The pharma industry is somewhat behind when it comes to logistics developments like distribution network optimisation and Sales & Operations Planning (S&OP). However, change is inevitable, since various developments currently underway in the pharmaceutical industry are making the logistics situation increasingly complex.Technology has emerged as a key factor to develop more astute operation models for pharma logistics. It has become a prime differentiator to gain a competitive advantage as the sector undergoes a transformation, driven by increasing regulatory scrutiny, time-constrained, product specific demands and user experience.
Ritika Arora Bhola
‘Every Life Counts’ – with this vision and adage, India’s pharma supply chain industry has been able to save millions of lives every year, and is continuing to do so. Undoubtedly, the Indian pharma industry has witnessed marvelous growth in the last decade– from contributing immensely to India’s economic growth, becoming world’s second largest exporter of vaccines, providing employment to over 2.7 mn people in highly skilled areas like R&D, manufacturing and logistics, the pharma sector has come a long way.
It’s not just the trade or supply of vaccines, drugs, bio-pharma products or equipment, but good handling and distribution practices which can save a life, therefore, everyone involved in the ‘supply chain’ process– manufacturers, shippers, LSPs, means of transport, transportation methods, and retailers hold an important position in the entire value chain.
According to reports, pharma is poised to be India’s largest export vertical in the coming years. Industry estimates suggest that India’s pharma exports could reach $20 bn by 2020.
Experts believe that a logistics revolution could be on the horizon for India; however, supply chain efficiency in pharma products is going to be imperative to support this growth and reduce bottlenecks. And Good Distribution Practices (GDPs) will be critical to growth as the country looks to close the significant gaps between the strategic vision and operational realities of the sector.
The Indian pharma supply chain sector is also expected to outperform the global pharma logistics industry which is set to grow at a rate of five per cent annually, informs experts. In fact, India has also maintained its lead over China in pharmaceutical exports.
Pharma Logistics: Paving way for growth
Ravi Kumar Tummalapalli, Head- Logistics – APAC, Japan, China, TEVA Pharmaceuticals is hopeful and accepts the fact that things have been improving for good. “There is a major focus and awareness among all the logistics partners on pharma logistics requirements. We see many companies taking up pharma logistics as a specialty product and designing solutions to meet the low volume, high value, high sensitivity products unlike in the past treating pharma as general cargo,” says Tummalapalli.
Elaborating the same, Tummalapalli says, “The Central Drugs Standard Control Organisation (CDSCO) has recently released a document on Good Distribution Practices (GDP) which is again a big step forward in bringing extensive focus on the pharma supply chain. There has also been a major shift from sea to air mode, in view of optimisation and reduced volumes to the western market. This calls in for a drastic change in the infrastructure requirements at the airports to handle the volume in a controlled environment. Many airports are taking this initiative to collaborate with private entities who know the pharma business to provide such facilities. One such collaboration is between the Cargo Service Center (CSC) and Mumbai International Airport Limited (MIAL). In the end, the whole industry is getting benefitted.”
Dasaradha Reddy Duvvuru, General Manager- Warehouse, Aurobindo Pharmaceuticals believes that efficient logistics is definitely helping the Indian pharma supply chain and its service level to improve year-on-year in terms of speed and safety/security of products. Duvvuru says, “Government’s new logistics policy is also a big boost for the logistics industry. Implementation of GST, removal of check posts and latest compulsory FASTAG for vehicles defiantly is an added advantage, when we talk about road transport of any time-critical goods.”
On similar lines, Pravin Rajput, General Manager- Supply Chain Management, Metropolis Healthcare states, “It is a good year for Pharma and Healthcare industry as they are witnessing constant growth. In 2020, my perception/goal is to understand technology in supply chain and implement them in current practices. Today, the only chance to grow in supply chain and handling automation project in supply chain management is through technology.”
However, on the contrary, T V Madhusudan, General Manager- Distribution, RPG Life Sciences feels the year 2020 is going to be a gloomy year for the pharma industry. “Supply chain growth is always directly proportional to the growth of top line of business. 2019 has not been so good. Flat growth because of the slowing down of economy is one reason,” says Madhusudan.
While Indian pharma supply chain industry’s growth trajectory looks promising on the surface, it is quite evident that there is a significant gap between the strategic vision and operational realities of the pharma sector. According to the experts, Indian pharmaceutical companies are facing hurdles on multiple fronts in their supply chains. The sector is currently struggling with unique set of challenges that are ultimately creating pressures on the pharma end-users to transform their supply chains.
As per reports, pharma sector is said to have a complex supply chain that is under-utilised, inefficient and ill-equipped to cope with the sort of products which comes down the pipeline. And in order to meet the demands of a fast evolving marketplace and the shift from patient to outcome, the pharma supply chain will need to undergo a radical overhaul.
According to Rajput, “Pharma and healthcare supply chains are complex because planning of demand forecast is always changed due to market challenges, policy amendments and increasing number of patients each year, which is more than expected. Key challenges are shortage, sanitation, product damages and HR dependency.”
Agreeing with Rajput, Lalit Patil, Manager- Warehouse Management, Roche Products India remarks, “In order to improve supply chain efficiency, we need support from government bodies, private associations and pharma manufacturers. Supply chain rationalisation is required in India to reduce operational complexities like number of distributors, lack of quality systems, and safety systems which are not available at distributor and warehousing level.”
Patil mentions two internal and external key hurdles restricting Indian pharma sector to grow:
- Internal: Cost pressure, understanding, commitments, technology, volume growth, policy changes, etc.
- External: Infrastructure, right talent, compliances, budgeted technology, changes in governance, pressure from local associations.
“Lack of infrastructure, skilled labour, government policies and rules, taxation (GST credit process is still in chaos) and end-to-end visibility are other major challenges,” underlines Madusudan. Although, Madhusudan feels, technology can play an important role to speed up under-utilised processes and assets to improve efficiency in the supply chain.
Meanwhile, Tummalapalli informs, “Every industry has its own challenges. Pharma supply chain is blessed in a way that it is process-oriented, focussed and niche. People in this industry need to know their business well and cannot be generalists. Since the objective is to get the right medicine in the right condition to the patient, it’s important that the solution is designed well considering constrains on the ground. Risk assessment of the accessibility, temperature conditions, communication and backup systems, etc. during the design phase will help deliver and also enable resolution in case of any untoward incident. Further, support and collaboration with the LSPs is much needed to establish a successful supply chain.”
On the other hand, Duvvuru envisages that the pharma supply chain is complex due to its quality to protect throughout its life cycle and deliver to end customer, i.e. patient at right time at affordable price. Patients expect products to be delivered at their doorstep, and accordingly logistics players need to widen their network and strengthen their capabilities.
Reducing complexities in the pharma supply chain
No doubt, India’s pharma supply chain sector is crippled with end-to-end complexity and reducing this complexity can unleash an array of benefits for the industry as a whole. Efforts should be focussed on the following priorities for bringing out results:
- Consolidating and optimising the network as a whole, supporting seamless communications across suppliers, manufacturers, distributors, and customers
- Tailoring visibility of supply chains, segmenting consumer needs, product types, product attributes, and markets
- Ensuring on-time safe delivery of pharma products as every life is crucial.
In the case of pharma industry, associations like Indian Drug Manufacturers’ Association (IDMA), Organisation of Pharmaceutical Producers of India (OPPI) and Indian Pharmaceutical Association (IPA) are doing a commendable job and are in constant consultation with the Ministry of Chemicals and Drugs Controller General of India (DCGI) to take up issues and apply suggestions pertaining to logistics and supply chain activities of pharma products from time to time.
Most importantly, Rajput says, every pharma and healthcare company needs to design a supply chain that is more adaptive, flexible and responsive to the changes. This can be done by focusing their efforts on:
- Use technology in end-to-end supply chain to track
- Creating agility and visibility
- Reducing complexity
- Building robust quality and compliance system
Patil puts it down as, “Firstly, simplified systems and processes should be there to encourage industry people for changes in the supply chain. Secondly, rationalisation needs to be there in distribution activities and direct accounts as per geographical/volume consumption of products. Thirdly, there should be awareness amongst the players of any organisation to support these kind of initiatives to reduce complexities. Besides, there is need for validation, due diligence process, and implementation of all existing distribution activities with focus on quality compliances, safety, financial ability and capability to be sustainable for next five years.”
Duvvuru highlights, “Logistics players should be transparent towards their customers, engage qualified and trained ground level staff and quickly adopt latest technologies. “3PL and reverse logistics are scope for improvement in India,” stresses Duvvuru.
Significance of last-mile delivery in pharma supply chain
There has always been stress on efficient supply chain operations and improving last-mile delivery operations. On-time delivery of pharma product is very crucial, and the products should reach the right customer at the right time in the right manner. Pharma leaders believe, the need of the hour is to enable pharma logistics companies transport time-sensitive goods faster with last-mile delivery augmenting the process. They also elaborate on efficient pharma transport (reefer trucks/vehicles) and availability of skilled labour to carry out supply chain operations – from loading, transporting and unloading pharma products safely.
On a positive note, Tummalapalli says, “With more and more efficiency coming in, all companies are focussing on reducing inventory, making the supply chain leaner with faster deliveries. This is becoming possible only with the improvements in infrastructure, availability of new startup delivery companies who are bringing in new concepts to improve delivery lead time. Many delivery companies have setup infrastructure to meet the requirements of E-commerce companies, and they see the need for pharmaceutical products to be delivered in a secured manner as an added channel for them to participate. They are making a great contribution to the industry but, specifically for pharma product handling, they need to train their staff appropriately and make them realise that they are also part of saving some lives.”
Rajput says, pharma companies and LSP alike must follow the following SOPs while handling pharma products in each stage:
- Drugs must be stored to prevent contamination, and be positioned to allow for inspection and cleaning of the area
- Each lot of products must be identified with a distinctive (and traceable) code, and the lot’s status must be identified (approved, quarantined, and rejected)
- Written procedures must describe the distribution process for each drug, which include procedures for recalls
- Pharma and healthcare material must be kept and transported in defined temperature mentioned on packet/instructions
However, with a different viewpoint, Patil comments, “Definitely, last-mile delivery time has reduced by almost 80 per cent for sensitive shipments as compared to the last decade. Still, the industry faces the burden of cost and safety. We have noticed lot many cases of damages/breakages. No proper tracking and tracing system or feedback mechanism is available in the pharma logistics industry. Many innovations like bar-coding of each shipment, and training all teams on pharma commodities, are missing. However, today, we notice the increase in number of skilled labour incorporation by the transportation industry, but safety features, or maintaining hygiene in the vehicles, trained drivers, incident records, on-time documentation, etc. still lack.”
Using Technology in Pharma Supply Chain to achieve LMD
Technology remains one of the most important component for pharmaceutical companies to focus on. The immediate results of using technology is greater transparency and efficiency, which further lead to better decision making. Technology can be used to integrate all functions across the network, increase visibility of products across the value chain, and automate processes to improve the supply chain’s responsiveness and reliability.
Logistics experts believe that the industry is actually benefitting from the digital revolution happening within the industry.
Rajput assures that supply chain professionals and manufacturers can now digitally plan and track their entire production process as it minimises risks, increases efficiency and eventually drives revenues.
Madhusudan deeply agrees that technology is the deciding factor for the success of business because it is progressing rapidly. “Re-skilling is essential for the supply chain professionals to remain competitive as well as face the competition,” says Madhusudan.
Track and trace, real-time monitoring of temperature control, integrity of product quality through secure identification are some of the advanced features coming into common use with the digital revolution. Availability of data is also becoming more and more demanding for everyone to take appropriate decisions.
The market share of biologics, or biopharmaceuticals, is growing rapidly over the globe and is expected to account for up to 28 percent of the global pharmaceutical market by 2020. While traditional drugs are generally stable and have a long shelf life, biologics – such as blood products, vaccines, and therapeutic compounds to treat various conditions – are more sensitive to varying temperatures and other types of exposure. Logistics providers wanting to capture a share of the growing market have already begun increasing their cold chain capacity.
Historically, the pharmaceutical industry was never a big consumer of cold chain logistics. This was because a majority of drugs did not need to be stored or transported in ambient temperatures. But ever since large molecule biologics and personalised medicines have been introduced, the pharmaceutical supply chain is constantly demanding newer technologies and better products for transportation as these require both temperature and time-controlled distribution.
Rajput elaborates, “The growth is estimated to be more than 3.5 per cent as per last five year’s financial trends, however the global pharmaceutical logistics market involves a very complex operational and supply chain process. This is essential as pharmaceuticals are an integral part of the healthcare industry. A pharmaceutical logistics chain is not like other regular logistics chains in terms of type of products, complexity and cost. Availability and accessibility of pharmaceuticals are of importance for both companies as well as governments. This also depends on the policies of the government related to healthcare and the entire pharmaceutical industry.”
Focussing on the same, Patil says, “Global pharmaceutical product volumes are growing due to new product launches. Today, every pharma company seeks for transformation by using technology as it impacts speed of work. The global pharmaceutical logistics market size is projected to be worth US$134.5 bn by 2025 as per Bloomberg, while global pharmaceutical industry growth is projected to be worth US$1448.5 bn by 2025 as per Market Research. The global pharmaceutical industry is growing by 5.8 per cent due to new product launches. Until 2018, R&D investment by pharma companies crossed US$1790 bn. The focus of pharma companies from a business vs patient psychology shifted just five years back. Previously, the entire pharma industry was concentrating on growth, business, sales targets, etc. Now, the focus is to serve more patients and this is really helping everyone to grow.”
Reddy concludes, “Global logistics market is expected to register a CAGR of 4.3 to 4.5 per cent in 2019-2025. Leading logistics players are spreading their wings across the globe by mergers and acquisitions. Presently, it is in a consolidating phase, and once it stabilises, their sales value will increase and that will help them be in a commendable position in terms of price because the competition is between limited global players.”