The pharmaceutical supply chain, which is the link between the lab and the market, is experiencing major changes. Manufacturers are developing and marketing new medicines to treat a variety of diseases and conditions. They face numerous fulfillment and distribution challenges. These include avoiding product shortages and minimizing product expirations, temperature control during shipment, and effective management of warehouse and DC operations.
The Drug Supply Chain Security Act (DSCSA) which outlines product-tracing requirements and partners for manufacturers has not made things easier. Problem is that the visibility of the entire pharma supply chain remains a major challenge, mainly because it involves global trading partners.
These companies are looking at ways to improve their visibility and supply chain activities, but pharma companies also answer to a higher calling: Patients who want single orders delivered to their homes.
Trends in fulfillment
The pharmaceutical supply chain, which includes the manufacturing, selling, storage, transporting, handling, transporting, and distribution of products, is prime for digitization and automation. However, none of these are being used in any significant way by pharma at this time. “Pharma, as a whole, just doesn’t move very fast,” states Michiel Vessel who is Swisslog’s head of Competence Center warehouse- and distribution solutions. “Right now we are seeing huge pressures placed on the industry regarding track-and-trace and product serialization.”
Veenman says that tracking individual medication packages throughout the supply chain can be costly and often involves manual scanning of each box. This is just one of the many reasons pharma has begun to integrate the Internet of Things, automation, and robotics in its fulfillment operations. Companies are being forced to rethink their distribution and manufacturing processes by trends like shrinking drug lot or batch sizes, and the production and sale of patient-specific medication.
Veenman says that these trends have a significant impact on not only the supply chain but also warehouse automation and pharmaceutical warehousing. “The pharma company that now has to store and process smaller quantities of the same items–including those made with different materials/formulas–has to change the way its warehouse looks and operates.”
Veenman compares pharma and e-commerce. He says that the two industries have a lot in common when it comes down to filling smaller orders faster than ever before. Complex regulations such as DSCSA are added to the mix and pharma will have a lot of work ahead of it in the coming years.
Veenman states that although pharmacy is less restricted than e-commerce as a whole but is being forced to adapt just as fast as e-commerce. He points out that many companies have mastered traditional routes from the manufacturer to the hospital or pharmacy. The distribution process becomes more complex when there is an exception to this rule (i.e., one delivery that must be shipped directly to a patient).
Veenman states that he was recently at a conference where pharma discussed using Amazon to manage small single orders. It was an interesting discussion.
Veenman, from a vendor perspective, says that Swisslog is helping to alleviate some of pharma’s pain points. They have developed more plug-and-play solutions that allow companies to get their automated systems up and running quickly. These solutions are faster to install and commission and require less overhead. They allow pharmaceutical manufacturers and/or third-party logistics providers (3PLs), to manage small, customized projects in an automated manner (i.e. short-term contracts with particular customers). Veenman states that this is at least one place where technology is headed. “With nothing bolted down to the floor, it’s easy to set up and modular.
A more efficient, less costly supply chain
Softeon’s chief market officer Dan Gilmore, who is looking at the pharmaceutical landscape, sees many changes occurring and believes that most of them will eventually have an impact on both the logistical and operational aspects of the business. He cites as an example the shift from large-scale, mass-market prescription drugs to smaller, more targeted options that have had a big impact on distribution.
Gilmore says that pharma companies will deliver medicines made specifically for you and me shortly. This has huge implications for both the warehouse and distribution. For example, Gilmore says that the fulfillment and production of personalized medicines could be done under one roof. Gilmore says that in a large, mass-produced model, drugs can be produced at one location and shipped to other locations for distribution. To manage smaller orders that are more personal, you will need closer ties between distribution and production.
The pharmaceutical industry may have to adapt to these shifts. Due to its high-value products, the industry has not paid much attention to logistics costs. A single pill can be as expensive as $15-20. Gilmore says that shipping has been relatively inexpensive. “Logistics costs as a percentage of sales (a common metric used in most industries) were very low.” It wasn’t something companies worried about.
This is changing. As the number of highly profitable, blockbuster drugs has declined over the past few years, pharma companies have begun to examine their logistics costs. Amazon’s acquisition of online pharmacy PillPack has accelerated the drive to lower logistics costs and reduce delivery times. Gilmore says, “Everybody knows that Amazon will introduce a leaner’ model for pharmacy distribution.” This is causing other pharma companies to wonder, “Okay, so what does it mean for our business and how can we also get leaner?
Pills on demand
Pharma companies are focusing on creating more efficient supply chains and a better customer experience. They’re also testing automation and other advanced technologies to make their work easier, faster, and more efficient. This is all for “delivery of a pill on-demand,” Gilmore says. However, Gilmore adds that many of the industry’s fulfillment processes are still hampered by manual processes and high headcounts. Gilmore says that compliance is a part of the problem, but not all. “As some aspects of compliance can more easily be automated, Gilmore adds.
Pharma is also focusing on incorporating more supply chain best practices in its operations. These best practices, which have been discussed for years but never implemented, include formalized commitments to centralize distribution for pharmacies – a domain that was previously outside the reach of traditional healthcare supply chains. “With rising drug prices, especially in the brand/specialty area, we are seeing more organizations recognize that best practices are necessary,” states Jeromie Atkinson senior director of the supply chain.
Atkinson believes that pharma’s greatest opportunity to reduce fulfillment costs and streamline the supply chain will be in companies’ ability to control their distribution processes. Others are focusing on hub-and-spoke distribution operations that are anchored by a hospital. Others are looking into their DC options. These facilities can be leased or built from scratch and used to distribute patients, pharmacies, and/or hospitals.
Atkinson believes these and other moves are made to leverage scale and reduce costs. He also sees technology playing a crucial role in pharma’s mission to be more efficient and less costly. He says that automation has improved workflow, while data has enabled companies to effectively use intelligence across the clinical care continuum and make it useful.
Automation and digitization: More
As more pharmaceutical companies replace their enterprise resource management (ERP)systems at home with more sophisticated, modular options, efficiency will likely increase.
Gilmore points out that “many of the order management systems used by pharma companies were built for another time and another age.” He also notes that the idea of real-time inventory visibility, network visibility, and capacity visibility, combined with current labor market constraints, are all key components in pharma’s drive to digitize and automate their operations.
“In the ‘old world’ of pharmaceutical distribution, activity was static, orders flowed a certain way, and time wasn’t of the essence,” says Gilmore, who is currently working with pharma companies that have to move temperature-sensitive shipments direct to consumers using both ground and air. These meds are not designed to last for three days, they must be available overnight. These are the same things no one was concerned about five years ago.