Healthcare Companies Tackle Supply Chain Issues

By Jan Denecker, UPS Europe | June 2, 2016

UPS study shows logistics gains in some areas, challenges in others

UPS recently released findings of its global UPS Pain in the Chain survey, which found that although there is still much work to be done, healthcare companies have gained some ground over the past year in addressing significant challenges to their supply chains.

One area of improvement was regulations, where 70% of global survey respondents reported success at addressing regulatory compliance. In Europe, the percentage was slightly higher, with 72% reporting success. A top success strategy cited was collaborating with third-party logistics providers. In 2014, only 57% of global respondents reported success addressing compliance challenges.

While it’s promising to see firms make significant gains in areas like compliance and product security, other areas remain a significant challenge, including cost management. As healthcare products become more specialized and companies look to expand globally to meet growing demand, the need for innovative supply chain strategies will continue to grow.

Companies struggle with EU GDP, other regulations
Despite greater overall success navigating compliance issues globally, healthcare companies still struggle with specific international regulations. EU’s Good Distribution Practices (GDP) leads, as 39% of all respondents cited compliance with these guidelines as causing the most pain. Brazil’s serialization regulations are second, with 24% of respondents saying the country’s guidelines are most challenging for them, and China Medical Device Good Supply Practices came in third, with 19% of respondents citing these as most painful. Sixteen percent each consider the EU Medical Devices Directives and Requirements, and U.S. Drug Supply Chain Security Act as causing pain to their supply chain.

You need only look at the rise in specialized pharmaceuticals and biopharma as a driving force behind more stringent regulations across the globe. Consider worldwide, revenues from biologics, which accounted for 12% of all drug sales in 2005, are expected to grow to 23% by 2017, according to Evaluate Pharma 2013. Regulatory agencies are imposing stricter guidelines for healthcare products and shippers to help ensure products are kept at the right temperature, to mitigate spoilage and damage, and to protect patients and consumers. Adding to complexities, EU policymakers enacted the Falsified Medicines Act to combat drug counterfeiting and to more rigorously regulate the supply chain.

In fact, in recent years, Europe, the U.S., China, Australia, Canada, Indonesia, Malaysia and Singapore all introduced new cold chain transportation rules—and regulations will only get tighter, so the sooner healthcare companies adopt best-in-class supply chain strategies to streamline processes and create more efficiencies, the better positioning they will have to achieve greater global market penetration and business growth.

Product security gains strength
When it comes to product security, the survey found that healthcare companies in Europe experienced the most success addressing product security challenges. In fact, the success rate in this area saw a significant point jump over 2014—to 75%. Of these respondents, 77% cited IT investments, including bar-coding, serialization and increased product insurance, as success strategies.

The biggest remaining pains for European healthcare companies’ supply chains are physical protection from theft, the presence of parallel trade, i.e. “Gray Market” (or non-counterfeit products imported without permission of the intellectual property owner), and inadequate law enforcement response. Another major pain identified in the region is counterfeiter sophistication growing faster than countermeasures.

Collaboration improves product damage, spoilage
European healthcare companies’ success rate addressing product spoilage and damage jumped to 65% in 2015. Most companies seeing success point to collaboration with higher-quality carriers, while other top reasons include choosing faster shipping service levels, and the use of proactive monitoring and tracking solutions.

Companies also have access to more cold chain solutions. The use of thermal blankets in freight shipments is just one example of risk mitigation for previously unprotected products. Even when it comes to manufacturer sales representatives’ product samples, there previously was less protection than there is today. Providing the right temperature controls from car to cooler to glove compartment have evolved, and will continue to evolve as more focus on product protection expands beyond distribution of samples into last-mile deliveries.

Cost management needs attention
Only half of healthcare executives responding to the survey reported success addressing supply chain cost management, and the top challenges in this area in Europe were rapid business growth (63%), fluctuating fuel cost (53%), fluctuating raw materials cost (51%), increasing regulatory requirements around cold-chain shipping (51%), new market expansion (47%), necessary IT investments to address compliance needs (47%), the cost of replacing aging IT systems (39%), and lack of visibility (38%).

In terms of visibility, one healthcare executive proclaimed, “We need visibility all the way, but our transportation partner isn’t optimized. They use another company to complete local deliveries, and so we lose traceability after our products have been handed off for the last mile. It’s not ideal.”

Pharmaceutical, life science and medical device companies must optimize their supply chain to get a better handle on costs. Gaining enhanced visibility end-to-end is key, and other ways to improve include optimizing the product carton and shipping carton, minimizing unused space. Pressure will only grow for manufacturers to activate more temperature controls within their supply chain network to reduce pack-out complexities and costs.

Healthy supply chains key to success
More healthcare products than ever continue to enter the global marketplace, and an increasing proportion of them require special handling. According to an Evaluate Pharma study, seven of the top 10 pharmaceuticals will be temperature-sensitive by 2018. The more sensitive large-molecule biologics require temperature ranges from 2-8°C or cooler, and the latest chimeric antigen receptor T-cell therapies that are currently in clinical trials require thermal protection down to -150°C. These temperature extremes are necessary to protect these latest immunotherapies that show the promise of beating certain types of cancers and are being successfully used to treat the most medically fragile patients.

More sophisticated therapies, specimens and pharma require smarter logistics. Healthcare decision makers are recognizing the value in selecting higher-quality carriers, faster shipping speeds and in-transit intervention capabilities. This collaborative model can help drive success in mitigating product excursions, reduce costs, and help manufacturers remain compliant with complex international regulations.

While pressures like costs and regulations mean the stakes are higher than ever for supply chains, healthcare firms also have the challenge of doing more with less. Those businesses that move their supply chain ‘pains’ to ‘gains,’ including through careful contingency planning, which only 67% of logistics decision makers in Europe ranked as “important,” will be better poised for long-term success and meeting growing industry and patient needs. 

Jan Denecker is director of healthcare marketing and strategy for UPS Europe.

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