November 22, 2016
The pharma supply chain can be incredibly complex with new molecular entities taking as long as a decade to get to market. And it’s growing even more complicated with the new demand for biologics-based products that need to be stored at colder-than-average temperatures during their long journey to patients, hospitals and pharmacies. It’s estimated that this will easily cost biopharmaceuticals somewhere in the ballpark of a cool $17 billion by 2020. Meanwhile, pharma companies are still trying to iron out distribution and inventory complexities that cause another $25 billion in excess inventory – in a nutshell, the new drugs are complex proteins and if they’re not properly handled every step of the way to market, they’ll go bad! Which means lost revenues and inventory that must be written off.
Yes, the situation is complicated, but take Arnold Schwarzenegger’s advice, and everyone chill.
Big Opportunities. Big Challenges.
The reason for the spike in demand for biopharmaceuticals in the first place is because we need them. According to the Washington Post, biologics are being used to treat hemophilia, rheumatoid arthritis, multiple sclerosis, Crohn’s disease, psoriasis, psoriatic arthritis, chronic pain and some forms of cancer. While the number of pharma companies currently involved in the space is modest, the long-term opportunities and health benefits are tremendous.
With that in mind, let’s take a level-headed look at the challenges. We’ve been storing vaccines and biologics successfully for years at a high operational cost. The explosive growth of biologics for prescriptions (and who knows, maybe someday even over-the-counter drugs) will make costs rise even more. It will require supply chain management solutions that can actually handle the complexities of a cold supply chain, in which the average storage temperature needs to be consistently between 2 to 8 degrees Celsius (36 degrees Fahrenheit and 46 degrees F). These challenges include:
- Fluctuations in demand for a drug (which can result in excess inventory and increase cold storage capacity requirements and cost).
- Communication between the many stakeholders involved in the cold supply chain (manufacturers, distributors, retailers, cargo companies, etc.).
- General adaptability as complications become inherently more challenging.
Let’s look at a recent example of a seemingly simple complication that could ultimately foil cold chain supply for pharma. Consider the recent bankruptcy of one of the world’s largest marine shipping companies – South Korea’s Hanjin Shipping Co. Following the official announcement, many of the company’s clients saw their operations come to a screeching halt.
“$14 billion worth of goods are languishing in a maritime limbo,” Salon contributor Angelo Young wrote shortly after Hanjin declared bankruptcy. “At least eight Hanjin ships have been seized as of Friday. Four vessels parked off Long Beach, California, have been prevented from entering or leaving the port, including one that was taken by U.S. marshals after a fuel supplier filed suit against the freight company.”
If some of these “languishing” ships contain biologics the will go bad if they aren’t delivered immediately.
Another key challenge lies with customers themselves. Insider Logistics noted that “customer habits” need to be considered, they may be the cold chain’s “weakest link.” “The biggest obstacle for many cold chain operators is the one part of the supply chain they don’t control: the moment products are placed in the consumer’s shopping cart or tendered to a healthcare provider,” Lisa Terry wrote.
Keep your supply cold; your money depends on it.
Prepping for the Pharma Freeze
A lot of research is underway on behalf of the imminent ice age facing pharma. Much work has been done in the past on multi-cell trailers, multiple temperature zones within a cargo unit, the development of more efficient insulated packaging, and active temperature controlled containers.
Companies have also been focusing on proper product characterization and matching those profiles with routes, temperature zones, and seasons to determine shipping configurations (e.g. active versus passive, 24/48/72 hour packaging, etc.). The biggest challenge for most companies is putting together the full picture of requirements, technologies, and monitoring to make sure that they are providing the lowest cost solutions without jeopardizing quality. Going forward, companies will combine these technologies with Internet-of-Things sensors that will continually monitor the storage temperature of product throughout shipment.
So what do you need to think about now if cold chain is part of your operations? First, digitalization is a major advantage for critical insight and to ensure your supply chain is business aware. Second, there are now predictive and prescriptive applications to help consider the best process and action to optimize inventory. With the right supply chain knowledge technology, it is feasible to keep chill “pills” chilled and take some of the challenges out of the pharma supply chain.
Read more about supply chain knowledge and how it helps Merck.