What is it that pharmaceutical and biotech supply chain/logistics executives are most concerned about? To find out, I recently spoke with John Menna, director of global strategy, healthcare logistics at UPS about the company’s newly released “Pain In The (Supply) Chain” healthcare market survey.

 

Conducted by Harris Interactive on behalf of UPS, the survey consisted of blind, in-depth telephone interviews with senior-level decision makers at nearly 150 pharmaceutical, biotech and medical and surgical device companies. Qualified respondents were responsible for supply chain and logistics at their company.

 

This is the third year of the company’s survey. As you would probably expect, healthcare reform was near the top of the overall list of concerns (55%). One of the biggest differences between the pharma-related respondents and others was in how they viewed the impacts of reform; only 9% of the pharma group thought it would hamper R&D programs and initiatives, whereas 26% of the overall group had this view. Also, 26% of pharma companies thought reform would open up new markets and opportunities, whereas only 18% of the overall group had this opinion. At the same time, 18% of pharma companies felt they didn’t have the current infrastructure to support reform and 15% said they wouldn’t be able to operate this way, demonstrating that like other groups, the pharma industry is uncertain about reform’s impacts

Overall though,  “increasing regulations” was the top business concern.  Again, you could have predicted that with the increased emphasis on entering emerging markets, it’s not surprising that adhering to global regulations is giving pharma/biotech supply chain executives a headache. After all, as Menna points out, with new regulations comes additional/new reporting requirements, packaging materials, temperature-sensitive packaging, higher-cost transportation modes, security, etc. Still, he was surprised at the degree to which healthcare and biopharm companies were looking to expand into emerging markets (47% said they would in the next 18 months). “This was a big jump from last year,” he said. “There was also a big jump from the previous year’s survey regarding the concern over regulations.”

 

When moving into new markets and worrying so much about adhering to new or foreign regulations, the conversation of outsourcing is bound to come up. According to all survey respondents (which Menna says is very close to the pharma/biotech findings), 35% said they will increase the amount they outsource in the next two to three years. Only 13% said they would do so in last year’s survey. Sure, maybe the fear and uncertainty surrounding the impact of healthcare reform is pushing this trend, but Menna says it’s more than that. “These companies are under so much pressure to reduce costs because of declining reimbursements, products coming off patent, slimmer margins, etc.,” he says. “They need to make their supply chain systems more cost efficient, and that leads to them asking themselves ‘Is this [i.e. supply chain services/logistics] something that is core to what we do, or should we look to outsource this to experts to help us with this process.”

 

If you do choose to outsource some or all of your supply chain/logisitics services, Menna suggests seeking a provider that can take finished goods from the manufacturing plant to a healthcare-compliant warehouse and finally to your customer. What’s a healthcare-compliant warehouse? Among other things, it includes cold, frozen, or air-conditioned storage; caged areas for controlled substances; validated healthcare IT systems; and SOPs that are validated for healthcare.

 

Menna also notes that you could outsource just parts of supply chain problem, such as regulatory management or QA, but using one organization for all of these challenges provides a lot of peace of mind. “Problems tend to occur when hand-offs happen [between disparate partners] in the supply chain,” he says. “”So, an end-to-end solution is often the best path to pursue.”