Brazil, Russia, India, and China (BRIC) are such promising regions for life sciences companies that it’s easy to forget their challenges. Developing markets, including BRIC nations, all tend to have inadequate transportation infrastructures, a limited number of knowledgeable distributors, security issues, and unique bureaucracies and interpretations of regulations.
Whether there for clinical trials, manufacturing, or market share, life sciences companies entering emerging and developing regions for the first time “tend to overlook the challenges associated with security, regulations, and the unique nature of the supply chain,” notes Bill Hook, VP of global strategy for UPS Healthcare Logistics.
The UPS “2011 Pain in the (Supply) Chain Survey” cited limited infrastructure as one of the top four barriers to global expansion. Likewise, the DHL report, “Transforming Life Sciences Logistics in India,” recommends strengthening the logistics infrastructure, coordinating ground-handling agencies, streamlining the import/export process at ports, implementing best practices, increasing the use of technology to improve supply chain operations, and developing multiuse warehouses. Those concerns extend to most developing regions. “Often, the infrastructure simply isn’t there,” Hook reiterates.
The infrastructure is improving, though. For example, Hyderabad, India, opened a dedicated cargo handling zone for pharmaceutical products in 2010, and DHL opened its second Life Sciences and Healthcare Competence Center in China in September. FedEx maintains a large Dubai facility as a hub for traffic flowing among nations in the Middle East, Africa, Asia, and Europe.
Track-And-Trace — The Holy Grail
Risk management concerns remain high in developing regions. In Brazil and Mexico, for example, DHL takes a comprehensive security approach for its warehouses and during transit. In DHL’s Brazilian operations, security includes background checks of all personnel, vehicle safety checks, and GPS tracking. Best practices include transportation escorts and extensive driver training to minimize the risks of hijacking.
“Robust track-and-trace capabilities are the holy grail of global visibility,” Hook acknowledges. “As an industry, we’re not there yet, but we are making improvements.” UPS is evaluating new technology to monitor the condition of products in transit and to note unplanned interventions such as package openings and delays. Such technology is especially beneficial in monitoring temperature-sensitive materials. “The challenge is getting the technology to acceptable costs. The best strategy today is to minimize the number of handoffs in the supply chain,” Hook says. He also recommends working with one organization — to the extent possible — to achieve global visibility using the same technology.
The Challenge Of Government Relations
As an API supplier, LGM Pharma is tapped into Africa, Asia, Eastern Europe, the Philippines, and South America. “The greatest challenge, logistically, is understanding local regulations,” according to Robert Hoppes, director of sales. He points to confusion over international commercial (INCO) terms (which should be resolved since the release of new definitions), the interpretation of local regulations, and sometimes obscure permitting processes.
“We get calls from clients who aren’t familiar with the requirements for importing certain APIs or who need last-minute documents when goods are held up in customs. Usually the issues are minor and can be resolved with updates or clarifications,” Hoppes says.
At UPS, “We have a public affairs group that meets with government bodies to help them understand our objectives and to help us understand their regulatory stance,” Hook says. Access to established, international government affairs teams is one of the advantages in working with large, global logistics providers in developing regions. Working with a logistics firm that already has undergone the process lets life sciences companies leverage those experiences and thereby smooth their own entry into new regions.
Those regulations may affect the distribution network a company establishes. “Who moves goods and how they are moved varies and affects other strategic decisions,” Hook says. “For example, in India, product is taxed as it moves across state borders. In China, healthcare is managed through hospitals, not the physicians,” so manufacturers deal with fewer, but more powerful, buyers.
In Brazil, the tax system causes manufacturers to ship directly to retailers to bypass wholesalers and one level of sales tax. Brazil also requires warehousing in the same state as the manufacturing facility. DHL began its PharmaShare services in Brazil, with consolidated warehousing and shipping, to help its clients meet those requirements and conserve capital, Jose Fernandes, VP of operations for DHL Supply Chain Brazil, says. PharmaShare is also available in Mexico and is launching in the United States now.
The Increase In Modeling & Simulations
Contract logistics is evolving to integrated logistics so that more aspects of the supply chain are handled by a single logistics provider. UPS and DHL, for example, each work closely with clients to design a network that is most effective for the region of interest and for clients’ own particular needs.
Logistics and business model simulations provide a way of smoothing expansions by helping managers identify the right questions, asserts Claire Cordeaux, leader of the healthcare practice for SIMUL8 Corp. “Anywhere there is a flow of events — people, product, process design — simulations can be used to see beyond volumes to identify bottlenecks, timetables, and other factors, enabling you to experience the problems you may encounter before going live,” she says. Modeling is used often as a learning device, to enable dialog and work out the real questions that must be answered.
“We’re seeing a sudden interest from medical device and pharmaceutical companies in using simulations to evaluate the economics of drugs in specific markets,” Cordeaux adds. Economic evaluations, ideally, include the healthcare model, pricing, volume, patient conditions, and access — many of the same parameters that also figure into logistics decisions. Modeling also can become a value-added service for manufacturers to help their own clients develop more efficient business and distribution models.
The Benefits Of Shared Warehouses
“I see hesitancy among the largest life sciences companies to outsource logistics and transportation to one party,” according to Richard Smith, managing director for life sciences specialty services at FedEx Express. The integration trend is growing, though, as life sciences companies and logistics providers expand into the interiors of developing regions. UPS, for example, launched express flights to Chengdu, in western China, last July.
Logistics providers are, increasingly, developing secure, shared warehouse facilities that meet the requirements of life sciences regulators and provide the flexibility that companies need as they enter new markets. For example, “UPS has nearly 5 million square feet of healthcare distribution centers around the world and is continuing to build out. Five or six more facilities are planned for the next year,” Hook says. Likewise, DHL has expanded Brazilian warehouses beyond Sáo Palo and Rio to include midwestern and southern Brazil.
Public Health Programs: An Entrance to Emerging Markets
Chembio Diagnostics Systems, Inc. entered emerging regions by working through public health programs. “Chembio’s tests for leishmaniasis, leptospirosis, HIV, and tuberculosis each have FDA approval, but a large percentage of our non-U.S. sales have been in Africa,” according to Larry Siebert, president and chairman. There, the President’s Emergency Plan for AIDS Relief (PEPFAR) provides Chembio’s AIDS point-of-care tests to the various nations’ ministries of health from a central distribution point in Africa. The company also works with an Ethiopian distributor that sells directly to the Ministry of Health.
To access the Brazilian market, Chembio works with the Oswaldo Cruz Foundation. Its tests are assembled there under the Foundation’s brand. As Siebert explains, “We shipped the components and trained the locals to assemble and manufacture our product there. For us, there’s no concern about distribution or quality.”
In those emerging markets, track-and-trace requirements are minimal, Siebert recounts. “We have lot numbers,” but more sophisticated solutions haven’t been requested. However, “The National Agency for Food and Drug Administration and Control (NAFDAC) in Nigeria required that ‘Chembio’ be printed directly on the individual pouches and the kit boxes, rather than a stick-on label, to combat counterfeiting,” Siebert says.
He adds that even though these are humanitarian products, his company still has to go through the application and perform due diligence. That applies not only to identifying the ultimate purchaser of the product, but to identifying product components. “The life sciences industry uses sophisticated software, radioactive material, lasers, etc. You never know what wlll trip up a company.”
The Complicated Cold Chain
The cold chain is very challenging, particularly in the emerging market. There are big opportunities there in terms of new technologies, but also in developing the information systems and reporting processes to manage the cold chain.
In North America and Europe, the transportation parameters are well-known. “We know the profile of the temperatures in which we are transporting, from the cold North Dakota winter to the heat of a Texas summer, and what that means for packages,” Hook says. That information is less detailed for emerging markets, where maintaining correct temperatures for packages can become complicated.
At Chembio, “We subject our products to all sorts of simulated conditions, including changes in temperature, air pressure, packaging seals, and shelf-life challenges,” Siebert says, to minimize the chance that challenges in the supply chain will adversely affect the assays.
“FedEx Express developed its SenseAware monitoring system to provide comprehensive monitoring that is managed on an iTunes-like platform,” Smith says. It uses real-time GPS and also monitors temperature, light exposure, relative humidity, and barometric pressure. Partnering with CryoPort, FedEx also offers deep-frozen shipments that are guaranteed to maintain the specimen at -150° C for 10 days.
The UPS strategy uses what it calls “Control Towers” in Asia, North America, and the EU to monitor critical shipments. “If a package misses a log-in window, the team mobilizes local staff to track it, get it moving again, and re-ice or recharge the package as needed. We try to intervene before temperature becomes an issue,” Hook stresses. UPS also is evaluating new technology, and has added a new type of air freight container that doesn’t require manual intervention.
The cold chain was one of two focus areas when DHL Supply Chain Brazil was formed in 2004. As yet, that operation does not have deep frozen storage capabilities. Instead, “DHL coordinates therapeutics to arrive moments before they are applied to patients. It’s very time-sensitive,” Fernandes adds. “That’s very convenient for clinics and hospitals that often lack the freezers to store deep-frozen product.”
Products that don’t require deep frozen temperatures are packed in Styrofoam and stored at -20° C in DHL’s freezers. “That method maintains temperature for 48 hours. We are investigating a new technology that doubles that hold time,” Rogerio Mansur, director of operations, DHL Supply Chain Brazil, says.
The Search For Logistics Skillsets
Finding people in emerging regions with the right logistics skill sets is another challenge. “Not having people on the ground to help resolve issues is problematic and, in emerging markets, there are not enough people with the right skills,” asserts George Bickerstaff, executive chairman and cofounder of the Global Leader LLC and board member of the International Vaccine Institute. Those skills include knowledge of the international logistics and life sciences industries as well as the local logistics and regulatory environments.
“China is particularly difficult without an in-country presence,” observes Karen Etchberger, executive VP for plasma, planning and supply chain, CSL Behring. When it launched its albumin product in China 20 years ago, it found two distributors and has remained with them. Their local knowledge helped CSL Behring navigate the bureaucratic hurdles. For example, she says, “Although there’s only one registration required, each Chinese state has different documentation requirements.” Other nations also have their own specifications, and even within the same country, interpretations can vary, she cautions.
Bickerstaff recommends outsourcing logistics to leverage the collective knowledge gained by larger teams working with multiple companies in a specific area. “Historically, Big Pharma handled logistics in-house,” he says. He sees that changing as blockbuster drugs are replaced by the smaller markets of personalized medicine. “Big Pharmas will call in additional extra expertise, and the number of specialized distributors will increase,” Bickerstaff predicts.