Reshaping pharma supply chain
Amaninder Dhillon, an oncology marketer, talks about the novel approaches required to achieve greater ‘end-to-end’ integration along the supply chain through technology advances
With access to essential medicine being one of the building blocks of healthcare systems, traditional pharmaceuticals manufacturing and distribution is currently facing challenges associated with the need for more patient-centric supply chains models that are not only capable of delivering greater drug product personalisation; but also supporting participative healthcare outcomes, and those are in sync with digital technologies, that leverages advances in novel continuous processing to enable more dispersed and responsive manufacturing.
Most models of the pharma supply chain are developed with production planning and scheduling in mind, rather than in comparing the merits of an alternative product or process technologies or
The pharma industry has been very sceptical in accepting changes, mostly relying on supply chain and manufacturing paradigms that have been around for a long time. But not for long now, given that technology
and digitalisation have disrupted every industry, the pharma supply chain will not be left behind. Novel approaches are required to achieve greater ‘end-to-end’ integration along the supply chain through technology advances in medicines manufacturing with more patient-centric delivery models.
Current contextual: Challenges
The pharma industry has multiple layers and the outbound supply chain is very complicated with various
stakeholders such as C&F, CSA, super stockists, dealers, distributors, substockists, etc. Even among distributors, there are trade distributors, hospital stockists, generic pharma distributors, medical device suppliers, consignment agents to name a few. Multiple vendors with varying requirements, lack of clear categorisation, lack of proximity to the manufacturer, and differing degrees of quality standards are clear challenges. To complicate this further, there are inter-state transfer pricing challenges, CST, Octroi, etc. Complications do not end here! Large companies have anywhere between 8 to 10 manufacturing plants with specialised capabilities at scattered locations. This has resulted in complex multilayer networks and material movement that not only affects inventory levels but also increases overall supply chain costs.
There are over 300,000 brands and 300 new brands of different SKU are launched every month! with PAN India coverage and availability. Incentives are based on primary or secondary sales and not on real-demand. Only 70 per cent of stockiest are covered for secondary statements and approx. 60-70 per cent sales of the company happen in the last week of the month. Quite obvious, the negative implications are reverse logistics, high rate of expiries and high employee turnover ratios compared to any other industry, difficulty in exploiting short-term opportunities e.g. shortage of supply of a competitor’s product, tenders for national supplies. This differentiates the pharma supply chain to a large extent and hence, is one of the most complicated ones!
The bullwhip effect of inventory which increases the demand variability in the supply chain as the stock moves from manufacturer to patient results in higher cost impacts for every stakeholder thus impacting negatively on performances and profitability. Companies lose visibility and control of the product’s movement beyond the clearing and forwarding agents. Besides, many warehouses, distributors, and far-flung retailers do not have the
infrastructure to store the product. This result is damaged products, rejection from customers, and greater
risk to patients. To overcome external infrastructure constraints, the pressure for timely and effective supply chain execution becomes paramount. Also, the non-visibility of inventory causes serious threats of counterfeits, loss of sale, challenges to trace products, and unpredictable demand scenarios. Moreover, reverse logistics takes a toll on costs that are adjusted in regular sales. Cold chain maintenance for speciality products like biologics adds another challenge given the diverse environmental condition in India. A temperature-controlled supply chain adds a burden to the cost of distribution and profitability. Just expiries result in an overestimated loss in India!
Ultimately, at the end of the day, what matters is to get the right quality of a product at a right time for the patient who needs the medicine.Right quality at the right time is the first point, the second point is automation and the use of the technological solution in partnership with the right network of good suppliers and vendors, having good distribution practices and ERP solutions that ensure transparency in operations, material management, and supply chain. The supply system should be able to trace, which product it is, where it has gone and how the disposition has been decided for the patients, and in case something goes wrong, a good system in place to ensure that it’s easy to recall back.
Tasked with manufacturing, selling, storing, handling, transporting, distributing, and regulating products, the pharma supply chain is ripe for digitalisation and automation, neither of which are being used to any great extent by pharma right now. Comparing pharma to e-commerce, the two industries share common ground when it comes to fulfilling a higher number of smaller orders and doing it faster than ever. Add complex regulations like
DSCSA (Drug Supply Chain Security Act (DSCSA), which outlines product-tracing requirements for manufacturers and their supply chain partners, hasn’t made the situation any easier. The problem is that end-to-end pharma supply chain visibility remains a key challenge and namely because it involves global trading partners.
The new level of healthcare consumerisation is pushing pharma to rethink and rewire its fulfilment, shipping, distribution, and delivery methods. Although most pharma companies have an enterprise resource planning (ERP) system, it is often used for specific operations (planning and demand forecasting) and not integrated with the larger network of supply chain management. For example, if a company is using ERP software to manage inventory, the location of raw materials and finished products are available only at a plant level and not at a cross-site level. Companies can achieve significant operational efficiency with more effective implementation and use of ERP systems by increasing automation for end-to-end transparency that improves tracking and visibility across the value chain.
New models, of information technology solutions such as RFID, enabled drug anti-counterfeiting, vendor-managed inventories, hospital inventory management, patient-centric digital homecare solution, end-to-end supply chain visibility of demand forecasting and analytical insights, blockchain with predictive analysis, digital supply chain solutions will be the next disruptive models.
RFID: Radio Frequency Identification (RFID) technology represents one of many possible solutions to enhance the supply chain. RFID technology permits the unique identification (Serialization) of each container, pallet, case, and item to be manufactured, shipped, and sold, thus allowing increased visibility throughout the supply chain. RFID systems comprise tags that are attached to products, interrogators that read and write data on tags, and back-end systems that store and share data. RFID has recognised the potential in anti-counterfeiting.
A manufacturer of pharma products inserts tags to individual articles at the manufacturing site. These products are distributed through multiple steps to a hospital or a pharmacy and they are authenticated throughout the supply chain to track and trace and also detect counterfeit products. The system utilises web service for clone detection through synchronised secrets with an assumption that all genuine products are equipped with an RFID tag, which is checked at least once at every stage of the supply chain. Operationally, product authentication and track and trace can be structured on three levels.
At the manufacturer’s level, each manufactured product will have an attached tag that identifies the
product (at the encasement phase). This tag may display initial information (manufacturer, product code,
manufacturing date, warranty period, server’s address where authentication of products can be performed, or any other information). If a product needs special transport and storage conditions, the RFID tag may hold a temperature sensor (temperature logger -automatic data recorder), which will include data read from the temperature sensor. Also, at this level, products can be grouped into packages or pallets. At the distributor’s level, when a product is received into the warehouse, the information saved on the attached RFID tag will be read and sent to the manufacturer (if authentication is required). To accomplish the authentication process, a comparison is carried out between the information received from the distributor and the information from the manufacturer (stored in the manufacturer’s database server). The distributor receives the results of this comparison. If the authentication process confirms the product’s origin, then the data regarding product reception into the distributor’s warehouse will be automatically written to the product tag. Since distributors can be organised on three levels (international, national, and regional), products or packages can be transported to any other distributor or retail dealer in the supply chain.
In retail, when products are received into the warehouse, authentication can be performed in the same manner as at the distributor’s level. Afterwards, the RFID tag attached to the product can be destroyed or kept attached to the product to preserve the product ID for future maintenance.
RFID significantly impacts the economy as well as the operational and financial performance of companies in the focus areas: RFID generates significant impacts in applications with a unique selling proposition, e.g. anti-counterfeiting, secure supply chains, and cold chain and quality monitoring, as well as better information for decision-makers. Many companies are trying to integrate IoT solution (Logmore, Roambee, PharmaSecure’s, AntTail) that provide real-time alerts and analytics, into Pharma supply chains. These devices are EU and CE certified and reusable.
Blockchain: A blockchain is a distributed ledger whereby every ledger holds the same information and all of them fit together one piece at a time. Furthermore, this distributed electronic (digital) ledger writes and publicises all the public information that is written on it to each of the ledgers, thus ensuring that it is accurate and can’t be lost. The blocks of information can also be put on a private permissioned ledger if so needed. Since the ledger is immutable and can’t be changed all the knowledge within it is known and permanent. This fact alone would be a huge help in fighting counterfeit and dangerous drugs.
With the blockchain, all pharma drug supply information would be logged within the ledger, updated in realtime, distributed upon a network, and verifiable at any time. The fact that it is distributed ensures that every step
is agreed upon to be true and the drug that is being delivered is original all along its path from one to eight. The
fact that the trust is eliminated from the equation due to the technology and its distributed verification ensures
the legitimacy of the drug and that the patient is receiving that which they have been prescribed.
Personalised drug supply: Pill on demand
Now, and certainly, in the future, pharma companies are going to be delivering medicines that are made just for you or just for me, based on our DNA and other factors (r.g CART Cell Therapy). This creates huge implications for the warehouse and distribution. It will therefore have to harness the most efficient final mile distribution networks to deliver medicines to the door as economically as possible. For example, the production and fulfilment of those personalised medicines could take place under the same roof. Effectively managing smaller, more personalised orders, on the other hand, will necessitate closer ties between production and distribution.
The digitalisation of healthcare delivery, with greater use of electronic health records, e-prescribing, and remote monitoring, will reinforce the drive to push healthcare into the community. However, it will also provide pharma with one of the key components needed to make the transition. E-prescriptions are effectively point-of-sale data.
Access to this data will enable pharma companies to build demand-driven supply chains in which healthcare packages for different patients are assembled at ‘super hubs’ before being delivered to their homes. The ability to electronically track and verify each step along the process would ensure the safety, reliability, and authenticity of today’s modern pharma ecosystem. It is now up to big pharma to ensure this authenticity through the creation of a model industry-wide smart contract and blockchain ecosystem. Once this is done, pharma companies can reap the benefits of digitisation.
Time and Cost-effectiveness
Business Security and Data
Automation and Single
In the coming years, the pharma supply chain will undergo a radical overhaul, with the below mentioned changes.
• It will fragment, with different models for different product types and patient segments
• It will become a means of market differentiation and source of economic value
• It will become a two-way street, with information flowing upstream to drive the downstream flow of products and
• Integration of pharma / medical devices and healthcare service supply chain
• Some companies may choose to establish joint ventures, while others might turn to the most sophisticated
third-party logistics (3PL) providers – i.e., companies that offer freight management and warehousing.
The most successful pharma companies will be those that seize the initiative and start building agile, efficient supply chains – either virtual or physical – to support this vision. They will be those that use their supply chains
to differentiate their brands and go the final mile’, those that recognise information is the currency of the