Emerging markets influence changes in global pharma distribution

Pharmaceutical CommercePharmaceutical Commerce - July/August 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).

Meeting product integrity, security challenges

Indeed, drug makers face new challenges to ensure product integrity and security in the supply chain. Distant markets may have insufficient infrastructure and widely varying regulations, which require 3PLs to work creatively with clients to develop supply chain solutions. A case in point is Walgreens, which last month approached UPS to deliver 375,000 doses of donated flu vaccine to Laos, Hook says, just in time for Southeast Asia’s flu season.

The delivery involved $9 million worth of temperature-sensitive flu vaccine, which had to maintain a critical temperature range of 2—8°C for five days to prevent spoilage. Close to 50 UPS experts spanning the firm’s airline, brokerage offices, shipment monitoring towers, distribution facilities and freight forwarding business were involved in the planning. “The shipment traveled more than 9,000 miles across five countries,” Hook says. “The vaccines arrived successfully in the hands of the Laos Ministry of Health and were administered to patients in need.”

While this exemplifies growing reliance on 3PLs, such as UPS, to handle complex temperature-sensitive logistics, equally important is ensuring supply chain integrity. Pharma companies are subject to increasing security expectations focused on preventing counterfeiting and diversion. “Constant monitoring, track and trace, and the capability to intervene when the monitoring detects a security risk, or a temperature risk, are important capabilities in securing the supply chain,” FedEx’s Kussow says.

The controls and visibility that safeguard the temperature-control chain also enhance transportation security. For example, FedEx has developed SenseAware, a multisensor monitoring device integrated with a FedEx platform for data and device management. “It can monitor temperatures in near real time,” Kussow says. “Secure Comm, the FedEx Custom Critical security command center, uses SenseAware and other devices or systems to fit each customer’s specific security need for layered security monitoring and quick response during transport.”

Technologies that aid in identifying product diversion and counterfeiting include introduction specialty inks and RFID chips incorporated in a product’s labeling. “In most instances, these technologies will increase operating costs,” UTi’s Abbate says. “However, when their effectiveness in loss prevention is taken into consideration, there may be a financial or service benefit.”

MD Logistics utilizes tamper-proof seals, tape and package products in secure ULD containers to mitigate security risks, Sell says. “Additionally, RFID technology and GPS (global positioning system) continue to improve security measures throughout the distribution process.”

New solutions improve cargo tracking

The ability to monitor a bulk-freight shipment in transit, using communications technologies like satellite telecommunications or a GPS, has been in existence for several years. But 3PLs say they are taking this one step further by utilizing these technologies to transmit real-time data on temperature, humidity and location, while a shipment is in transit. For example, DHL developed Smart Sensor for air freight transportation and, through RFID and GSM technologies, introduced a product called Ocean Secure, which utilizes a GPS to track ocean containers and shipments.

“We have also developed Smart Sentry, which utilizes GPS and GSM technology for specialty courier shipments,” Orfanos explains. “We have also started a company based in Germany called AGHEERA, which is solely focused on providing shipment visibility of assets in motion and rest for a broad array of target markets.”

In a related development, DB Schenker, together with global transportation security firm Kirsen Global Security (Berlin and Berkeley, CA), offer the Smartbox service, which provides satellite-aided shipment tracking in real time, using sensor technology. This solution works by transmitting a shipment’s current GPS coordinates and any deviations from the predetermined route, the company said. It also provides information on additional security parameters, such as temperature, vibrations, activity at the container door and light inside the container. “The additional data it delivers is of great value to everyone involved,” Gahan explains.

Vaccine delivery in Laos via UPS’ PharmaPort. Credit: UPS

UPS is creating innovations with its shipment visibility solutions when it comes to handling temperature-sensitive products. The coupling of the new PharmaPort 360 air-freight container offering with UPS Temperature True door-to-door air freight service is pushing the paradigm on temperature-sensitive shipping, Hook says. “Aside from being able to globally monitor and track temperatures in near real time, 24/7/365,” he points out, “UPS has the technology and network to intervene and rescue a shipment experiencing a temperature excursion before it’s too late.”

Underpinning the logistics requirements for life sciences companies are the business drivers for safe, but economical, transportation. Ocean container freight is considered a less expensive transportation mode for goods, and can be a good option for lower-cost, more stable solid-dose products. Although transit time is longer, sealed ocean containers offer higher security and better access to active cold-chain solutions.

While healthcare companies are seeking ways to leverage ocean freight wherever possible, there are several challenges that impact any large whole scale movements toward this trend, such as longer lead times and a certain level of transit unpredictability. “One could argue that the products are stuck in the ocean for an extra 15 to 25 days and, for that reason, add cost to the supply chain, similar to products being stored in a warehouse,” Geodis Wilson’s Svantesson says. “This has to be calculated vs. specific products, products in stock at the destination, lead time expectation in order to reach the ‘time to market’ requirement, etc.”

Service levels distinguish 3PLs

Perhaps the single most important element in transporting pharma products from the US to locations abroad is selecting a reputable carrier who is transparent about methods used in providing service. As a 3PL solely focused on serving the pharma, biologic and medical device industries, LifeScience Logistics says it is committed to supporting clients with the highest quality, flexibility and compliance in healthcare supply chain solutions. “Our end-to-end solutions model allows for companies to outsource their supply chain needs to us, so they can get back to what they do best: saving lives,” Beeny says.

DB Schenker, too, offers customized, end-to-end solutions for healthcare customers. “We manage healthcare products in a stringently secure, expeditious manner, which can mean the difference between success and failure in maintaining patient safety,” Gahan says. “We deliver innovation and global scope to time and temperature-controlled healthcare supply chains from a single source.”

A single company capable of providing seamless door-to-door solutions, including customs and other government requirements, on both the origin and destination sides of a shipment, maintains a competitive advantage, experts say. “We offer our customers the capacity to service shipments from initiation to delivery, providing them with security, integrity, speed and visibility,” MD Logistics’ Sell says. “Operating with this global footprint allows us to distinguish ourselves from the competition by providing our customers with streamlined supply chain solutions and a single point of contact.”

DHL has worked hard to develop an orientation towards the level of quality the industry demands, Orfanos says, and maintains the capacity to shift and adjust its business according to customer needs. “Over the years, we have developed a community of dedicated life science and healthcare professionals who are well-trained with a high degree of competency to be able to handle customer shipments,” Orfanos adds. “Our customized logistics products and solutions, across the entire DHL product portfolio, along with our network of competence centers, GDP and GMP storage facilities, cross docks, clinical depots and, of course, our people are what differentiate us.”

FedEx Custom Critical quality systems are applied to validated transport solutions and supported by dedicated teams of experts specifically designed to assist pharmaceutical shippers with their GDP needs worldwide. The FedEx family of companies provides an array of high-quality transport solutions in its custodial network, or as an individual shipment transaction to meet special needs. “We specialize in ground and air transport, or the appropriate blend of both to meet the critical needs of each individual shipment in the most effective, safest and economical way,” Kussow says.

The combination of technology, breadth of services and global network position UPS to meet the unique needs of the pharma market. “What also truly differentiates UPS in this space is the value, control and visibility gained with the full scope of offerings, such as a network of more than 30 dedicated healthcare facilities globally, regulatory compliance expertise, distribution and post-sales expertise, order-to-cash services, package and heavy freight transportation, and brokerage,” Hook says. “All of which is backed by our technology solutions.”

Geodis Wilson focuses on developing tailored supply chain solutions as it faces opportunities. “We focus on control tower solutions whereby a dedicated team of people are ‘hooked up’ on the management of the distribution,” Svantesson says. “We would run this on three levels: strategic, tactical and operational. The control tower is linked with other regions, depending on the markets nominated.” The firm offers warehousing in the Charlotte and Chicago areas, and oversees investments in four strategic locations for export/import purposes that fit the US pharma market.

3PLs contacted by Pharmaceutical Commerce concur they are best positioned to help life science and healthcare customers navigate the challenges of doing business in emerging markets, given their global footprint and years of experience working in these locations. “By only having to concentrate on the supply chain aspect, 3PL companies are able to benchmark ‘best practices’ across multiple clients in multiple geographies,” Beeny says. “By outsourcing their logistics needs, pharma companies can select a 3PL provider, and expect that their product is in safe hands.”

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