Nicholas Basta, Editor Emeritus

Over the past decade, the industry practices associated with delivering temperature-sensitive pharmaceuticals have undergone a rapid evolution. In the 2000s, a pharmaceutical cold chain interest group arose, almost spontaneously, among industry experts to raise up and standardize industry best practices. Vendors—including many newly formed companies developed new methods of protecting shipments with high-tech containers, new procedures for maintaining required temperatures, and new methods for tracking and recording shipping conditions. In parallel, organizations including US Pharmacopeia, the International Safe Transport Association, the Parental Drug Association, and the International Air Transport Association (among quite a few others), formalized guidances and protocols, or updated existing practices. Behind these stand the FDA and the European Medicines Agency (EMA), charged with ensuring the safety and efficacy of the drugs the industry has been delivering.

All this was put severely to the test during the COVID-19 pandemic, and for the most part, the industry came through with flying colors, even though the leading vaccine offerings required a temperature regime (-80°C) that had only occasionally been seen previously. The various service providers for pharma cold chain distribution expanded their capacity and upgraded their service levels on a near-emergency basis—and those improvements are benefiting the pharma industry today.

“The pandemic created a broader perspective compared to how cold chain distribution evolved over the past 10 or 20 years,” says Henry Ames, director, global life sciences and healthcare at Everstream Analytics, a supply chain analytics and risk firm. Traditionally, risk analysis for the cold chain involved validating packaging and trade lanes; now, it involves visibility to upstream suppliers, geography, and weather, among others. “There’s more evidence of this focus in proposed legislation in the US Congress to address resilience and visibility in the pharma supply chain," he adds.

Significantly, new technologies had been introduced to the pharma cold chain over the past several years, such as refrigerated ocean containers, dataloggers connected to cellular networks, or high-performance, reusable packaging for ultracold shipments. Now, there continues to be a flow of new and improved products, but more on a level of filling in gaps in existing cold chain practices. For example, CSafe, maker of both active and passive containers, is introducing a pallet-size air freight container rated at -20°C, complementing its existing fleet of 2-8°C RKN containers. Also:

• Sonoco ThermoSafe introduced its Pegasus unit-load device (ULD) a few years ago; in the past year, around a dozen air carriers, as well as logistics providers, have certified its use in global air freight. The ULD is notable for being a passive (non-powered) unit, rated for 300 hours in 2-8°C service, yet FAA- and EASA-approved as a component of flight equipment.

• Cryoport, which specializes in ultracold biologics shipping, usually with liquid nitrogen at -170°C, is introducing its Elite branded ultracold container rated for -80°C and employing dry ice. Another design, the CryoSphere, an LN2 dewar for deep-frozen shipping, is scheduled for release early next year. That unit will have the innovation of operating equally in any physical
orientation (most dewars require upright positioning, a common problem during shipping).

• Envirotainer, a provider of air-freight ULDs (and usually for 2-8°C service), is jumping into the ultracold space with CryoSure, a one-to-11-liter box for -70°C service, targeting the new mRNA-based vaccines and therapeutics.

• Another ULD provider, Swiss Airtainer, is introducing an active ULD for pallet shipments that is 40% lighter than competing versions; the unit is said to offer cost efficiencies for shippers due to its low weight.

Low-temperature shipping is the driver for several of these examples, pointing to the dramatic advances in cell and gene therapies (CGTs) over the past several years. A potential new direction is indicated by the German refrigeration company Secop GmbH, which last year introduced a two-stage compressor driven refrigeration unit that can achieve temperatures as low as -86°C; however, its use in shipping containers is still to be determined.

“With well-established active or passive containers and packages, as well as the growing practice of pre-qualified packages (not requiring validation testing prior to use), the packaging and datalogging/monitoring element of pharma cold chain shipping is definitely becoming commoditized,” says Everstream’s Ames. “The barriers to entry for packaging and data collection have dropped, making it easier to shift from one solution to the next” he adds, “but validation to meet the most rigorous industry standards is still a challenge.”

Another hallmark of the past decade of cold chain development has been its rapid growth relative to the pharma industry overall. Past surveys showed that pharma cold chain shipments were growing at twice the rate of industry overall, usually in the low double-digit range. There are indications that that rate has slowed somewhat: a key factor is the rate of new FDA drug approvals, which dropped from 55 in 2021 to 45 in 2022. Several CGTs that were expected to already be introduced commercially this year have been postponed or delayed as well. 

On the other hand, 2023 is a milestone year for biosimilars, at least in the US market, where Humira (adalimumab), AbbVie’s $20+-billion blockbuster, is seeing biosimilar competition in the US market. According to a January report from IQVIA, roughly 24% of the US market for biologics was accessible to biosimilars at the end of 2022—a figure that is only going to go up.

Normally, the lower prices inherent in biosimilars would lead to an expanded volume of prescriptions; however: “As biosimilars become available, most molecules have seen incremental volume ranging from +7% to +154%, but there are notable cases where incremental volume has been flat or declining, ranging from -1% to -30%,” the report notes.

Other factors come into play when considering the pharma cold chain market. The overall logistics market in the US is softer, coming out of the pandemic, but “in healthcare and pharmaceuticals, home delivery is having a big jump, and will be growing exponentially in the coming years,” says Dan Gagnon, a SVP for marketing for UPS Healthcare Logistics.

“More bulk commercial shipments will be going to small packages shipped directly to the home,” he says. That will make for more deliveries per annum.

There is a mixed bag of indicators when looking at business trends in the cold chain. On the one hand, the past year has seen some significant consolidations: Envirotainer has acquired one of its key competitors, the healthcare business of va-Q-tec (which will expand Envirotainer’s offerings of passive shipping solutions).

Last fall, UPS Healthcare Logistics acquired Bomi Logistics, a global healthcare logistics provider based in Italy. The acquisition added four million square feet of warehousing capacity to UPS’ (which now totals 15.5 million square feet), and enlarges UPS Healthcare Logistics’ footprint in Europe and South America. In the life-sciences datalogging market, SpotSee has acquired Marathon Products, another datalogging company.

On the flip side of these consolidations, the pharma cold chain continues to attract private-equity capital. Witness two deals announced this year: NewSpring Healthcare (along with existing investors) putting $43 million into AeroSafe Global, a container and logistics service provider, in June; and Lazard Asset Management taking a minority share in SkyCell AG, for an undisclosed amount, in March. The biggest deal of all, announced in mid-2022, was Envirotainer’s sale from one set of investors to another, EQT and Mubadala, for an approximately $3 billion.

Summing up, a July report from Visiongain, a UK market research company, valued the current healthcare cold chain logistics market at $17.8 billion this year, projected to grow at a 9.0% compound annual growth rate (CAGR) through 2033.

The part of the pharma cold chain generating the most buzz today is in visibility: the ability to track a shipment, along with its environmental conditions, from point of origin to point of destination, in real or near-real time. The traditional practice was to include a datalogger that could record the internal temperature of the shipment. That datalogger would be accessed at the destination to confirm safe, compliant delivery. Now, between advances in telemetry, including a variety of Wi-Fi and wireless networks, and advances in software—most notably incorporating new capabilities in artificial intelligence/machine learning (AI/ML)—a new level of supply chain management and optimization is becoming clear.

Real-time tracking is not new; various vendors have used cellular communications to enable it for quite a while. What is new is the internet of things (IoT) influence: with the expanding availability of communications devices that can collect signals automatically, the data-gathering becomes a lower-cost, less effortful exercise. Making use of a cloud data-services provider is also key. One of the more promising examples of this is Amazon Sidewalk (with Amazon Web Services cloud behind it), which is building up its network of consumer-focused data collectors and communicators (such as its Ring doorbell). Amazon Sidewalk employs Bluetooth Low-Energy technology, which is short-range, but if enough devices are located
adjacently, it can provide network coverage over a wide geography. Last spring, Amazon released a map (see graphic above) that, according to it, represents coverage for 90% of the US population. 

The barriers to entry for packaging and data collection have dropped, making it easier to shift from one solution to the next.

In turn, OnAsset Intelligence, a company that has provided sensors and dataloggers for use in pharma logistics for years, has announced its Sentinel 200 device, a datalogger/communicator used by, among others, the clinical logistics firm Marken, is now compatible with Sidewalk. (On Asset already makes use of Bluetooth communications and Wi-Fi.)

Quite a few companies that specialize in cloud-based logistics communications have focused on the pharma industry as a key client. These include ParkourSC; Roambee; Controlant; FourKites; SendCloud; and others. Some of these companies provide both sensors and a cloud-based data-management system; some are software-only. Some have garnered FDA CFR Part 11 compliance and related life- sciences data validation; some have not. Most are aligned with third-party logistics providers (3PLs) and freight forwarders; some are even embedded in cold-chain containers. Among the software-only providers, the race is on to build the best AI/ML capability, thereby bringing preventive management
or supply chain optimization to the table.

All this activity is gradually being taken up by the pharma industry.

“After 35 years, AI is suddenly an overnight success,” wryly comments Jerry Shelton, CEO of Cryoport. While open to working with the sensor and software providers, his company is building out a condition monitoring service called SkyTrax.

“One example of the difficulties in this area is wireless communications," adds Shelton. "While much of the industrialized world is adapting to 5G cellular communications, Japan still operates in 2G or 3G. Our technology enables an automatic switch from one cellular band to another. That creates a seamless chain of custody.”

“I am super excited about what our company is doing, and what the supply chain software developers are doing,” says UPS’ Gagnon. “But I think the whole logistics industry is trying to figure out what can be solved with this technology and what makes an impact.” The IoT trend seems to be “a great
solution looking for a big problem” to solve, continues Gagnon.

After years of paying lip service to the concept, the pharma industry is getting serious about sustainable practices, say industry observers. In practice, this usually means looking at the carbon footprint of logistics, and paying attention to materials use and wastage in packaging and related cold chain hardware.

While there is some backlash publicly over environmental, social, and governance (ESG) ratings, especially in the US, pharma supply chain managers are fairly uniform in including environmental criteria in their request for proposals (RFPs), and acting on what is reported. 

“Large corporations have 2025 or 2030 goals for reducing their carbon footprint,” notes Amardeep Chahal, SVP of marketing at Cold Chain Technologies, a packaging provider. Cold Chain Tech approaches this task two ways: with a reuse program that, where possible, enables a circular loop of loaded packages going to a destination, and empty packages being picked up, refurbished, and returned to use. The company also touts its CCT Rx and CCT TrueTemp Naturals containers, which are “curbside recyclable” packages made primarily of paper. The company is well along on its goal of avoiding 60 million pounds of packaging from the waste supply stream. 

Most of the packaging companies have some level of reuse or container leasing going on; they vary on how broadly their networks are located. Vendors of high-performance packaging featuring vacuum panels and sturdier boxes point out that a solid reuse program helps offset the higher
unit cost (but better performance) of their offerings, thus providing a potentially more reliable shipping solution) to the industry. Chahal says that across the industry, he estimates that 15% of packages are now being reused (excluding most air-freight ULDs, which are reusable of
necessity), and the volume is growing. 

— Nicholas Basta is Editor Emeritus and Founder of Pharmaceutical Commerce.

Articles

While vendors fill in gaps in products and services for the supply chain, the action moves toward new cloud-based visibility systems.

The State of the Pharma Cold Chain

The outlook for drug wholesaling in the US is mostly promising, but with clouds on the horizon. The industry underwent an extraordinary stress test during the pandemic, responsible not just for ensuring safe and near-universal delivery of relatively complicated vaccines (requiring a dry-ice-charged distribution from the manufacturing sites almost to patients’ arms), but also for the therapeutics needed to address newly sickened patients. And this occurred while deliveries of the hundreds of billions of dollars’ worth of conventional medicines took place during a time of quarantined workers, shuttered businesses, and logistics shortages.

Coming out of the pandemic, many observers see a “new normal” or a “new commercial model” evolving for the drug trade. Telehealth, decentralized clinical trials, and e-commerce-style drug dispensing are among the new elements of healthcare delivery. Drug manufacturers are shifting their R&D dollars from mass-market small molecules to biologics-based therapies for rare diseases. The US government—the biggest drug reimbursor by far—will soon be getting broader discounts on some therapies, squeezing margins all the way across the distribution chain.

With a broad-enough perspective, three dominant trends can be identified: 

Beyond business trends and challenges, however, one post-COVID-19 change dominates: “Both through and since the pandemic, the level of visibility on the pharma supply chain is unprecedented,” observes Chip Davis, executive director of the Healthcare Distribution Alliance (HDA), the wholesalers’ main trade association.

“Traditionally, it didn’t get the attention paid to front end manufacturing business practices or pricing, or tail-end issues like provider-side payment and reimbursement. Now, the focus and attention on the pharmaceutical supply chain is here, and it is not going away anytime soon.”

According to HDA (whose members constitute 94% of all US wholesaling), wholesalers are the essential intermediary between manufacturers (roughly 1,400) and over 330,000 dispensing locations. For most of the 21st century, it has been dominated by the "Big Three": AmerisourceBergen (ABC, soon to be known as Cencora); Cardinal Health; and McKesson. Each is a gigantic company in terms of revenue (they are, respectively, No.'s 11, 14, and 9 on the 2023 Fortune 500 list); the catch is that they (and most major wholesalers) operate on the narrowest of profit margins—less than 1%

The Big Three and some other wholesalers strive to be “full line” providers to their pharmacy customers, meaning that they can deliver essentially every type of drug available. Another part of this relationship is to be the “prime” vendor to their customers—the first place the pharmacy goes to supply its inventory. According to the annual HDA Factbook, HDA members have 103 distribution centers (DCs) around the country (not counting US territories), and they average over 4,300 orders per day, delivering over 104,000 units of products, usually five times a week. For the most part, pharmacies don’t pay for the cost to deliver products.

The biggest pharma companies push for the most economical distribution costs, which for full-line wholesalers means that the rates on branded, mass-market products are relatively low, under the fee-for-service arrangements that were established in the early 2000s. Wholesalers can require higher rates for generic manufacturers (or, equivalently, set their own price margin on the generics they sell), especially when a branded product comes off patent and multiple generics come into the market. In effect, the generics subsidize the delivery of the branded products.

“We work with each manufacturer to assess the appropriate fees to support distribution of their products and reflect the value of the services that Cardinal Health provides,” says Debbie Weitzman, CEO of the pharmaceutical segment of Cardinal Health.

Currently, there are some stresses on this traditional way of doing business. According to Bill Roth, SVP of Integrichain’s consulting business and columnist for Pharma Commerce, when the rate of branded-to-generic switching is low (as it is now), it can cut wholesalers’ margins. One adjustment to be done, then, is to raise rates on smaller, limited-product manufacturers. “I’ve heard of a few instances where a wholesaler simply drops a manufacturer from its lists, which was unheard of a few years ago,” he says.

An added burden, more on manufacturers than on wholesalers, is the so-called national drug code (NDC) blocks that leading pharmacy benefit managers (PBMs)—the organizations that negotiate manufacturer reimbursements on behalf of insurers—impose on products, making them unavailable or expensive to patients. NDC blocks have gone from around 30 five years ago to over 150 now, says Roth.

These stresses are one of the reasons that there is an uncomfortable level of drug shortages around the country. Sales prices of some generics are so low that some manufacturers are selling some of their product mix at a loss, hoping to keep buyers on board with other, more profitable products, according to Roth.

Special mention needs to be made about one class of drugs—opioids regulated by the Drug Enforcement Administration (DEA). In 2021, the Big Three (plus Janssen Pharma) entered a national settlement with multiple states’ attorneys general to pay up to $21 billion over the following 18 years to compensate states and localities for opioid use disorder treatment. A similar settlement, for upwards of $15 billion, was achieved in 2022 involving CVS, Walgreens, and Walmart, plus manufacturers Teva and Allergan.

Besides the financial settlement, wholesalers have new obligations for suspicious order monitoring (including pooling their respective activities). The settlements are cold comfort to families for the tens of thousands of deaths that have occurred, but at least the funds will help mitigate the opioid crisis. While HDA’s Davis notes that closer communication between distributors and DEA is expected from the settlement, there continues to be friction: this spring, DEA revoked Morris & Dickson’s license to distribute controlled substances; in June, a federal judge stayed the DEA action “indefinitely, pending appeal,” according to the company, which is the fourth-largest wholesaler in the US,
operating in 27 states.

In addition, at the very end of 2022, the Dept. of Justice (DOJ) filed a civil suit against AmerisourceBergen alleging numerous and long-lived violations of DEA rules on suspicious order monitoring “from 2014 through the present” and that it is potentially liable for “billions of dollars in penalties.” ABC countered that it did indeed file the reports. Court records show that to date, ABC has filed a motion for dismissal; DOJ has filed an opposing motion; and a second response from ABC is due at the end of July.

Another stressor on wholesalers, shared by manufacturers and dispensers, is compliance with the 2013 Drug Supply Chain Security Act (DSCSA), which has a Nov. 27 deadline for full, all-electronic tracking of pharma products throughout the supply chain. Over the past 10 years, wholesalers have been integrating the technology and business processes to enable this tracking, but they also will depend on pharmacies to acknowledge receipt, and on manufacturers to provide necessary data. No one is fully ready, as shown by surveys conducted by HDA. The association has come out with a proposal to FDA to stretch out compliance deadlines to 2025, while keeping partial compliance requirements in place until then.

Cardinal Health's newest distribution center, in Greenville, SC, is for its at Home Solutions business, providing home healthcare products. Credit: Cardinal Health

HDA has moved its annual Traceability Seminar, where the latest information on DSCSA is to be had, from its traditional mid-autumn date to the end of August, in part to spur pharma supply chain participants to get ready for the nominal November deadline. The meeting will be held in Washington, D.C., from Aug. 29-31.

One of the surprising features of the US pharma supply chain is that over 90% of prescriptions are filled with generic products, but branded and specialty products represent about 85% of the industry revenue. Even so—as noted earlier—wholesalers make more margin on the low-cost generics than they do on the high-priced branded products. The higher priced products, particularly specialty ones, represent an opportunity for multiple distribution channels—mail order, specialty pharmacies, and hospital pharmacies, among others.

In recent years, there has been a trend toward “direct-to- provider” and even “direct-to-patient” drug delivery—and wholesalers have responded by setting up their own specialty distribution businesses, including relationships with providers in areas like oncology and rheumatology. Considerable complexity enters the equation based on the type of reimbursement—a pharmaceutical benefit paid by PBMs, versus a medical benefit paid by hospitalization insurance, for example. Some manufacturers—especially in the growing specialty space—have “gone direct” for years and for many of them, logistics is handled by a third-party logistics provider, or 3PL.

3PLs differ from wholesalers in that they do not take ownership of the drug; they merely act as agents of the manufacturer. Some 3PLs, including the logistics giants UPS, FedEx, and DHL, provide a wide range of additional services, including warehousing, order-to-cash management—even kitting or packaging. “Leading 3PLs have been making a major push to automation in their healthcare facilities—think robotics and automated guidance vehicles, or automated storage/retrieval,” says Brian Shotto, president of a 3PL consulting firm, Lumens Group. “Wholesalers typically lag the 3PLs in this regard.”

While that perspective can be debated, what is certainly true is that the major wholesalers themselves have 3PL business units offering comparable services. Also, there is considerable 3PL-to-wholesaler, and even wholesaler-to-3PL business going on, as suppliers scramble to design the most efficient means of moving product from one location to another.

“Our specialty 3PL helped pioneer the commercialization of innovative cell and gene therapies, including CAR-T, and we are at the beginning of a huge new wave of treatments that promise to revolutionize the best standard of care for even more conditions,” says Cardinal Health’s Weitzman. Cardinal’s competitors, AmerisourceBergen and McKesson, both boast extensive business units handling logistics and business services for clinics and pharmacies.

As of press time, the status of negotiations between UPS and its unionized workers was looming before the entire healthcare supply chain. UPS has a substantial healthcare logistics business, with 30 dedicated distribution centers in the US and dozens more handling global healthcare services. “A significant impact to one of the largest parcel delivery companies, especially one that has a major footprint in the healthcare logistics space, could further exacerbate the drug shortages,” notes Chuck Forsaith, a VP at HDA and head of its Pharmaceutical Cargo Security Coalition.

Besides 3PL activities, pharmacy and mail-order dispensing activities are changing the shape of some distribution channels—albeit only at the fringe, for now. There were huge expectations that Amazon, when it entered the pharmacy space in 2018, would upset the applecarts of both wholesalers and retail pharmacy, but its progress has been slow and recently announced some staff cutbacks. Most recently, the Mark Cuban Cost Plus Drug Company, with its stated goal of selling drugs at the manufacturer’s costs plus 15%, has announced several agreements with companies offering a newly approved diabetes treatment and a biosimilar of the all-time blockbuster Humira, but at costs upwards of 10x less than the competing drugs.

According to the company website, it has set up a “vertically integrated supply chain” and “negotiates with manufacturers and supplies all products to our Cost Plus Drugs pharmacy.”

It was not merely symbolic that AmerisourceBergen announced its name change, to Cencora, at the beginning of this year (it will officially transition on Aug. 30). “To further bolster our position, we must continue to adapt and evolve within our dynamic industry as we pursue the goal of enhancing health outcomes. Building a unified brand is fundamental to our identity as a global healthcare company,” says Steven Collis, chairman and CEO.

Collis, as have the leaderships of AmerisourceBergen's competitors, has positioned his company as a partner to manufacturers in delivering pharmaceuticals originally, and now even “healthcare outcomes.”

Cardinal Health’s Weitzman sings the same song: “With a breadth of in demand services that are critical to the healthcare value chain, we work from product research and discovery to lifecycle management and patent extension. Our commitment to manufacturers is to drive market access, improved cost, patient adherence, and support and improved outcomes.”

The push into clinical research is notable, because there has been a parallel universe of “clinical trial logistics” next to commercial logistics for many years; now, the two are beginning to merge.

Going back a number of years, the Big Three used to have significant investment in contract packaging for manufacturers, but that has dwindled. At this point, the emphasis seems to be on assisting manufacturers in reaching directly to patients, via services like patient-support hubs and adherence programs.

“I have a hard time embracing the argument that there is a shift away from wholesalers,” concludes HDA’s Davis. “In my conversations with industry leaders, it is clear that their businesses are evolving, and they are very focused on where the science is going.”


Companies' emphasis on delivering pharmaceuticals is evolving into a collaboration focused on healthcare outcomes.

Wholesalers Step Up Their Partnering

The looming November deadline for compliance with the Drug Supply Chain Security Act (DSCSA) represents a turning point of sorts: the majority of participants in the pharma supply chain—except for retail pharmacies—have contracts in place to implement the barcoding, data collection and transmission, and product verification requirements of that law. Thus, a lot of the business opportunity for new system sales by software vendors and systems integrators is already in place. However, there will still be a drawn-out slog in the US to get all systems functioning, and all the connectivity needed, for effective compliance. Additionally, pharmacy compliance is a bridge only some retailers have crossed.

One result of this is consolidation among solution providers, the latest being Advanco’s acquisition of Vantage Solutions. Advanco has an interesting pedigree: it is one of the vendors used by the Turkey Ministry of Health to help install a national track-and-trace serialization system in the 2008-2012 time frame—one of the first national implementations in the world. Its client base is now over 100, with 90% of its business in pharma. Vantage Solutions is a systems integrator and validation services provider, based in the US with a satellite office in Switzerland. Together, the two companies will be able to provide a “sophisticated suite of products and services across the full spectrum of the supply chain,” according to Alf Goebel, Advanco CEO.

Other recent consolidations in pharma track-and-trace include Dover Corp.’s buyout of Systech International (2020); NNIT’s purchase of Excellis Health Solutions (2020); and Antares Group’s rollup of rfXcel (2021) and Acsis (2022).

While there are still numerous opportunities in pharma supply chain work, Advanco (and others) are positioning themselves for traceability projects in other industries, such as food & beverage and cosmetics: “Other sectors are learning from the pharma industry and are looking to incorporate serialization as a key function,” says Goebel.

Buyout gives Advanco a bigger US footprint.

Serialization Solution Provider Consolidation Continues: Advanco Acquires Vantage Solutions 

Like many other aspects of healthcare, pharmaceutical sales and marketing practices have been changed by the COVID-19 pandemic. The most noticeable initial effect, of course, was the rapid diminishment of face-to-face sales encounters. Pharma sales positions were cut back (ZS Associates notes that they have now rebounded to around 81,000 positions in the US), while video calling went up, but overall healthcare utilization plummeted as fewer patient visits with doctors’ offices occurred and fewer elective procedures were performed. According to IQVIA’s “The Use of Medicines in the US 2023,” prescribing levels (excluding COVID vaccinations) only recovered in Q4 2022 to the level they had in the first few months of 2020.

Overall, the pandemic accelerated many changes that were already occurring prior to 2020. The pharma industry had been adjusting to a rising number of “no-see” physicians (who were also increasingly becoming health system employees rather than independent practitioners). Health system consolidation was centralizing prescribing and formulary decision-making. And the industry itself has moved more deeply into specialty pharmaceuticals, which have a more complex prescribing profile and need a wide range of diagnostic or ancillary services to complete a therapy decision.

Meanwhile, the service providers to the pharma industry for sales and marketing support have continued to evolve. Video conferencing services have become routine. IT developers of sales force automation tools are expanding their range of capabilities. The latest hot trend—the emergence of “generative AI” as best exemplified by a system called ChatGPT—is attracting attention and investment from a range of technology organizations. (ChatGPT, whose current platform version is GPT-4, is owned by a nonprofit company called OpenAI Inc., which has a commercial arm that has attracted over $10 billion from Microsoft.)

Numerof & Associates, a St. Louis healthcare consulting firm, finds that 85% of survey respondents agree that “digital content and virtual meetings will remain significant components of the customer engagement model, even if access restrictions [some of which were imposed during the pandemic] are relaxed.” The survey, “The Future of the Commercial Model: Post-Pandemic Insights,” was performed in late 2022 and follows on a similar survey in 2020. In that year, many respondents expected the industry—and its commercial models—to revert back to pre-pandemic forms, but now, there is a consensus that traditional ways of doing business are history.

Another market-research firm, Gartner, issued a report on life sciences customer relationship management (CRM) in late 2022, noting that the drive toward more digital capability, and the changing role of sales reps, has been gestating for a long time, but is now a more urgent need. "Gartner introduced the idea of a 'concierge' sales representative, which is a digitally enabled sales representative, a decade ago. However, it never reached mainstream adoption, as many life science brands preferred not to change their business models for fear of revenue disruption," the report said. "The pandemic has changed that calculus. Digital 'concierge representatives' won’t be asked to drop off samples or engage in two-minute elevator speeches, but rather, will invest significant time nurturing long-term relationships with their customers. Face-to-face engagement will change from the inside-out, ‘I have a presentation for you,’ to the outside-in, ‘What do you need from my organization, and how can I facilitate that?’”

Five recurring themes emerge from market studies like these and industry commentary:

The need for managing both face-to-face and digital interactions, preferably with a unified system that can accommodate call reports or feedback from any channel. The older concept of “multichannel” marketing has given way to today’s “omnichannel” approach.

The emergence of so-called hybrid reps (adept at multiple channels) and/or the development of inside-sales or call centers that complement field sales. This trend also takes advantage of the employee trend toward work-from-home arrangements.

The availability of more, and more in-depth, data on both patients and prescribers, the former to analyze market potential and performance, and the latter to recognize key influencers among healthcare professionals (HCPs) and to feed that into the reps’ sales plans.

The steady growth of artificial intelligence/machine learning (AI/ML) capabilities, starting with an earlier era of CRM-generated “recommendations” for sale reps’ actions, to the current “next best action” for reps or for marketing managers, to the future potential of generative AI like ChatGPT and similar IT tools.

The growing importance of consolidated health systems and pharmacy benefit managers, whose decisions on physician access, therapy choices and drug formularies dictate market access for manufacturers. This business condition, in turn, drives the need for key-account management teams in sales forces.

“Back in the day, ‘multichannel’ simply meant putting out your content in whatever channel you could—via print, on a website, in an e-mail, and so forth,” says Parker Richardson, VP, omnichannel strategy and operations, Astellas Pharma. “The shift to omnichannel is twofold: understanding, via deep analytics, the journey that a prescriber is on and helping to orchestrate that journey; and then recognizing the content that would benefit the prescriber and delivering it.” Rather than tailoring content to multiple channels, he says, the process should begin with understanding what the prescriber needs to know, and then delivering it via the channel that prescriber prefers.

The generally acknowledged market leader in life sciences CRM is Veeva, which states that it reaches 80% of the global market for life sciences sales reps (and even more in the US). Veeva pioneered cloud-based CRM in the mid-2000s, and has also grown a substantial business in managing IT needs for clinical research. Late last year—and in more detail at its recent Commercial Summit in Boston—it announced that it was leaving the platform it was built on, Salesforce.com, and building its own, called Vault CRM.

Salesforce.com happens to be broadly used in CRM in many industries and types of business, and competitors to Veeva, including IQVIA (and Salesforce itself, in certain applications), use that platform. Veeva says that this will be a seamless transition for users, but as Paul Shawah, EVP, commercial strategy, puts it, “Customers can choose a ‘lift and shift’ approach to transition from the old platform to the new one, or a ‘refresh’ approach to revamp their sales structure while transitioning.” The transition will begin in early 2024, and continue until 2030, when Veeva’s partnership with Salesforce.com will expire. At the same time, Veeva is moving closer to Microsoft, by enabling Microsoft’s Outlook (for email) and Microsoft 365 (the former Microsoft Office) to be seamlessly integrated with Veeva CRM.

Veeva announced some significant new offerings at that Boston meeting. One is a service center extension, tailored to supporting inside sales teams while linking seamlessly to Veeva CRM. Another is an expansion of its Compass data service, with anonymized patient data available now, and predictive prescriber and national-markets data available next year. (This product competes directly with a variety of services offered by IQVIA, which are currently available to pharma clients using Veeva CRM via third-party agreements; the new service is supposed to eliminate these agreements. On the other hand, Veeva and IQVIA have been engaged in legal actions against each other since 2017.) A third offering, CRM Bot, will be described later.

Over at IQVIA, the focus in recent years has been its Orchestrated Customer Experience (OCE), which enables the company’s rich data prescribers and markets to be integrated with the Salesforce platform. OCE has been upgraded recently to “OCE+”, the difference being the incorporation of a product from the company called the “Next Best recommendation engine.” “Next Best” refers to the process of identifying a preferable action to take (send a doctor an e-mail, engage with the medical science liaison, etc.) for reps or marketers to take, based on the data on hand and a set of business rules or algorithms (see chart above).

“IQVIA is uniquely positioned to bring together data, analytics, technology, and AI/ML capabilities all under one roof,” says Sanjay Chikarmane, chief product officer, IQVIA. “With OCE+, our customers can make smarter and more informed decisions through embedded intelligence that surfaces the actionable insights they need, when they need them, to better personalize the HCP experience and improve business results.”

The next-best action approach has been kicked around for several years by various IT firms and business consultants. Earlier versions had the problem of recommending self-evident actions or simply ineffective ones. But as AI tools have improved, acceptance is growing. Saby Mitra, principal, digital customer experience, at ZS Associates, has followed the evolution of the next-best concept for nearly a decade.

“Back in 2015, industry was not warming up to the idea of winning with better analytics [like next-best action]," he says. "In the 2015-2018 period, we saw basic business rules being implemented, i.e., ‘if you’re falling behind plan, do this.’ Now, these recommendations are becoming more predictive: ‘this doctor will have x patients for a therapy, and there is a high likelihood that the HCP will appreciate this relevant content on your next call.’”

Like IQVIA, ZS has a stable of data services, now combined with AI/ML tools, under the brandname Zaidyn. The company is also a high-level partner with Veeva, providing implementation services and consulting for life sciences sales and marketing teams. Mitra says that the earlier (2015-2018) instances of next-best actions generated sales bumps of 4-5%; now, with the latest range of AI/ML tools, that has nearly doubled.

One of these ZS data services, Affinity Monitor, has records on 800,000 HCPs. Within Zaidyn, use of Affinity Monitor enables marketers to analyze HCPs’ preferred channels; follow-up actions can range from looking for clinical trial candidates to assembling reimbursement information for patients. Mitra says that an evolving area of interest is accounting for the social determinants of health, itself a growing area of interest for deeper insight into patient behavior. Most recently, ZS announced a partnership with Informatica, a developer of master data-management tools, to combine Zaidyn with Informatica’s Intelligent Data Management Cloud (IDMC), creating (in the industry lingo) a “data fabric” across a range of data sources.

Veeva plans to jump more deeply into the AI game with a product called CRM Bot, which, when introduced in an expected 2025 timeframe, will employ ChatGTP resources to provide to reps not just next best actions for reps on prior call reports or channel preferences, but even to predict HCP needs by drawing patient data from Veeva Compass (a compilation of healthcare data) and Link (a compilation of HCP activity).

ChatGTP is a type of “generative AI” that, in this case, builds content or analysis based on “large language model” training. Google, Microsoft, and a host of other IT firms are racing to build comparable systems. Whereas everyday computer users have been experimenting with ChatGTP tools to create documents, songs or graphic images, even writing computer code, its use in pharma will require training on the data stored in pharma’s own repositories. Veeva notes that each pharma customer will be using its own data for training, not industry-wide databases.

The near-term objectives for tools like CRM Bot will be internal documents, such as reps obtaining an AI-generated summary of their customer lists and call plan goals. Marketing managers might use it to speed development of a marketing plan. However, there is a significant obstacle to creating documents or texts that might be sent outside the organization—even something as straightforward as an e-mail response to a physician query. All such communications depend on a prior legal and/or regulatory review. The experience of everyday computer users to date has shown that ChatGPT and related AI systems can make mistakes or create false narratives—and the consequences of that in a healthcare context could be disastrous.

“I think the jury is still out on these AI tools,” says Mitra. “The technology has clearly created excitement, but so far it hasn’t been used in a regulated industry like pharma.” He also sees it as being complementary to, and not a replacement for, AI tools like neural networks or ML. He adds that ZS has a workgroup devoted to developing this technology; eventually it and its pharma clients will find a way forward. Meanwhile, there is an intensifying debate within IT circles over creating guidelines for safe development of AI technology.

Still, there is a sense in industry that exciting new capabilities are just around the corner. “I’d like to see an application that goes beyond next-best action,” says Richardson. “For example, could reps ask for a system to tell them how to run their territory for the next three months?” He sees the value of well-qualified reps as more important than ever; but given the investment that the pharma industry makes in its field teams, there is potentially more value to be obtained.

The traditional lament of commercial operations in pharma has been overcoming the difficulties of siloed functions, both geographically (for global firms) and operationally in the duplicate efforts and lack of collaboration. IT providers have come a long way in weaving the disparate data of commercial operations into a unified “cloud” or “fabric"; the hope is the same can happen in a workforce context.

The latest IT offerings for sales force automation—including new AI tools—promise a more effective pharma sales process.

New Trends in Sales Force Organization

Since its founding in 2007, when it introduced cloud computing to life sciences sales teams, Veeva has used the Salesforce.com cloud platform upon which it built dedicated applications. Now, at its 2023 Commercial Summit (Boston, May 1-3), the company fleshed out what this previous news will mean for its customers in life sciences, where it is the dominant customer relationship-management (CRM) provider (and, increasingly, its presence in managing R&D activities for that industry).

Heretofore, Veeva customers paid a pass-through subscription to Salesforce.com, according to Paul Shawah, EVP, commercial strategy; the arrangement between Veeva and Salesforce will officially begin expiring in 2025, but Veeva customers staying with the Salesforce platform will be supported through 2030. Pilot customers will begin working with the new platform, Veeva Vault, next year; Veeva also announced a deeper partnership with Accenture for Veeva Vault CRM customers who want to update or revise their software implementation, rather than a straight “life and shift” implementation.

New capabilities will be added to Veeva Vault CRM: a free “service center” feature that can organize such functions as internal sales teams or inbound call response, and the CRM Bot, which employs artificial intelligence (AI) tools to enable sales reps to generate texts or documents (taking advantage of the so-called “generative AI” tools now becoming popular).

At the meeting, the company also announced new capabilities in its Link product (for identifying key accounts and their relationships) and Compass, which will soon include deep analytics on providers in addition to the current data on patients.

A ‘next generation’ CRM platform will gradually leave the Salesforce.com platform behind.

Veeva Is Building Its Own Cloud Platform, Plus Other New Capabilities for Managing Life Sciences Sales and Marketing 

It is well known that there are thousands of illicit online pharmacies used by Americans to purchase drugs, usually via e-commerce; for years, the National Association of Boards of Pharmacy (NABP) has tracked their online presence and waged a campaign to discourage their use. Now, a study by the IQVIA Institute for Human Data Science, in partnership with Spain’s IE University and that school’s business offshoot, Translucent DataLab, has conducted a more detailed study of what it calls illegal online pharmacies (IOPs) that have been used by US customers.

The study finds 1,501 active IOPs (as of February), and that between 2019 and the end of 2022, annual prescription volumes rose from 64 million to 85 million—a CAGR of 10%. In calendar year 2022, this volume represented $34 billion in “value loss” to industry (it is uncertain how much of these sales represent legitimate product).

Some definitions: a legal online pharmacy has a license from a US state, provides an FDA-approved and -authorized drug, and requires a prescription written by a US medical practitioner. IOPs typically operate outside the US, don’t have state licensing, and sell drugs that often don’t have FDA authorization. While it is illegal for a business to import volumes of unauthorized drugs, individual consumers are not penalized for obtaining up to three-month supply of a drug.

To start the process, IQVIA and its partners did some sophisticated web scraping to not only identify the 15,501 IOPs, but also how many of them were linked (the same business entity might sponsor several or many pharmacy websites). Web-sourced data from an analytics company (Semrush) was used to estimate monthly traffic to these sites. Then, a series of regression analyses and comparisons with IQVIA’s rich database of overall prescription patterns led to estimates of the types of drugs being dispensed. (A nifty bit of detective work involved comparing purchase order numbers from orders placed at the beginning and end of a month to get an estimate of prescription volume of some sites.) The analysts were also able to get pricing information directly from sites (interestingly, although many customers expect lower prices for the IOP purchases, that is not universally true).

By some hard-to-follow methodology, the analysts also estimate that purchasing these drugs caused a tenfold increase in adverse events (comparing the adverse events per prescription of legitimately dispensed drugs with the IOP dispensing), which cost the US health system upwards of $64 billion annually for the 2017-2022 period. “This preliminary evidence shows that the public health impact of IOPs is substantial and has exhibited an increasing trend in the last few years” says the study. Whether that’s an accurate figure is debatable, but the clearest trends are a worrisome increase in use of IOPs, and a threat to legitimate drug supply chains.

https://www.iqvia.com/insights/the-iqvia-institute/reports/assessing-the-impact-of-illegal-online-pharmacies-in-the-us

“Deep learning” IT tools were used to calculate sales volumes and drug class.