It will not be an overstatement to say that pharma supply chains are the elixir of life particularly at times when there is a dire need of delivering life saving drugs. Last decade has been promising for pharmaceutical industries owing to the uptick in healthcare spending by bourgeois class but organisations can’t afford to lose sight to the fact that supply chain cost and quality of drugs are still the issues which demand utmost scrutiny.
In present times, when India is vying to become a global pharma supply chain hub, not only for the advanced markets but for the emerging nations as well, there are various challenges which need to be tackled and leading pharmaceutical firms have all the potential it requires to realise this objective by putting low-cost manufacturing and R&D practices in the system, but eventually it will require an optimised and efficient supply chain network in place as products have proliferated exponentially and become more complex, driven by patients’ growing therapeutic needs, hence cost and timely delivery of drugs will drive the pharma supply chain towards the global competitiveness. Companies are looking at the next phase of growth, but there is a significant gap between the strategic vision and operational reality.
Current market trends
With the rise in the spending on the healthcare services among the middle class, the pharma industry has witnessed a significant growth in recent times. The revenue of the top 10 pharma companies grew at about 19 percent while the industry grew at about 18 per cent. According to estimates of the Associated Chambers of Commerce of India (ASSOCHAM), India’s pharmaceutical industry is poised to exceed $55 billion by 2020 while generic market continues to expand; after growing by 22 percent in the past decade, Indian exports now have a 20 percent share of the global generic drug exports market. By 2020, India is expected to capture between 10 percent and 12 percent of a $350 billion global generics market.
To assess the state of India’s end-to-end pharma supply chain, which serves local and global markets, and to identify the imperatives for the future it is preemptive discern how the pharma companies are aligning their supply chain network to make the best out of dynamic market and rise in the demands of quality drugs at moderate prices. Pharma supply chains in India now face greater pressure to enhance their performance to prepare for the future and create a competitive advantage.
Impediments to pharma supply chain
As pharamaceutical firms have to go through a slew of complex processes and operations they are likely to encounter a many challenges from manufacturing to distribution. Though manufacturing and development operations can be optimized through in house research and innovation but the real challenges are faced in distribution and transport for which the supply chain network has to be free from various inconsistencies.
Talking about the predicaments of pharmaceutical supply chain in today’s global marketplace, Avinash Kumar Talwar, Head – MRO & Pkg Material Sourcing (Strategic & Plant) at Dr Reddy’s Laboratories Ltd Global Supply Chain Management says, “Risks can arise from increasingly destructive natural disasters, cyber-attacks, or geopolitical actions. Unforeseen factors that cannot be controlled could influence the cost of goods, delay or prevent deliveries, and negatively impact the budget of the well-prepared organization. These tips can help your business identify and prepare for common supply chain disruptions”.
Besides this there have been a lot of internal and external challenges today for India pharma, more from the external point of view when you look at global scrutiny, which is happening more from the regulatory agencies, the quality issues which are there, happening everywhere, not only in India but also throughout the world. Challenges that are affecting the overall performance of their supply chains and still need to be tackled are as follows:
Supply chain costs– Supply chain costs depend heavily on the type of product. Specialized cold chain requirements for vaccines and other complex formulations can significantly increase supply chain cost.
Quality and regulatory issue- In the domestic market, the Central Drugs Standard Control Organization (CDSCO) has increased the coverage and frequency of inspections to address the issue of low-quality drugs.
Procurement- Issues with the quality of raw materials have spiraled over the past few years, leading to batch failures, production delays, and lack of availability of resources across the plant.
Drug Counterfeiting- It has profound and devastating impact on the patients so it has to be surveyed with utmost care throughout a channel.
Increased competition– Multiple products are on the market with very similar specifications, bioequivalence, and price points, marketed by both Indian and multinational firms. This fuels the need to continuously innovate and reduce the costs of existing drugs to remain competitive.
Large number of vendors– In the next five years, a pharma company’s active supply base will double because of an increase in exports and growth of intermediates, recipients, and other raw materials. With companies exploring new synthesis routes and new technologies, raw material requirements are far more complex, and their availability is scattered.
T V Madhusudan, GM- Distribution at RPG Life Sciences marks the inadequacy of the infrastructure to complement lean supply chain channels and explains, “Disruptions are likely to stay on and will be on the rise in days to come because of various factors, mainly of competition and pressure on service efficiency with minimum cost. The vulnerability altogether cannot be done away with through lean supply chain net work only”.
“Providing an effective temperature controlled end to end logistics is yet another issue which is indispensable in order to maintain the quality of the drugs throughout the operation. Absence of single operator for end to end logistics makes it a challenge to overcome. Online tracking in all modes of transportation is also a prerequisite, says Vinay Phatak, Head Quality – South Asia, Bayer”.
Impact of tech renaissance
Technology remains one of the most crucial aspects for pharma companies to focus on. Leaders admit that one immediate result is greater transparency, which leads to better decision making. Technology can be used to integrate functions across the network, increase visibility of products across the value chain, and automate processes to improve the supply chain’s responsiveness and reliability.
“Multiple technologies are evolving not only to improve the supply chain efficiency but also to ensure safety & security of the products. Communication and data exchange are part and parcel of the supply chain journey. These are also being made stronger and faster. Track and trace system along with Block chain technologies are evolving across the globe along with strong GPS and VPS. We need to gracefully adopt and adapt it to remain in competition with the rest,” elaborates Prabir Das, Head – Packaging Tech Services, OSD (India) Mylan Laboratories.
Integrating enterprise software- Although most pharma companies have an enterprise resource planning (ERP) system, it is often used for specific operations and not integrated with the larger network. For example, if a company is using ERP software to manage inventory, the location of raw materials and finished products is available only at a plant level and not at across-site level. Companies can achieve significant operational efficiency with more effective implementation and use of ERP systems.
Increasing automation- Large pharma companies are focusing on automation across the value chain. However, very little capex has been invested to automation. Companies with effective automation have streamlined the work flows with few handovers and end-to-end transparency on costs and business value.
Tracking and visibility across the value chain – With rapid growth in the industry, pharma companies must use tracking technologies to streamline distribution and reduce lost revenue as a result of damaged products and recalls. Greater visibility during planning also optimises inventory levels across all nodes.
As pharmaceutical and healthcare industries maintain a continual stock of drugs from suppliers and distributors across varied locations, an efficient temperature controlled cold supply chain is the prerequisite for maintaining the quality of drugs, where technology has a vital role to play, increasingly packaging companies are incorporating innovative design features and utilizing more advanced technologies, to produce and manage pioneering products and ever more sophisticated systems, which help eliminate excursions in temperature in cold chain.
Pharmaceutical shipments are temperature sensitive and controlling temperature excursions during transit is a challenge and this concern is prevalent across the pharma industry. For some critical lifesaving drugs even the slightest excursions can irreversibly alter the efficacy and potency of the drug. Generally, for oral solid dosages (OSDs) the requirement is to maintain temperature below 25 degrees throughout the logistics cycle of the product (factory-to-customer). During transit at nodal change points (especially in case of air shipments) if the pallet is exposed to temperature excursions waiting for next connecting flight, batch release at country of destination becomes an exercise for qualified person (QP) responsible for release. QP would need enough scientific proof to demonstrate that product is robust and efficacy/potency has not been impacted due to the temperature excursion
“With technology advancing many folds in each passing decade, it is quite easy now to move lifesaving drugs from manufacturing factory to customers within required time. IOT and AI have made it possible. IOT has made it possible to communicate and control the conditions (eg Temperature) of the drug and AI to decide and optimize the best route for delivery. Of course, without network connectivity, all this instruments will have 0 intrinsic values. As we call it the Industrial revolution 4.0, it is going to change the way we operate fundamentally. With 5G network coming soon, it opens up more possibility and will solve issues that we could not solve yesterday, remarks Talwar”.
Collaboration and Improvements
Innovations in pharma supply chain cannot be realised in isolation but it has to occur across the ecosystem. However, some important initiatives are beyond the control of pharmaceutical firms. Strong interaction with government and industry bodies will be essential to making this happen. Government has updated the Indian Pharmacopoeia Commission to improve quality standards, but responsibility does not stop there. For example, policies governing testing and release need to be reexamined to reduce risks to patients. Regulatory improvements are a good sign, but stricter governance and vigilance to enforce the standards are clearly needed. A number of collaborative industry-company consortiums are pushing for improvements, but most lack a robust task force to monitor implementation.
Striking a discourse on the need of collaboration between pharmaceutical manufacturer and logistics service providers Talwar asserts, “Organizations want to focus on its core strength and depend on other partners in ecosystem for rest of the functions. It is very important to have appropriate engagement with the service providers depending on the value addition from that service. In other word, one can’t solve all the problems or someone has solved already some problems that we are facing today, so it is always good to partner with other party who is expert in it”.
Talking about the improvements in packaging and labeling Das reveals, “Packaging takes the primary responsibility to ensure product stability, quality, safety &security. Once packaging design and specifications are finalized keeping these factors in mind, then next factors like handling of finished packs, storage of the goods and transportations mode/conditions are ensured during the journey across the supply chain. During the journey there are many threats encountered – Damage, Spillage, Breakage, Pilferage, Exchange, Diversion, etc.”
“Different types of labelling with visual precautions help a lot in identifying the consignment. Level of education and awareness building at the grass root level often helps to improve the processes. Choosing right transport mode and carrier also play critical role. Road, Rail, Water, Air connectivity and their judicious combination with strong networking through effective communication helps to minimize cost and cycle time, keeping the product quality intact, “adds Das.
“When it comes to complex injectble drugs, biologics and vaccines, we need to address slightly more complex cold chain challenges. These formulations need more stringent shipment controls (2-8 degrees, sub-zero, etc) and cold chain needs to be maintained across the entire supply chain network, right from loading till the time it’s delivered to the patient. Freight forwards and logistics service providers need to work closely with industry players on technology advancement keeping cost and affordability in mind,” points Vickram Shrivasta, Planning Head- Supply Chain at Zydus Group.
The paramount mission, which has been the genesis of generic pharma industry is to make critical lifesaving drugs available across the globe at an affordable price without compromising on quality of the drug, hence the speed at which the product reaches the market/customer is very crucial.
To realise their full supply chain potential, India’s pharma companies will need to revamp their models and processes. A supply chain transformation will be essential. This comprehensive change will require commitment from top management, coupled with a capable execution team that can help sustain the benefits. Although this is no small task, consumer goods companies that have built world-class high-performing supply chains have emerged as market leaders. Now is the time for pharma companies to follow suit and prepare for the future.