Are Pharmaceutical Supply Chains Due an Outsourcing Overhaul?



Pharma IQ
03/10/2011

The current manufacturing and distribution infrastructure of drugmakers across the globe may be uanble to cope with the future challenges facing pharmaceuticals worldwide.

Research published by PricewaterhouseCoopers (PwC) in February warned that the existing infrastructure of many pharma firms was not sufficient to cope with new medicines, cost pressures and health reform expectations.

In recent years, drug companies have responded to industry upheaval by striving to discover, develop and market their medicines more efficiently, but many have failed to invest a lot of time in reconfiguring the manufacturing and distribution sides of their business.

One of the key points to emerge from the PwC report was that supply chains are just as – if not more – important as drug development, as they represent the crucial link between the laboratory and the marketplace.

Six trends were identified by the research, which the authors said would fundamentally alter the way in which pharmaceutical companies make and distribute their products. First on the list is the government's tendency to place a greater emphasis on health outcomes and the efficacy of new drugs as a basis for payments.

This will surely require pharma organisations to not only manage the manufacturing and distribution of products, but also combine their offering with data and additional services that support and add value through improved outcomes and efficiencies, the PwC report said.

Another factor affecting production and delivery is the emergence of new types of products. Biologics, bioengineered vaccines and advances, like those in stem cell research and nanotechnology, are set to prompt more and more diverse portfolios in years to come.

Such advancements will likely bring their own sets of logistical challenges – shorter shelf lives for instance – which require more complex manufacturing and distribution processes than conventional medicines.

There is also the growing trend for incremental product launches, which by their very nature can alter and skew the sales curve. Companies will need to have adaptable cost structures in place, designed specifically to ensure margins are preserved at every stage of the product lifecycle.

Furthermore, pharmaceutical businesses are seeing greater use of electronic health records, e-prescribing, mobile health applications and remote monitoring.

While this is all positive change for moving healthcare delivery further into communities and homes, directly to patients, it also means that drugmakers will need real-time information to properly manage wider distribution networks and demand-driven processes.

Wynn Bailey, head of supply chain strategies at PwC, commented: "In a world where outcomes count for everything, health organisations need to acquire a much deeper understanding of patients and their healthcare needs. Information is the new currency, and the data behind the product may soon be as valuable as the production itself."

Next on PwC's list of key trends is the growth of emerging markets, requiring manufacturers to fully understand the consumer needs specific to developing economies. Product costs and design will need to be altered accordingly.

Finally, drugmakers face heightened public scrutiny, as globalisation, foreign sourcing and increased exports further expand the need for supply chain control, so that risks of contamination and fake medicines can be identified.

Over the next ten years, PwC predicts that the pharmaceutical supply chain will undergo three main changes.

It will become: fragmented, with distinct models for separate product types and patient segments; a means of market differentiation and a source of economic value; and more of a 'two-way street', with information moving upwards to ease a downward flow of products.

Looking at how drug firms might restructure their supply chains in years to come, the report suggests that companies focussing on specialist treatments might quit manufacturing altogether – instead outsourcing the entire process.

As manufacturing and distribution of pharmaceuticals grows in importance – and complexity – external supply chains are set to become an increasingly common way for drugmakers to drive efficiency.