Forces Shaping Future Pharma Supply Chains

As the global pharmaceutical industry continues to change beyond all recognition, supply chains increasingly need to adapt, so that the demands of the future can be met despite companies facing an ever more challenging market.

Generic competition has already had a severe impact on drugmakers' profitability and this looks set to continue, as patents on products with combined sales of more than $250 billion (£154 billion) expire over the next six years. As such, the economies of scale traditionally enjoyed leaders in the pharmaceutical industry are quickly disappearing.

In response to these challenges, many firms have begun refining their supply chains, though most of the changes introduced to date have been short-term fixed to address immediate obstacles. This was just one of the observations made by PwC in its recent Pharma 2020: Supplying the Future report. It went on to suggest that this shortage of long-term consideration is "reflected in the progress or, rather, lack of it they've made in recent years".

The report noted that few, if any, pharmaceutical companies currently have supply chains capable of meeting the demands of the coming decade. The authors explained how, both internally and externally, numerous "forces" were reshaping the environment in which big pharma operates. They warned of "profound consequences" for the way in which drugmakers manufacture and distribute their products. Four of the key concerns outlined by PwC were: increasing emphasis on outcomes; new modes of healthcare delivery; the growing importance of emerging markets; and greater public scrutiny.

Increasing emphasis on outcomes

In the wake of arguably the most significant economic downturn in several decades, overstretched governments and health insurers are becoming much more demanding in terms of value for money and ROI. For instance, buyers now insist on seeing clear evidence of a new medicine's efficacy prior to purchasing, which of course has enormous implications for drugmakers.

"The industry will not only have to manage the manufacturing and distribution of medicines and companion diagnostics, it will also have to ensure that patients get the most from the therapies they receive by supplementing its products with a wide range of supporting services," the PwC report added.

New modes of healthcare delivery

For decades, most of the developed world has been working hard to reduce its reliance on hospitals and specialists, instead focusing on self-administration of medicines. As science and the pharmaceutical industry develop, the likelihood is that more and more patients will be empowered to treat themselves.

The authors commented: "Pharma will need to distribute its products to many more locations, including patients' homes. It will therefore have to harness the most efficient final mile distribution networks in order to deliver medicines to the door as economically as possible."

Growing importance of emerging markets

All of the challenges faced by drug companies globally are accentuated by the growing importance of emerging markets to the pharmaceutical industry's future. If pharma firms are to successfully apply their products in the world's developing economies, they will need a thorough understanding of the different needs patients have in these areas.

"It will also have to build a supply chain that is both more geographically dispersed and more secure. The number of recorded cases of counterfeit, stolen or illegally-diverted medicines has already soared nearly nine-fold since 2002," the PwC analysts warned.

Greater public scrutiny

Finally, the authors noted the expectation that, by 2010, the ability to manage risk and compliance throughout the entire pharmaceutical supply chain will be more critical than ever before. As the stakes rise with globalisation, so do the risks. Combined with increased public awareness and tighter regulation, such forces look set to make pharma companies work harder than ever to hold onto their share of what remains a dynamic industry laden with opportunities.
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