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Cost and Risk Reduction Strategies in Pharmaceutical Cold Chain Distribution

As pharmaceutical companies develop more complex biological-based medicines, as opposed to chemical-based medicines, the shipments of hormone treatments, vaccines, and complex proteins that require cold chain refinements will be on the rise. The transportation and delivery of temperature-controlled pharmaceutical products and medical devices is a fast-growing part of the overall healthcare logistics industry. With an increasing globalization of pharmaceutical logistics and growth in products & medical devices, a more detailed and more advanced “Good Distribution Practices” (GDPs), protocol development is taking place.

This year, it’s estimated the global pharmaceutical industry will spend a total of $8.36 billion on cold chain logistics in 2015. This spending is estimated to climb to $10 billion by 2018.

Revenue Chart

The cold chain logistics sector will have to gabble with increases in the sensitivity, volume and quality standards of goods and continually mounting regulations. The entire supply chain is becoming more strategic and we’ve identified some trends that lends to the new reality.

  1. Increasing Globalization

Cold chains are becoming more global as supply routes are increasingly long-distance and multi-modal, presenting extraordinary challenges to maintaining optimal control during storage, handling and distribution across a wide range of parameters, from temperature to relative humidity to vibration.

In pharmaceuticals, added product specialization means logistic practices must comply with national regulations of each country and drug makers are therefore motivated to raise practices across their supply chain strategy.

  1. Product Sensitivity 

Pharmaceutical manufacturers are seeing an increased focus on the quality and product sensitivity. High value active ingredients means drugs have shorter shelf lives and stricter temperature requirements.

  1. Mode Shift in Transportation

With fuel price fluctuations, industry has seen some transportation mode shifting from truckload to intermodal, or from air to ocean. While selecting ocean transportation might make sense for the majority of goods for economic reasons, one could wonder whether shipping more high value healthcare products by sea is similarly justified.

Data suggests that mode shift is in fact taking place within pharmaceutical logistics departments, even for complex, temperature-sensitive shipments. Some large pharmaceutical companies are claiming that they plan to transport 70% of their international freight by ocean in the short to medium term, including cold chain shipments.

Factors that influence mode shifting are also related to truck drivers’ availability and capacity shortages. Cold chain supply directions must balance the additional time these modes may take in alignment with speed-to-market requirements.

  1. Increased Regulations

Tighter regulations are part of a global shift of Governments to take preventative measures that harmonize regulations around the world that is becoming a major issue for many pharmaceutical and food industries.

As of November 2013, the EU guidelines on Good Distribution Practice (GDP) for medicinal products for human use went into effect, extending temperature requirements to transportation, and expanding coverage to include over-the-counter (OTC) drugs. Before then, pharmaceutical mandates required products to be within manufacturer-established guidelines only in storage.  This has caused a big shift in pharmaceutical cold chain logistics and is one of the reasons the overall industry is seeing new solutions in this domain.

In the European Union, a majority of pharmaceutical products (80%) require temperature-controlled transportation. With similar regulations coming to the United States, many pharmaceutical manufacturers are adopting a similar approach in North America as well. In 2016, it won’t be enough to document every step in the cold chain supply, but track the temperature of shipments in real-time, with an alert system and analytics solution which can isolate specific batches of product, in time and space. Having a technology and the automation of the smart data along the supply chain will become part of the increase in stringent practices that implicate the manufacturers, the 3PLs and pharmaceutical companies themselves.

  1. Innovation & Technological Advances

As with all industries, pharmaceutical cold chain distribution is witnessing innovation that has the potential to disrupt the way things were traditionally done using much more efficient, streamlined and automated technologies. Typically such automation simplifies cold-chain inter-linkages, minimizes risks associated with human errors and reduces the level of complexity and variability in local markets deployment strategies.

In the current mobile era, smart data and mobile-cloud solutions are very likely to dominate cold-chain distribution since they bring cost-efficiency, better analytics and contribute valuable business insights to pharmaceutical logistics management

  1. Market Demand 

As technology advances, the market pressure will drive a demand for increased supply chain efficiency. Corporate-wide adoption of new technologies, practices and better strategies will mean a disruption in how cold-chain logistics is managed. The move is towards supplier facing supply chains now, involving all service providers.

As cold chain operators are eager to find new strategies to reduce costs, new technologies are emerging that meet the market demand.

Pharmaceutical companies are not only investing in the right cold chain logistics technology solutions but also turning to specialized third-party logistics (3PL), providers, to mitigate the risk of product perishment, tampering, and losses.

As manufacturers are outsourcing more processes to 3PLs, the visibility of the temperature data across the chain becomes more important to mitigate risk factors.

Pharmaceutical and biotech (biopharma) manufacturers are therefore constantly looking into new advances in the transportation and delivery of temperature-controlled products, resulting in the emergence of technologies offering better insights all along the shipment. Mitigating risk is an important consideration as well, since Biomed & pharmaceuticals are generally high-value commodities found in both new and well-established markets. With the rise in global clinical trials for high-value cold chain products, the cost for each trial also rises. Therefore, the supply chain must meet more stringent controls and the technology involved must be adequate and provide a maximum efficiency whereby in effect, there is no “acceptable loss” of product or samples. The margins in emerging markets are especially key, with more commercial and clinical trial drugs being shipped to more patients in more countries than ever before.

With this continued growth, new developments in operational excellent and cold-chain technologies become more valuable similar to the way healthcare itself is becoming more innovative and more accessible at the same time.

With smart notification on shipments and temperature alerts, global pharmaceutical manufacturers can rest assured that their cold chain products are safe. According to Deloitte Consulting, variations in temperature are a common danger to shipments and a technology that enables constant vigilance in facing the diverse risks in the supply chain is needed.

Companies, which invest in a solution that offers cold-chain logistics data of shipments along all the points of the journey can better, anticipate weak points and the greatest risks in their bio-pharmaceutical network. The data of the temperature of shipments must then be monitored in real-time in the most efficient way possible.

We anticipate an evolution in global cold chain infrastructure; fuelled by sensors, cloud technologies and analytic tools. Increasingly, private sector initiatives are expected to lead efficient allocation of resources towards improved cold chain standardization. Logistics managers are increasingly recognizing the need for technologies that streamline distribution strategies and optimize costs and risks associated with cold chain logistics.

Product-Level Monitoring

In the meantime, pharmaceutical companies are being forced to rethink their supply chains and pay a lot more attention to how their temperature-sensitive products are handled end-to-end. Adoption of tagging technologies using sensors at the individual product level could be nearing an inflection point for pharmaceuticals. SenseGeni is working with pharmaceutical companies to assist with the following:

  • Logistics and inventory management in real-time.
  • Analytics on the quantity of each product, its current geo-location, temperature and estimated time of arrival (ETA) to destination.
  • Integrated conditions, including humidity, pressure, light and shock conditions, which aid forensic analysis of the supply chain including storage & warehouses.
  • Theft protection and counterfeit brand authentication, ideal for brand and generic pharmaceuticals. The best solution, would not only deal with temperature, but have preventative measures built-in to the sensors that would lead to the highest ROI for an investment to upgrade logistics technology.

Conclusion

Packaging with affordable and miniaturized sensors is evolving to meet new needs, reduce costs and risks in the pharmaceutical cold chain. Having smart tracking gives the insights required in the cold chain. Disposable wireless sensors per package that are cost-effective will reduce waste and minimize risk of product waste, and theft. We foresee smartphones, cloud and data analytic tools becoming more prevalent in cold chain logistics management, as they are for healthcare.

At the heart of the debate is the conclusion that, innovation and technology investment remains a key aspect to cost and risk reduction strategies in pharmaceutical and cold chain distribution

About SenseGeni

SenseGeni is poised to change how big pharmaceuticals & their partners, approach cold chain logistics management. SenseGeni’s disposable wireless sensing and secure identification tags offer cloud-based monitoring of individual products from manufacturing to consumption eliminating products waste, tampering and thefts.

To learn more about our value propositions, click on contacts here.

To stay in touch with SenseGeni, visit and follow our LinkedIn

For more information, visit our corporate website.

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