Growth in time- and temperature-sensitive healthcare products shows no signs of slowing down. In 2012 the FDA approved a total of 15 new biological products, all of which require cold-chain handling/storage, and 31 new molecular entities, seven of which require cold chain handling/storage). EvaluatePharma’s World Preview 2018 projects that biotech sales will grow 6% per year to $208 billion by 2017, when biologic products will comprise 23% of the global pharma market in dollar terms. By that time, 24 of the top 50 selling drugs will require 2° to 8°C storage and handling. Ten will be newly introduced drugs, and the remaining 14 are currently on the 2011 top 50 list.

According to forecasts released last month by Pharmaceutical Commerce, 11.7% of the overall $64 billion pharma logistics spend for 2013 will be dedicated to maintaining temperature management during transport. More than half the temperature management spend is on transportation, and that excludes an additional $2.7 billion from the clinical trials logistics market. Combined with growing regulatory scrutiny regarding the transport of these products — the EU being the latest to enter the fray with new guidance on drug distribution — the focus on temperature management of drug products continues to gain momentum.

Companies that manufacture such products have relied heavily on the airline industry for its speed and efficiency in transporting this high-value, time-sensitive cargo, and over the past decade dozens of air carriers have responded with branded products and services — although all are not created equal — in hopes of gaining a share in this lucrative market. Likewise, freight forwarders have developed specialized services targeted specifically at this niche market. But the costs keep escalating as demand for limited cargo space on mixed-use aircraft — passengers above the wing, cargo below the wing — increases with the downsizing of available equipment. Fuel prices remain volatile and can account for a third of airlines’ operational costs; many wide-body aircraft have been mothballed or replaced with new orders for smaller, more fuel efficient jets (the Boeing 737 narrow-body aircraft is the fastest growing model in the world).

The main gateways for pharma exports are New York’s JFK and Chicago-O’Hare (ORD). Along with San Juan Puerto Rico and Miami, these airports account for more than half of total tonnage. JFK, Chicago-O’Hare, and Philadelphia account for half the inbound tonnage. To offset escalating costs, pharma companies transporting their products between the U.S. and Europe have broadened their scope and increased their partnerships with specialty freight forwarders that work in conjunction with cargo only air carriers at smaller airports in the US. There can be tremendous advantages for doing this provided the airport is in close proximity to the customer base.

Using Chicago-O’Hare as an example, there are two very viable options: Rockford, IL and Indianapolis, IN. Both are international airports that can handle any aircraft and have an excellent network of road feeder capabilities, and freight forwarders and third party logistics providers specializing in temperature-sensitive healthcare products. Rockford is about 90 minutes northwest of O’Hare and Indianapolis about three hours southeast,  all via interstate highway.

Smaller airports mean a reduction in air traffic congestion, which lowers operational costs, results in fewer delays and provides a reduction in taxi time, saving fuel. Many smaller airports offer other incentives such as no landing fees, no parking fees and FTZ facilities (free trade zone) status for expediting customs processing. Their size can make them more agile and authorities there are often eager and flexible in meeting pharma customers’ demands and requirements.

“A non-traditional airport environment, like Indianapolis (IND), allows all the service providers in the regulated pharmaceutical air cargo supply chain to regain control of their temperature-sensitive processes while the product is on airport property versus traditional gateways,” says Christofer Matney, Air Service Director, Indianapolis Airport Authority. “We may not be able to match the pennies-per-kilo savings found from the economies of scale in traditional cargo gateway airports, such as O’Hare, but there can be significant reductions in risk and substantial savings to be found through faster processing/clearance and reductions in handling.”

To Mr. Matney’s point, ORD currently handles the most international medicinal air cargo volume in the U.S., but only 2.5% of O’Hare’s business is cargo. ORD’s focus is on passengers. At IND, 54% of air traffic consists of cargo flights. Air cargo handling for all-cargo airlines at ORD is not ideal for temperature/regulated medicinal products. Congested operations and constrained resources have forced pallet build-up at remote warehouses rather than on-airport, and the completed build-ups are truck-transferred to stage pallets for loading onto aircraft, exposing them to the elements during the transfer process, often for inordinate amounts of time. Additionally, there are no easy contingencies for delays and returning the product to a sheltered and temperature controlled area. Cargo aircraft parking is remote, shared and limited, and temperature-controlled warehousing is not always available on airport property. All of these factors challenge the reliability of operations.

Standards for handling pharma are becoming more stringent, and with stricter guidelines regarding product time waiting on the ramp (tarmac time) and requirements to store, build and stage product in controlled temperature environments, reductions in handling and efficiencies of processes can go a long way in reducing risk to temperature exposure.

Mr. Matney explained that while the $/Kg is higher at IND than ORD, total cost of ownership and risk have been significantly reduced through other supply chain benefits and he proudly boasts that Indy has been providing its pharma customers an “excursion-free” cargo environment since pharma cargo flights began in February 2006. IND’s cargo service providers have developed systems where touch points have been reduced by half; from 14 down to 7. Unlike most major airports, IND cargo service providers have been able to retain a reliable and consistent handling staff that continue to gain cold-chain expertise. U.S. Customs staff is smaller and more manageable than traditional gateway airports, facilitating a good, on-going and all-important relationship with the airport authority and its air cargo operators. The airport and its airside warehouses are located in an FTZ, allowing for immediate breakdown and inspection of international shipments. The result is that customers have reduced delivery times by 24 to 36 hours using cargo operators at Indianapolis International Airport over the traditional cargo gateway at O’Hare, Mr. Matney contended.

The future strategy at IND is to further develop airport assets in support of temperature-controlled air cargo. The airport has recently brought a new airside facility online with even closer access to the cargo planes and a larger aircraft parking area to further reduce any handling congestion in support of the specialized need of temperature-controlled regulated air cargo.