The drive for greater efficiency, business globalisation and the growth of biotechnology all have implications for future supply chain management. Mario Johnson, commercial manager at Alloga, looks at the new challenges facing healthcare logistics
Rising costs, competitive pressures and the threat of counterfeiting are just some of the issues facing pharmaceutical and biotech companies that also have to be addressed by their logistics service providers.
But in addition to these economic and political factors, medical advances are also changing the healthcare scene and paving the way for new entrants into the market.
Specialist healthcare distribution service provider Alloga has noticed a shift in its customer mix with the rise of biotechnology. It is increasingly being faced with high-value, specialist products that have specific needs, which require the company to adapt its role in the supply chain and expand the breadth of its services.
It is no surprise that there is a trend towards regional rather than local supply and ultimately, global distribution. Initiated by small biotech companies with no legacy of a cumbersome infrastructure, this shift is now being driven by larger pharmaceutical companies. As a pan-European company, Alloga has found that its customers are looking to find much needed economies of scale by consolidating their operations, while preserving the local market knowledge.
Governments will also come under pressure from international pharma companies looking to create regional or global strategies. For example, they may have to realign their regulations to ensure they support regionalisation, making it easier to trade across borders. Logistics providers that can offer a combination of regional and local coverage across Europe will be well positioned for the future.
There are two broad trends affecting the healthcare sector: supply chain simplification and delivery specialisation. These may appear to be two unconnected developments, but there are a number of commonalities. Both are characterised by high levels of monitoring, control and access to information, helping logistics to align more closely with the needs of the business.
In the UK, Alloga has been involved in one of the most fundamental shifts in the European healthcare distribution model. In March 2007, Pfizer introduced its new direct-to-pharmacy system.
This new distribution arrangement allows Pfizer to take full responsibility for its medicines from its manufacturing centres to the point where they are sold to the dispensing pharmacists and doctors. The improved visibility achieved by the new system also means that Pfizer can be more responsive to stock shortage situations and better able to trace and recall its medicines if required. This was the first move of its kind by a pharmaceutical manufacturer in the UK.
For pre-wholesale logistics provider Alloga (through its partnership with UDG in the UK), it means delivering to a single company and fewer warehouses, helping to slim down the supply chain. The whole chain has been simplified, not only geographically but also in terms of IT systems and processes; product monitoring can be more all encompassing, information management systems standardised and margin for error significantly reduced.
Overall, error reduction and product tracking have always been high on the industry's agenda. In future, identification down to the individual box should be possible. RFID has been presented as a possible solution, but the technology has yet to find its place in the pharmaceutical supply chain. The major issue is apportioning the high cost; who should be party to shouldering that financial burden?
Mass serialisation, on the other hand, is a viable alternative. Reimbursement issues have already pushed this practice through in Europe, with a trend toward 2D bar-coding on a batch level. Ultimately, it is deepening inter-organisational collaboration and blurring boundaries that will ultimately help the industry overcome its tracking limitations.
The second trend, delivery specialisation, has seen healthcare logistics become more sophisticated, high-tech and precise in operation. Biotech products being developed by pharmaceutical companies and specialised biotech firms are high-value, lower volume but most importantly, high maintenance. Delivery requirements are more demanding. It is not simply about getting a product from point A to point B, but temperature levels have to be regulated and, in cases of some chronic conditions, delivered to the patient's home and followed by a homecare visit.
As one would expect, the technology involved in making this happen is advancing. Alloga's systems can now not only monitor its fleet's progress and status, tracking every batch and reporting in real-time the completion of the delivery, but the all-important temperature levels of the cold chain can be monitored centrally, alerting head office to any potentially damaging changes. While cold chain capabilities are not new to the market, the prevalence of such services among healthcare logistics providers is rising. As biotech products grow in market share, so will cold chain requirements.
It is essential that both the healthcare logistics and manufacturing sectors continue to develop more collaborative ways of working to support this evolution for their mutual benefit.
Sophisticated monitoring will become a key component in the future of healthcare logistics. Ultimately, by working with companies such as Alloga, manufacturers at the source of the supply chain will be able to view a complete history of the product in transit from manufacturer to end-consumer. Track and trace, 2D barcoding, and potentially RFID will contribute to this service, in conjunction with best in class back-office management software, which will be able to interface with customers' systems.
One of the most valuable products resulting from the increasing IT sophistication and supply chain control is information. Previously diluted by the various layers involved in delivery of the product from source to consumer, logistics providers are now in prime position to offer manufacturers access to elusive sales and usage information.
Product sales volumes and timings to end-customers, often pharmacies, hospitals or dispensing doctors, have historically been distorted by wholesalers' isolated stock management systems and a lack of transparency. Logistics providers will find that as monitoring and management systems advance in technical sophistication and level of integration, their role as information managers will come to the fore. As the key end-consumer interface, they will be able to provide essential insights central to manufacturers' planning and production needs.
Personalised medicine has been a topic much discussed in the past but has yet to become a reality. Highly specialised, this category of medicines presents a unique set of benefits and problems, with each treatment being specific to the patient for whom it was designed. While it remains on the horizon, healthcare logistics providers must give some thought to how it would work.
The current delivery specialisation model would transform into an even more customised service, created for each treatment and each patient. It is suggested that products for chronic conditions will be delivered directly to the patient, making the logistics providers the main interface and brand representative to the end-consumer.
It is also feasible that they could take on responsibility for homecare and support, checking compliance and treatment efficacy. Take this one step further, and the logistics provider's role may become increasingly similar to that of a more conventional healthcare provider, working with pharmacies, and primary and secondary healthcare providers in the community.
For those treatments where DNA sampling is initially required in the medication development process, the logistics team would be best placed to provide this service, collecting the sample and returning it to the biotech company in the required condition. The highest levels of skill would be required to perform this process and the service completely customised.
As the healthcare industry evolves, so too will logistics providers in order to offer the best solution for customer and patient needs. Alloga will continue to support manufacturers in being more agile and cost-effective, and help its customers focus on their core competencies.
Logistics providers will become an increasingly important contributor to the success and viability of pharmaceutical and biotech companies. They will provide essential information to help customers run their businesses more effectively and offer added-value services that will engender brand and service commitments from patients.
With the potential value of logistics services on the increase and the logistis provider's role becoming more central to manufacturers' operations, there are exciting times ahead in the healthcare logistics industry that will see a revolution in technology, integration and, ultimately, national health.