Newark, NJ). DHL is also working closely with the clinical trials supply chain, Orfanos adds, supporting manufacturers with the capability to reach new markets with clean patient populations to conduct trials, or with a network of clinical depots to rationalize their supply chain.
Factoring in global trends in pharma manufacturing and distribution, the market for temperature-control (“cold chain”) services (from air, land and sea carriers; third-party logistics firms; and dedicated packaging and instrumentation) was projected to rise from $6.5 billion in 2010 to $7.6 billion in 2013, according to the 3rd annual Biopharma Cold Chain Sourcebook, a market study and guidance resource of this fast-evolving market pioneered by Pharmaceutical Commerce. Supporting this forecast are results from the Harris Interactive/UPS study, which found healthcare and pharma companies are preparing to increase their outsourcing activities in many areas, including distribution. More than a third plan to boost their decision to use third parties in the next two or three years, a significant increase over 2009. Another 26% of respondents plan to maintain outsourcing levels in the near future.
“3PLs are becoming more of a cross-divisional partner of the pharma industry, with the ability to offer solutions for warehousing, pick/pack, and stock control linked with final leg distribution,” observes Martin Svantesson, director vertical markets, Geodis Wilson (Amsterdam), a global freight management company. “The added value for the end receiver will be a lower cost and more control over the product, from a security aspect.”
Upholding cold-chain integrity and compliance is morphing into a primary issue, experts say, with the explosion of temperature-sensitive products on the market, new global and regional manufacturing mandates, and supply chains extending globally. Shippers must meet stricter regulatory compliance standards as countries look at different issues in their local markets. According to the Global Use of Medicines: Outlook Through 2015 report released last May by the IMS Institute for Healthcare Informatics (Danbury, CT), significant policy changes made in 2010 will have longer-term impacts on spending and usage of medicines across many countries.
“Companies are focused on new regulations approaching in the near future, which will help expand the use of serialization designed to protect the well-being of the supply chain,” says Richard Beeny, CEO, LifeScience Logistics (Dallas, TX), a 3PL. “Along with this, companies are looking for more control over their supply chain, so they can create more efficiency within their organization, and can get back to focusing on their core competencies and generating revenue.”
New regs impact temp-controlled transport
Last year, there were approximately 30 worldwide additions or changes made to “good distribution practices” (GDPs) as part of the management and regulation of pharmaceutical transportation and storage. GDPs exist in various forms, in numerous countries or regulatory jurisdictions, and their principles are in place in many contractual agreements between manufacturers and service providers. “3PLs have to invest in new infrastructure to support these requirements,” says Peter Logan, healthcare VP, DB Schenker (US HQ; Freeport, NY). “This infrastructure is expensive to develop and maintain, and is putting pressure on margins, especially as larger levels of inventory now require temperature-control environments.”
To that end, DHL has developed a global network of GDP-compliant cross docks, life science competence centers for air freight, as well as GDP and GMP warehouses. “A network of multiuser warehouses meets GMP and GDP standards strategically located with an array of value-added services,” Orfanos says. “This allows customers the flexibility to transform their supply chain and logistics.”
DHL’s suite of logistics service offerings, from air and ocean, to integrated courier and road freight, enables customers to conduct a “best fit analysis,” which matches cargo to the right transportation model.
There are numerous scenarios driving customer need for temperature-controlled transportation. The majority of biotech products require refrigerated (2–8°C) storage and transportation, as do most vaccines, blood products and other injectables. Meanwhile, regulatory requirements for what has traditionally been called “controlled room temperature” (CRT) storage (15–25°C) and transportation are tightening—and that covers the majority of pharmaceuticals.
“Because of regulatory changes, we see a large spike in moving products in controlled room temperatures in the 15–25°C temperature range,” says Bob Gahan, global VP, healthcare, DB Schenker. “We find many shippers’ supply chains have not been budgeted to provide the extra handling to maintain the CRT from the US to the rest of world.”
What used to be fixed costs for distribution is now trending to variable cost models. Manufacturers are forced in certain markets to consider new routes, packaging and storage, as well as providers experienced in handling specialized cargo. “It is now universally expected that all products be both stored and transported in a way that ensures they are not adversely impacted by the environmental conditions, including temperature, they experience along the route,” reports Karl Kussow, manager of quality, FedEx Custom Critical (Uniontown, OH). “The pharma manufacturer must be able to prove, using stability data, storage and shipping records, that the products were not damaged by extreme temperatures during transportation.”
To successfully mitigate the risk of temperature excursions, 3PLs have established handling protocols that take into consideration seasonal variation, arrival days of the week, equipment availability and contingency planning to mitigate transportation risks. The more sophisticated have even gone to the extent of bringing onboard pharmacologist-trained quality management. “’Mode shifting’ or utilizing ocean ‘reefers’ as a means to create a more controllable (albeit longer transit time) solution is often negated due to high product value and unacceptable liability limitations,” says Phil Abbate, global vice president pharmaceutical and healthcare, UTi (Long Beach, CA), a 3PL.
Meanwhile, technological advancements in active and passive cold-chain solutions, such as cooled ULD containers, dry ice, gel packs and refrigerated trucks ensure products maintain the appropriate temperature while in transit. “Newer temperature recording devices can be used to actively monitor temperatures in real time throughout the entire shipment,” notes Mark Sell, president, MD Logistics (Plainfield, IN).