Where's the pain in your supply chain?

When it comes to the supply chain, healthcare industry executives continue to be concerned about regulatory compliance, cost, and product security, report respondents to the 7th annual UPS "Pain in the (Supply) Chain" (PITC) survey. More than 530 executives in the United States, Canada, Western Europe, Asia, and Latin America were interviewed during the blind phone survey conducted by TNS, on behalf of UPS, between January and March 2014.

For more details on this survey, register for the on-demand Webcast, “Gain in the Chain: New Healthcare Supply Chain Strategies to Help You Capitalize on Untapped Opportunities.” 

Regulatory compliance is clearly the largest issue, both in North America and around the world, and it has been the top concern since 2011 when the survey was first fielded globally. In this year’s survey, 60% of respondents from around the world expressed concern with regulatory compliance. “Regulations, mainly those around pharmaceutical storage and distribution, are complex and pretty specific,” Robin Hooker, director, healthcare sector marketing, UPS, explains toPMP News. “The top barrier to global market access is the issue of country regulations, according to the survey.”

Specifically, 75% of respondents who indicated that their companies have been less effective in addressing areas related to regulatory compliance have found the current legislative outlook to be “murky, unstable, or changing.” And 69% are concerned about “delays caused by a lack of clarity in regulations,” with 54% citing a “higher cost of managing multiple countries’ regulatory requirements.”

The PITC results also show that while executives are still feeling the impact of the economic downturn, the concern is lessening. In the 2014 study, 47% of North American respondents are concerned about managing supply chain costs, with 44% concerned globally. However, 51% of global respondents were concerned in 2013, and that percentage was down from 60% in 2012. 

“Lower concern levels could be partially associated with healthcare executives’ weary acceptance that the cost containment challenge is likely here to stay,” the report reads. It could also be because some executives are employing strategies to manage supply chain costs such as using logistics and distribution partnerships, IT investment, and outsourced transportation management, the report states.

Product damage or spoilage is another top concern, and this could be partially attributed to the growth of certain types of drugs. “We see growth in the number of temperature-sensitive products, particularly large-molecule biologics — by 2018, seven of the top 10 best-selling pharma products will require temperature control,” says Hooker, citing the 2014 Biopharma Cold Chain Sourcebook. “There’s also growth in the vaccines and diabetes market.”

In addition, companies are dealing with updated cold-chain rules, Hooker adds.

Hooker also says a shift in packaging is driving further concern. “There’s a trend of multidose vials transitioning to prefilled syringes, volumetrically increasing the amount of space needed to package, ship, and store them. There are clinician benefits, but syringes are bulkier than multidose vials. Roughly, the average volume for a package of five doses of PFSs is 53 cubic cm while 10 doses in one MDV is only five and a half cubic cm. It increases the amount of cold-chain packaging required.”

Respondents are also concerned about counterfeiting and theft. “The counterfeiters are agile,” says Hooker. “They’re quite adept at duplicating almost every countermeasure that pharmaceutical firms use. And they are nimble because they don’t follow regulations.” 

The good news is that the Drug Supply Chain Security Act (DSCSA) “has raised the bar,” Hooker says. “It will provide knowledge of manufacturing origin, where a product has been along with all of the supply chain hand-offs, complicating factors for the counterfeiters. And there is a lot to be gained with untapped business value in the standardized data including optimized distribution and product recall efficiencies.” 

Interestingly, contingency planning concerns only 26% of respondents. “It is not a high-tier pain point,” says Hooker, but “it should be a top concern. Business continuity strategies need to be developed as companies optimize their supply chains — these two issues will grow together. Companies need shock absorbers with resiliency to handle low-probability, high-impact events.”

A developing trend toward collaboration and partnerships is helping healthcare executives manage these concerns. “Healthcare companies have been slower than those in other industries to outsource their supply chains,” reads the PITC report. “That picture, however, is now changing. Likely reasons for the shift include globalization, industry cost pressures, the increasing need for expertise in areas such as regulatory compliance and product protection, and expansion into new markets.”

Hooker says “the economic downturn provides the opportunity to develop new market strategies. Healthcare product firms need to look at ways to efficiently access tomorrow’s global markets and build out their global platform.”

“Top strategies involve leveraging relationships with third-party logistics (3PL) partners, setting up multiple distribution sites, and performing recovery exercises,” he continues. 

Logistics and distribution partnerships, which are used in some way by 65% of global respondents to successfully address global expansion, allow companies “to mitigate risk efficiently and in an asset-light manner by plugging into a compliant network,” Hooker says.

Such partnerships are particularly beneficial when expanding into new markets. “Developing countries are starting to diverge from each other, spreading firms thin with investment and infrastructure,” he notes. “There are risks associated with developing infrastructure, with investing, and with compliance. A partnership allows firms to mitigate that risk by taking advantage of existing multi-client facilities and leverage regulatory expertise, and it is more sustainable. A fragmented strategy that involves bootstrapping eats up a lot of capital.” 

For instance, many healthcare firms have “IT infrastructure that needs to be updated, or they are dealing with disparate systems after mergers and acquisitions,” notes Hooker. Given the DSCSA requirements phasing in over the next several years, these healthcare firms are now facing “multiyear projects requiring a lot of investment.”

Healthcare firms can manage such projects efficiently and maintain market access through partnerships, Hooker says. “Working with a 3PL that has invested heavily in its IT platform lessens the investment of developing the technology internally — and that is attractive,” he says.

Partnering also provides healthcare firms access to consultative support. “For instance, firms can source ideas from our Customer Solutions Group, which makes recommendations to customers to optimize the supply chain and develop new strategies. Firms that rated themselves successful in the survey are plugging into such consultative expertise somewhere,” Hooker says. 

UPS currently has more than 6.4 million square feet in 46 facilities dedicated to supporting healthcare firms, says Hooker. “We can help companies looking for end-to-end solutions, with air, ground, and ocean distribution, field stocking locations, security, IT infrastructure, and more.”

Partnerships also provide contingency support, even when that wasn’t the original goal. “In 2011, one of our customers, Advanced BioHealing, which markets skin grafts for diabetics, had contacted us seeking a centralized distribution location as a secondary source,” says Hooker. “When a local power-grid failure affected the southern California airports, it couldn’t ship skin grafts,” he says. “Because UPS served as the secondary source in Louisville, all skin grafts got out to surgeons as planned.” 

UPS can even help manufacturing firms seeking to keep up with changes in healthcare. “The future involves connectivity to the patient,” says Hooker. “How care is being delivered is shifting away from hospitals to clinics, retail environments, even the home. For instance, home care will be leveraged more and more by the providers of the future.”

“Firms can plug into the experience of 3PLs like UPS and take what we’ve learned from the business-to-consumer market and apply it to telemedicine,” he says.

When asked how a company can achieve global scale and still be patient centric, Hooker points to solutions like UPS My Choice. “Residents register their names and addresses and can get a text or email notification the day before delivery and can reroute if needed, promoting adherence to medication timeliness and maintaining the cold chain,” he says. “Solutions like this have tremendous business value, and they support our promise — that it’s a patient, not a package.”

For more details, visit www.ups.com/healthcare.