How developments in the pharmaceutical sector are impacting logistics

The rise in biosimilars

The pharmaceutical sector has seen exponential growth in biosimilars and there are numerous indications that this level of growth will continue. Mckinsey & Company estimates that sales of biosimilars will triple to $15 billion by the year 2020. Despite biosimilars providing substantial benefits to the healthcare sector by offering biological products at more accessible prices, they are creating significant challenges in cold-chain logistics.

Biosimilars are extremely temperature and time sensitive and thus require consistent monitoring throughout the supply chain to maintain integrity. Their temperature sensitivity requires them to be stored within a specific temperature threshold throughout the entire journey, most commonly ranging between 2-8°C. Furthermore, biosimilars have a very short label claim, so every delivery must be extremely time efficient.

To overcome these challenges, companies have started utilising cutting-edge technology such as the Internet of Things (IoT). IoT sensors allow companies to track a product’s condition (temperature and humidity) and real-time location. Instant alerts are automatically triggered when any deviations occur, meaning a cold chain breach can be rectified before costly damage occurs. Logistics companies have also been investing in pioneering cold-chain packaging, which is integral to maintaining product integrity, not only to sustain the temperature threshold, but also to handle any vibrations or drops. Cold-chain packaging can come in both passive and active form, and these can retain a scope from room temperature all the way to cryogenic.

Downward pressure on pricing

GlobalData Pharma’s 2019 industry outlook survey reveals that more than 50 percent of global industry respondents believe that drug pricing will have the greatest negative impact on the pharmaceutical sector. Downward pressure on pricing can seriously impact pharmaceutical companies’ profit margins and create tougher market conditions for the industry in general. Companies will need to implement a more flexible pricing strategy to counteract this and determine how they can improve efficiency and reduce their bottom line. This focus on the bottom line not only concerns the manufacturing process; it impacts the entire supply chain, including logistics.

The pressure on pricing will be passed onto logistics firms, meaning they will have to reinvent their systems to offer more competitive prices while maintaining the same level of service. However, the logistics sector has always focused on the bottom line and is consistently adapting operations to become more efficient. To achieve this, companies are exploiting a wide range of new technologies to drive efficiency, from data analytics to automation.

The logistics sector now has access to more data than ever before, affording them vast opportunities for improvements. Relevant data can lead to more informed decision making on, for example, the best routes to take or when to conduct maintenance. Using machine learning algorithms to analyse data can deliver truly dynamic routing and provide substantial cost savings. Automation is another element that companies can introduce to improve operational efficiency. For example, automated loading and unloading systems are already available, but in the future trucks will be able to bypass obstacles and adjust routes automatically. This is a further saving that companies can pass on to pharmaceutical manufacturers to help relieve the pressure on pricing.

Advances in technology

The pharmaceutical sector has started developing various technologies that will bring huge advancements to the healthcare sector, including bionics, 3D printing and nanotechnology. Many pharmaceutical manufacturers are partnering with technology companies to develop new innovations that will expand their offering beyond medication. For example, Verily and Novartis have co-developed a smart contact lens that can measure glucose in the wearer’s tears and transmit the data to a wireless device. However, these ground-breaking technologies are exceptionally delicate and expensive and will require highly specific transportation, including resilient packaging alongside consistent monitoring of the shipment.

Pharmaceutical companies must ensure that logistics companies are properly equipped to transport novel technologies. For example, bionics will not require a cold chain, but will need specialist packaging that is reinforced to protect the product, making it more like a technology shipment rather than a pharmaceutical one. Furthermore, there will be no guidelines in place regarding how best to package new innovations, or the best mode of transportation; it may be a case of trial and error until the best procedure is identified.

Increased global spend

The pharmaceutical sector has seen consistent growth for many years and PwC expects the market to be worth nearly $1.6 trillion by 2020. Developed countries, however, will experience moderate growth compared to that of developing countries, who are expected to have exponential growth. In particular, India and China are predicted to grow by 230 percent by 2030.

This global growth is great for the sector and opens the door to more international opportunities, but it will present challenges for the logistics sector. Transporting large shipments of medicines or vaccines internationally is a complex process; they are classed as dangerous goods shipments and require the correct documentation and hazard labelling in order to pass through customs. Not only this, but a cold chain must be maintained across various international borders. Monitoring temperature throughout international transit is difficult due to increased risk of poor visibility, heightening the chance of a breach. Most breaches occur on airport tarmac, where products are left standing before loading, exposing them to various external conditions. International shipments travel through different climate zones, which could expose them to freezing or humid conditions, so packaging needs to be highly effective to maintain the required temperature thresholds, even under the harshest of conditions.

Each of these industry developments presents various challenges for the logistics sector. However, companies should embrace it and see it as an opportunity to be more innovative with their operations and develop a more efficient and effective service.