The 2015 Biopharma Cold Chain Landscape

Pharmaceutical CommercePharmaceutical Commerce - September/October 2015

More volumes of more valuable products drive growth

Fig. 1. Cold-chain drugs and biologics will outpace overall industry sales growth through 2019

Although dealing with rising cost pressures

from payers around the world, the biopharma industry is enjoying strong growth, especially in the US. The long-sought promise of using genomic information to develop drugs and diagnostics is starting to come home. Monoclonal antibodies (mAbs) have been premier products in oncology (a strong growth area by itself) for several years; now, with new mAbs such as the so-called PSCK9s to treat cholesterol-related conditions, their application is broadening.

These high-value products put an added emphasis on proper storage, transportation and dispensing. Maintaining a secure “cold chain” through the storage, handling and transportation of temperature-sensitive drugs, vaccines and blood products assures product quality and integrity for the benefit of the patient, and keeps the manufacturer, hospital, pharmacist, physician and nurse in compliance with various laws, regulations, guidelines and codes.

In clinical trials, where following protocols is so essential to obtaining meaningful results, maintaining the cold chain also preserves the validity of the tests.

It costs more to keep products at 2—8 °C or at frozen temperatures than it does to keep them at uncontrolled ambient conditions, more to pack and transport them cold, and more to be able to demonstrate by process qualification or by measurement of each shipment that they stayed cold. But industry and society benefit enormously when temperature-sensitive drugs and biological products can be made in efficient large batches, shipped around the world, and delivered as needed to the point of purchase or use.

In the 6th annual forecast from Pharmaceutical Commerce, we extend our market-trend predictions for cold-chain and clinical-trial logistics to 2019, and provide insights on the forces that are driving or slowing growth across these essential global industries, and in particular segments and regions.

For cold-chain logistics, the top drivers are the greater adoption of cold-chain products in both developed and developing markets, and the continued development of new drugs. The outlook is for continued expansion through 2019, at an average growth rate of about 6% per year, about the same as the 6% uptrend in the 2012—2018 forecast last year, but with more growth in North America.

For clinical trials logistics, a 2.5% average growth rate through 2019, vs. a 1—2% uptrend in the 2012–2018 forecast last year.

Fig. 2. More than $10 billion will be spent on cold-chain logistics in 2015, in a global biopharma logistics market of $58 billion

Market scale

Projected growth of cold-chain biopharma products will run roughly at twice the rate of the industry overall, according to our analysis (Fig. 1), reaching more than $361 billion worldwide in 2019. As of 2015, it exceeds $250 billion in value, and the special logistics for maintaining the quality of temperature-sensitive products as they are shipped from manufacturers to hospitals, clinics, pharmacies and patients around the world account for more than 15% of all biopharma logistics spending.

Our forecast for biopharma cold-chain logistics spending (Fig. 2) in 2015 is about $10 billion worldwide, in a $58-billion overall pharma logistics market, of which $7 billion will be transportation and $3 billion will be specialized tertiary packaging and instrumentation, such as insulated boxes, blankets, phase-change materials, active-temperature-control shipping containers, and various temperature sensors and recorders (Fig. 3). By 2019, cold-chain biopharma logistics spending will expand to $13 billion.

Clinical trial logistics is an adjacent and very substantial market for temperature-assured transportation and packaging. It involves shipment of products to be used in trials to study sites that may be dispersed around the globe, and return of unused medicines, as well as shipment of medical samples to centralized analytical laboratories. Because of a recent uptick in number of new trials and enrollment, and a speedup in industry R&D spending overall, our forecast now is for a continued expansion of clinical trials logistics spending at an average 2.5% per year rate.

Fig. 3. Cold-chain logistics spending is forecast to grow to $13 billion by 2019

Growth drivers

Products requiring cold-chain handling are mainly bioengineered drugs, or biologics, derived from living cells, delivered in liquid form by injection or infusion, and packaged in vials or syringes or “pens.” Most of the drugs are brand-name proprietary products, with only a few considered “biosimilars” or generics, while many biologics, such as blood products and vaccines, have several or many suppliers of very similar products, whether branded or not.

Some refrigerated products, such as various insulin products, are labeled to allow them to be held at room temperature for some time. USP also defines “controlled room temperature” as a range around 20—25°C with allowed excursions between 15–30 °C, and most tablets and capsules are labeled for such non-cold-chain storage and handling. In the US, temperature limits for blood, plasma and some vaccines and other specific biological products are written into federal law and, while they overlap with ranges described by USP for drugs, they do not conform; for instance liquid red blood cells and liquid plasma may be stored at 1–10 °C (34–50 °F).

The total value of bioengineered drug products is more than $150 billion worldwide, three times what it was 10 years ago, and vaccines and blood products have expanded as well. Most of these products are made in relatively small volumes and often for small populations with chronic conditions, and sold at high prices, which can add up to $10,000 or $100,000 or more per patient per year, with some exceptions, such as insulin products and childhood immunization vaccines, which are used by hundreds of millions of patients per year.

Biotechnology products requiring cold-chain handling make up an increasing fraction of total sales. Of the top 50 global drug products in 2013, 24 required cold-chain handling, accounting for $104 billion in sales. In 2010, the top 50 drugs included 18 cold-chain drugs, with sales of $73 billion.

The most widely prescribed of these brand-name cold-chain products are the various forms of insulin, such as Lantus Solostar, which had about 10 million prescriptions in the US last year, according to IMS Health. This is in the same order of magnitude as top non-cold-chain branded products, but much less than the 100+ million annual prescription volume (US) of the top generic (hydrocodone/acetaminophen).

By 2020, 27 of the top 50 sellers will be drugs requiring 2—8 °C cold-chain storage and handling. Nine of these are new; the other 18 were on the 2013 Top 50 list (Fig. 4).

Fig. 4. By 2020, 27 of the top 50 best-selling global drug products will require 2—8°C cold-chain storage and handling

New drugs and specialty drug trend

In 2014, the FDA Center for Drug Evaluation & Research (CDER) approved 10 biologics, and 30 new molecular entities, of which all the biologics but none of the NMEs require cold-chain handling. This compares with four biologics and 24 NMEs (two cold-chain) in 2013.

One of the new biologics, Opdivo (nivolumab), approved Dec-2014, is projected by 2020 to be a $6 billion product, #9 on the “top 50” list.

Review of vaccines and blood products at FDA is handled by the Center for Biologics Evaluation and Research (CBER). In 2014, CBER approved an additional 16 biologic products, 13 of which require cold-chain handling.

In global volume, insulin is the largest cold-chain biopharma product. According to Novo Nordisk, one of the original makers of insulin in the 1920s and still a market leader, the unit demand for insulin worldwide grew 6% per year 2009—2014, with much faster growth in emerging markets such as China, which as of 2014 had about one-quarter of the world’s diabetic population, but used only 6% of the world’s insulin. If every diabetes sufferer in China received the same amount of insulin as a US diabetic, it would more than double the world demand. This trend is translating into very substantial market growth. Since Novo is China’s leading insulin supplier, with 60% share, market growth also drives substantial business growth for them. Sanofi and Lilly have most of the remaining market.

The company points to the growth in prevalence of diabetes, and the expansion of treatment, as driving forces for growth of insulin and other therapies. According to the International Diabetes Federation, 382 million adults suffered from diabetes in 2013 (98 million in China), and the prevalence of this disease will grow to 592 million adults—one in ten adults worldwide—by 2035, about a 2% annual growth rate.

Blood and plasma products

In the US particularly, blood and plasma products are produced and handled in high volumes. According to the US National Blood Collection and Utilization Survey, the US has about 16 million blood donations per year; plasma donations were estimated at about 18 million by the Plasma Protein Therapeutics Association. The largest commercial suppliers of plasma-related products are Baxter International, CSL Behring, Grifols and Octapharma. Baxter had revenues of $15 billion in 2013, including such plasma-derived products as Advate clotting factor and GammaGard immune globulin.

As of 2014, the North American demand for immune globulin, a plasma component which sells for about $100 per gram, was pegged at about 62,000 kg per year, with a value of about $6 billion, with growth of about 5% from the prior year.

Overall cold-chain biopharma forecast, and by region

Adding biotech, vaccines, blood, plasma and all other cold-chain products, the overall cold-chain biopharma market is expected to exceed $250 billion this year, and to top $350 billion by 2019, driven by innovation in the most-developed markets, as well as by expanded distribution of cold-chain products in Asia and the southern hemisphere.

Cold-Chain Logistics Market Sizing and Forecast

We are continuing to predict an expansive future for cold-chain logistics, driven by introductions of new biotech therapies and even more by expanding usage of cold-chain products in developing countries, and shadowed by rapid non-cold-chain growth in those countries, particularly China.

Our estimate of how much is spent per year on transportation and packaging for refrigerated and frozen biopharma products is based on estimates of how many legs the products travel, how far, in what amount, in what kind of protective or “tertiary” packaging with what instrumentation or phase change materials if any, and by what mode and speed.

As a starting point for the forecast, logistics for refrigerated and frozen drugs, biologics and blood products are estimated to have cost the global industry about $9.0 billion in 2013, about 17% of total biopharma logistics spending, which was about $53 billion. Forward projections are based on volume, and changing patterns of trade and distribution, with prices held constant.

Fig. 5. Growth in cold-chain spending will be faster in Asia and North America than in Europe or the Southern hemisphere

Cold-chain spending is estimated to be about $10.1 billion in 2015, in a $58-billion total pharma logistics market, and to grow to about $13.0 billion by 2019. Asia and the southern hemisphere will account for about the same amount of cold-chain logistics growth as North America and Europe, and more non-cold-chain growth.

With 20% of the world’s population, Europe and North America consume more than 60% of its pharmaceutical products in dollar terms; if Asia and the rest of the world used drugs at the same level, the global pharma market would be three times as large. This forecast follows IMS and others in predicting how far that expansion will go by 2019, but it could be faster or slower (Fig. 5).

The proportion of cold-chain products within that mix is based on assumptions about new drugs being approved, and more so on how quickly existing drugs are adopted. In the long term, if biosimilars or other bio-generics dramatically reduce the price of cold-chain drugs, the market could expand much more than three times, but within the scope of this forecast, expectations for biosimilars are minimal, and cold-chain growth is most related to the mid-cost products such as insulin rather than the higher-cost biotech therapies.

There are also assumptions about how cold-chain products are sourced. If developing markets do better than expected at manufacturing cold-chain products locally, that would tend to reduce the logistics spending, but in the probable case that the US, Europe and Japan maintain a hold on these technologies that tend to continue to drive export trade and air logistics.

Clinical Trials Logistics

The economic importance of careful cold-chain handling is extremely high during the development and testing of a drug, because careless handling could spoil an experimental protocol, and prevent or delay approval of some beneficial and profitable new product. While they are being developed, all drugs and also all medical samples generated get special handling, including the highest levels of temperature assurance; for instance, having temperatures checked and phase-change materials replenished at transit points between the factory and the study site, and between the study site and the lab.

In 2015, there are more than 60,000 clinical trials in progress around the world, according to the US National Institute of Health’s global database. Most, if not all, of them take a very high level of care in logistics, whether the drugs or devices involved need refrigeration or not. Phase 3 studies, which precede marketing approval, are the most expensive and account for the greatest fraction of R&D spending, due to per-patient costs that exceed $40,000, according to research firm Cutting Edge Info in a 2011 survey.

Phase 3 trials also place the most demands for efficiency and speed on logistics providers and the most pressure on the cold chain, not just for outbound shipments of the drugs being tested, but also for sending unused test products back to the maker, and sending medical samples to a central lab. Challenges include labeling, primary packaging, Customs clearance, barcodes, validated inventory systems, high volumes, temperature controls and associated documentation. For this and other reasons, logistics including packaging, storage and transportation of product and samples can account for several thousand dollars per patient, even as much as 50% of study budgets in an extreme case, according to industry analysts such as the Tufts Center for the Study of Drug Development.

According to the Pharmaceutical Research and Manufacturers of America (PhRMA), the US trade association, there were 5,400 drugs in the global development pipeline as of 2013, and $51.1 billion was spent by US companies in 2013 on R&D, more than ever before. Spending was up about 3% vs. the prior year, and exceeded the previous peak which was $50.7 billion in 2010.

European pharma industry R&D was also up in 2013, about 2%, to €30.6 billion, from €30.0 billion in 2012, according to EFPIA, the European Federation of Pharmaceutical Industries Associations.

Clinical-Trials Logistics Forecast

For this year’s forecast, we again approached clinical-trials logistics as a single global market (no regional breakdown) and weighed several bottom-up, as well as top-down measures, including:

  • Measures and forecasts of clinical-trial activity, such as from the US National Institutes of Health’s and various forecasters
  • Measures of R&D spending
  • Revenue estimates for companies dedicated to providing these services
  • Documented analyses of trial costs and budgeting norms cited by industry experts.

Since trials are normally completed in 3—4 years, the full impact of the 2009–2010 R&D slowdown was likely realized by 2013. Looking ahead and combining various measures, our estimate for specialized logistics serving drug and biologics trials is $2.84 billion in 2013, reaching $3.00 billion in 2015 and increasing to $3.29 billion by 2019 (Fig. 6).

Fig. 6 Clinical trials logistics outlook is for an uptrend matching general R&D growth trends

The clinical logistics market could expand faster if companies start seeing greater returns on research, if trials shift again to distant foreign markets, and if biosimilar pathways to approval are adopted and prove to be profitable.

Future Direction

The top-selling drug through 2020 is expected to be Humira, a monoclonal antibody that requires cold-chain handling. AbbVie—the Abbott Laboratories spinoff—said in late January that Humira sales were up 10.6% in 2014, to almost $12 billion, from $10.7 billion in 2013 when growth was 15%. Since its FDA approval in December 2002 for treatment of rheumatoid arthritis, Humira has received additional approvals for treatment of psoriasis, Crohn’s disease and several other conditions in the US, Europe and elsewhere.

Thirty years after marketing approval of the very first genetically engineered drug—Genentech’s Humulin, a human insulin licensed to Lilly, in 1982—the industry is now in a middle stage of growth. Because of their cost, products like Humira are used more in the US and Europe than elsewhere in the world, and even insulin is much more widely used in the most developed countries. As incomes rise, there is potential for all biotech and cold-chain products to expand in use by a factor of four or six or more, but high cost will limit how fast this can happen. Demand is also rising, as populations in developing countries live longer and become more susceptible to chronic diseases and cancer.

Potential for innovative new treatments also remains strong, as biopharma companies notch successes in developing new bio-engineered treatments for cancers and other diseases. Likewise, potential for biosimilars, whose impact seems to be always beyond the forecast horizon. Though Humira’s patent expires in 2016, no generic is expected to replace it in the way Lipitor or other small molecule blockbusters were replaced. A biosimilar from Cadila Healthcare approved in India in Dec-2014 is sold for 1/5 of the price of Humira.

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