Supply Chain & Distribution Challenges in the Pharmaceutical Industry

Pharmaceutical uses unique approaches to managing its supply chain including customized KPI metrics; logistics and financial hubs; asset and resource sharing; tax and revenue optimization strategies; collaborative forecasting, and parallel production development strategies.

Pharma Companies must need to identify what is important to maintaining a competitive positioning, including the business strategies, operating models, goals, and best supply chain practices.

The pharmaceutical industry quite broadly encompasses a large and varied number of logistics and supply chain activities that could be the basis of excellence. The industry, as a whole, relies on some standard benchmarking indicators such as months of on-hand inventory, and inventory turns; however, the existing metrics do not allow for trait of the industry or provide adequately detailed insight into the key factors that make a pharmaceutical supply chain excellent.

The pharmaceutical industry, in recent years, underwent significant reshaping and restructuring via mergers and acquisitions. Inside pharmaceutical supply chains, companies must also face issues of product expiration and limited shelf lives. Seasonal and short shelf life products such as flu vaccines leave companies without the opportunity to redistribute or reallocate product in order to meet demand. In these instances the product placement must be accurate the first time; few second chances are available. With the increase in biopharmaceutical research, the importance of climate controlled supply chains and faster response times will continue to increase.

When defective product is discovered, immediate and complete action must be taken. Adequate systems for tracking product from the origin to the destination are necessary to enable reverse logistics in the event of a catastrophic recall. Regulatory agencies maintain high standards for the visibility of products and the ability for a company to retrieve substandard goods. Once defective products have been retrieved, they must be tested and/or disposed of properly. The disposal process and the controls in place to prevent tampering or intervention also raise concerns about the security measures within pharmaceutical supply chains. The pharmaceutical industry primarily caters to large pharmacy retail chains and wholesalers of medical products. In addition to these primary customers, governmental agencies can also provide large quantity orders of prescription medications. With respect to prescription medication, the end consumer must purchase products from one of the above mentioned organizations, a few exceptions and anomalies withstanding. There has been an increasing trend in the number of consolidations amongst the wholesalers and pharmacy chains which is resulting in stronger customer purchasing power and in many cases this translates into lower margins for the pharmaceutical companies. The pharmaceutical industry also provides product directly to clinics and hospitals, however these are not the main market channels for prescription medications. The industry also encompasses the OTC (Over-The-Counter) market for products. These products can be sold in less controlled and less stringent venues such as grocery stores and other retail outlets.

One of the future challenges for the pharmaceutical industry involves the combat of counterfeiting. The Regulatory body has recognized that RFID (Radio Frequency Identification) technology possesses potential to reduce the treat of counterfeit drug introduction. The Regulatory bodies believe, “Modern electronic technology is rapidly approaching the state at which it can reliably and affordably provide much greater assurances that a drug product was manufactured safely and distributed under conditions that did not compromise its potency. Radiofrequency Identification (RFID) tagging of products by manufacturers, wholesalers, and retailers appears to be the most promising approach to reliable product tracking and tracing. If the Regulatory bodies imposed mandatory implementation of RFID, the industry on a whole could experience vast changes in the cost basis for supply chains. The cost of the infrastructure to implement RFID would be a one time sunk cost; however the benefits would continue to contribute to the bottom line. Even if the cost of the RFID tags, which is where the main portion of the cost exists, remained high at few rupees or dollar per tag, the benefits would still show significant increases in profit from the reduction in counterfeit products.

In short, the pharmaceutical industry faces numerous challenges in the current ecosystem including but not limited to the followings. However, by implementing effective strategies, it can overcome supply chain disruptions and be better prepared for future unforeseen events.

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Lack of visibility into the cold chain

Cold chain companies require real-time information about the condition, timing, and location of their products, raw materials, and subcomponents to maintain visibility into their operations. Without access to detailed data such as real-time location, temperature, and humidity, pharmaceutical companies may struggle to effectively manage their perishable products.

?Temperature excursions

Temperature control failures across supply chains result in an annual loss of $35 billion for the biopharma industry, according to the IQVIA Institute for Human Data Science. Such failures can compromise drug quality, stability, and compliance, particularly for products shipped globally. For example, Pfizer’s COVID-19 vaccine must be stored at temperatures between -70°C and -60°C, while Moderna’s vaccine requires standard refrigerator temperatures of 2-8°C for 30 days and standard freezer temperatures of -20°C for 6 months. Any deviation from these temperature ranges can result in spoiled vaccines, leading to costly consequences such as product quarantine or loss.

Real-time data collection

One of the major challenges facing pharma supply chains is the lack of real-time data collection during transit. Without access to real-time information about product conditions, it is difficult to identify and address issues such as temperature excursions or delays. This also makes it challenging to allocate resources efficiently and ensure timely delivery.

Maintaining pharmaceutical compliance.

In recent times, there has been a significant increase in the number and complexity of regulatory and business compliance requirements i.e. GMP/GDP/ISO etc. Failure to comply with these requirements can have severe consequences, including increased costs, damage to reputation, and negative impacts on patients’ well-being.

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