Top 2020 Pharma Supply Chain Logistics Trends

Top 2020 Pharma Supply Chain Logistics Trends

In previous posts, (here and here) we’ve discussed the growing scrutiny on bio/pharmaceutical supply chains. Company executives are increasingly worried about how long their supply chains are – and the risks each layer poses.

Regulators are paying close attention and expanding their scope to encompass elements up and down the manufacturing chain – from API and excipient providers to compounding, packaging, logistics and beyond.

We’re also at the cusp of transformation. In a PharmTech video on supply chain logistics trends at last year’s CPhI, LGM’s CEO Prasad Raje explained that the FDA will increasingly expect industry participants to become more technology- and data-driven. More emphasis will be placed on supply chain transparency, with traceability stretching to the furthest reaches of a product’s supply chain.

What are the top supply chain logistics trends we believe will impact the industry in 2020?

2019 ushered in a number of manufacturing-related regulatory changes, including a new GMP inspections risk-based selection model, the Mutual Recognition Agreement between the FDA and the EU’s EMA, along with other manufacturing-related guidance and regulations. Hand-in-hand with accelerating scientific discovery is a sense that compliance is growing more challenging.

So here’s the big question: Will 2020 bring yet more changes, or offer some respite?

Some trends are short-lived while others are longer-term, bordering on permanent, with incremental changes spanning years. 2020 is expected to continue the mix. The growing awareness – and embrace – of digital transformation in the life sciences along with ongoing trade uncertainties remain on our list (below) due to their influence on the industry.

Here are the top supply chain logistics trends we believe will impact the industry in 2020.

1> No end in sight for global trade instabilities.
Trade tensions are a recurring supply chain nightmare. Countries are increasingly adopting protectionist positions, and the last few years have seen increasing uncertainty for global companies. This has been especially true of companies with lengthy supply chains that pass through countries at issue (e.g., API precursors from China, sent to India for manufacturing, then shipped to the U.S. for marketing).

About 80% of active pharmaceutical ingredients and 40% of finished drug products are imported into the U.S. from overseas. Manufacturers in India and China, in particular, are a key source of pharmaceutical ingredients for the generic drugs prescribed to Americans in ever-increasing volumes.

Awareness of supply chain issues with Chinese manufacturers has grown exponentially in recent years after regulatory, environmental and government actions led to numerous API manufacturers being unexpectedly shuttered. Pharma and biopharma companies fearful of manufacturing disruptions have reacted by seeking secondary supply sources.

The issue stretches well beyond Asia. With Brexit still in play, even supply chains between the EU and the UK are at risk. And it isn’t just political and economic uncertainties posing a threat – the environment is producing rising numbers of natural disasters which are increasingly a risk factor that must be considered.

2> More attention will focus on compliance.
As mentioned above, the industry as a whole is seeing more targeted compliance, as regulators work to identify gaps and address process failures. Enterprise pharma companies will continue to launch regulatory transformation initiatives.

IBM, Merck and Walmart have been chosen for a U.S. Food and Drug Administration pilot program that will explore using blockchain technology to improve the security of prescription drug supply and distribution by allowing real-time monitoring of products. We’re watching closely to see the results.

3> Supply chains are emphasizing the speed of development.
Drug pricing pressures are expected to help drive new operational efficiency improvement measures. With the cost of developing a new drug rising to about $2.6 billion, every link in the pharmaceutical supply chain will be forced to adapt in order to speed drug development and control costs.

4> Serialization gets serious in the fight against counterfeit drugs.
Fake drugs - LGM PharmaAdding an extra layer of complexity to the drug industry is a new set of regulatory changes being driven by safety and counterfeiting concerns. Counterfeit medicines may be contaminated or contain the wrong – or no – active ingredient. 

According to Forbes:An estimated $200 billion of counterfeit drugs go on the market annually. That makes it the largest fraud market in the world!”

Not only are counterfeit drugs illegal, they can also be harmful to your health. Regulatory agencies are requiring pharma companies to track the product ID, origination and the tracing of its movement.

Distributors have speculated that the FDA will soon require the collection of serialization data and verification as to which serial numbers were in each container and pallet, and ultimately which individual drug product units were sent to each retailer.

5> Increased data traceability demand is driving digital transformation.
The industry is undergoing a digital transformation and it will continue to pick up steam in 2020. With the goal of streamlining the entire supply chain, eventually virtually all documents will move through online processes. Today, digitization is playing a huge role everywhere. Everybody wants access to real-time data and information to improve decision-making processes.

6> Logistics will change because pharma is changing.
We live in a time of heightened customer expectations, and it is impacting every part of the supply chain. Next-generation delivery and logistics management solutions will need to make global supply chains smarter, faster, more sustainable and customer-centric.

Two aspects of logistics highlight this trend: partnering and green logistics.

Pharma companies are starting to consider logistics partnerships to minimize freight cost and mitigate supply chain risks. The right partnership may also decrease delays in delivery and as well as the amount of required administrative work, creating workflow efficiencies.

We also anticipate M&A activity will see more logistics companies acquired by CMOs and CDMOs, as contract providers seek vertical integration to strengthen customer supply chains.

The other rising trend: green logistics. More and more companies are embracing green logistics to cut costs, reduce their environmental footprint and win customer loyalty.

7> Precision medicine creates unique logistics challenges.
Precision medicine creates unique logistics challengesThe number of precision medicine drugs is projected to grow by nearly 70% in the next 5 years as the FDA prepares to approve a significant number of cell and gene therapies.

Precision medicine, however, adds some additional supply chain complications.

Increasingly, peptides and proteins need temperature- and humidity-controlled transportation conditions with monitoring throughout the duration of shipment – adding to cost and complexity. The push into biologics and gene therapy drugs will further drive demand for temperature-controlled/cold chain logistic companies, potentially elevating API prices.

What key pharma supply chain logistics trends do you think we’ll see in 2020? Leave your thoughts on LinkedIn.



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