Supply chain visibility, strategic sourcing, cold chain requirements, sustainability demands, and personalized medicine are creating opportunities in the life sciences supply chain for IT partners delivering digital solutions. Read this first part of our blog series to understand the shift that is underway.
New security requirements, industry mandates, and changing customer needs require the contemporary life sciences supply chain to become more efficient, transforming the logistics network.
The worldwide value of pharmaceutical goods traded has grown six-fold in the past two decades from US$113 billion in 2000 to US$629 billion in 2019, according to the United Nations Comtrade Database.
This growth has driven more companies to outsource production to Contract Manufacturing Organizations (CMOs) to meet the pent-up demand. Let’s explore the factors impacting these increasingly global and complex chains.
- Pandemic-driven supply-demand fluctuations: Rising consumerism and pandemic-driven proliferation of precision medicines, wearables, and telehealth applications have left enterprises struggle to meet increased demand. One example of this is Bristol Myers Squibb’s struggling to meet the strong demand of BCMA-targeted CAR-T cell therapy Abecma
- Ever-changing regulatory oversight: Many industry-wide regulations have been implemented to strengthen the safety and effectiveness of medical devices and drugs commercialized across the globe. These include the European Union Falsified Medicines Directives (EU FMD) in 2011, Drug Supply Chain Security Act (DSCSA) in 2013, European Union Medical Device Regulation (EU MDR) in 2017, and the UK Medicine and Medical Devices Act (MMD) in 2021
- Need to reduce product diversion and recall: Increasing numbers of black-market activities and illegal drugs are finding their way into the supply chain and affecting companies’ brand values. The most common drug diversions are class benzodiazepines, opioids, stimulants, antipsychotics, anesthetic drugs, and GABA agonists
- Supply chain data sharing and data security: Broad threats, ranging from cybersecurity to data breaches, have led to unplanned financial and intellectual property losses. A case in point: IBM detected cyberattacks against the cold chain drugs specifically associated with GAVI, the vaccine alliance, and government agencies involved in the drugs’ distribution
Five key investment areas in the life sciences supply chain
- Supply chain visibility: Implementing visibility platforms could have saved 1 billion vaccines during the pandemic, according to the United Nations Environment Programme. This creates opportunities for IT service providers to partner with enterprises to enable end-to-end supply chain track and trace models.
Additionally, the Drug Supply Chain Security Act (DSCSA) outlines requirements to achieve interoperable, electronic product tracing at the package level to identify prescription drugs distributed in the United States by November 2023. Similar laws are in effect in Europe and other parts of the world. (For more on supply chain visibility, see our next blog.)
- Strategic sourcing: With the growing awareness post-pandemic of the supply chain risk of overdependence on raw material procurement from India and China, enterprises are starting to reshore pharmaceutical manufacturing in the US and Europe.
Also, since sourcing and procurement account for roughly half of drug development and manufacturing costs, firms are focusing on optimizing spending by using technology to gain real-time spending views, structure budget accountabilities, and align purchasing with production
- Emerging cold chain requirements: Various factors have pushed enterprises to increase their focus on temperature-sensitive drugs that contain high-value active ingredients and have shorter shelf lives. Cold chain adoption also has been accelerated by the rapid growth of consolidated distribution houses and online retailers’ improved last-mile connectivity
- Sustainable supply chains: The growing importance of sustainability initiatives is evident from the surge we have seen in Environment, Social and Governance (ESG) report. ESG funds in biopharma companies increased 27% in 2021 from the prior year.
Sustainable secondary packaging, carbon footprint tracking, responsible raw materials procurement, effective medical device decommissioning, and scrap minimization are gaining more traction in the life sciences industry. Additionally, the European Union directive 94/62/EC, in conjunction with directive 2018/852, demands a significant reduction in packaging waste by 2025
- Supply chain tailored to personalized medicine: Specialized logistics partners are needed to handle the extremely delicate and patient-specific components of innovative and personalized medications – from collecting cells/genes from healthy donors to delivering innovative medicine to patients.
Life sciences enterprises have invested approximately US$ 13 billion in cell and gene technologies since 2018. More than 900 enterprises worldwide are developing cutting-edge advanced therapeutics, and approximately 1,000 advanced therapy clinical trials are underway. This changing landscape requires supply chains that provide temperature-sensitive environments, closed loops, Chains of Identity (COI), and Chains of Custody (COC)
Implications for service providers
In response to these factors, next-generation connected supply chain ecosystems are beginning to emerge. Life sciences enterprises will need the right complementary digital technologies to optimize costs, drive productivity through streamlined route selection, and improve the customer experience.
This will create new opportunities for IT service providers that bring niche talent and a balanced portfolio of engineering and digital services, as well as supply chain-specific platform providers who will become partners of choice for life sciences enterprises.
Follow the second part of this blog series as we explore supply chain visibility platforms and enterprise initiatives.
For more details on the service provider outlook, watch our webinar, Outsourcing Services Pricing: What to Expect Next.