As medicines have become more specialized and their manufacture globally has advanced, the need for cold-chain transportation has skyrocketed.
The demand for cold-chain providers who can not only fly goods across the world while maintaining tight temperature controls, but can also mitigate issues with customs agencies when they arise and properly store these goods at distribution centers, will become more important than ever.
Currently, officials at FedEx peg the overall pharmaceutical market’s supply chain value at $25 billion, with $14 billion of that in transport and $11 billion in logistics, but note that the industry will only grow with the rise of the middle class in developing countries.
This growth, and how service providers can handle it, was the main idea behind an online roundtable hosted Jan. 9 by FedEx officials that looked at the future of healthcare and measured the ballooning demand in the industry.
Carl Asmus, the express carrier’s vice president of market development, said cold chain wasn’t really a factor in transportation 20 years ago because the drugs manufactured generally didn’t require such tight temperature and time controls. Drugs manufactured in increasing quantities today are classified as large-molecule drugs, which require “much more stringent temperature ranges.”
In fact, the group Pharmaceutical Commerce has projected more than half of the 50 bestselling drugs will require cold-chain transport by 2016. As an example, the group reported that half of the top 10 drugs in 2009 were large-molecule pharmaceuticals that required cold-chain solutions; in 2016, that ratio will increase to eight out of 10.
“Sales growth of such products will be slower than the double-digit growth rates of the past few years but faster than conventional small-molecule drugs, and will be driven by price increases as much as by volume growth and new approvals,” the group found.
These sophisticated medications are also borne from the Human Genome Project, which aims to tailor drugs to a person’s DNA, making an individual pharmaceutical cure for each individual. Drugs like these are not only boosting cold-chain demand, but changing the very essence of the pharmaceutical supply chain.
“As you get into creating a drug that is really engineered for an individual, instead of drugs that are now all being moved to a distribution center and then through warehouses where they’re moved, let’s say into pharmacies in large quantities, they’re being shipped individually to the patient’s home,” Asmus said.
He added FedEx has seen a “dramatic increase” in these direct-to-patient pharmaceutical shipments. This new level of healthcare is also changing how FedEx develops its network; the integrator has taken a domestic focus in international markets like China, India, the United Kingdom and Saudi Arabia because demand for tailored drugs is on the rise.
“As we continue to expand our delivery networks, it gives us greater opportunity for that direct-to-patient care,” he said.
To try to tap into general pharmaceutical demand more broadly, FedEx unveiled a new cold-chain shipping service in August that would keep goods between a range of 2 degrees Celsius and 8 degrees Celsius for up to 96 hours.
Late last year, UPS increased its presence in the pharmaceutical-shipping arena by announcing three new service levels in its Temperature True cold-chain program designed to handle pharmaceuticals with a range of cold-chain requirements. At the time, Dirk Van Peteghem, vice president of UPS Healthcare Logistics, said the company was expanding its offerings because of “increasing cold-chain regulations, and expansion of specialty drugs and treatments that require temperature control.”
Officials said most of the pharmaceutical demand is coming from China, Brazil and India because of the dramatic growth in those regions.
“As you look at the demand driven by the growth in those emerging markets, that’s a big contributor to the overall growth in the healthcare industry,” Craig Simon, president and chief executive officer of FedEx Supply Chain, said. He also noted competition among drug firms is boosting growth in the healthcare field. Generic drugs are manufactured all over the world and thus need a healthy supply chain in order to get their products to market, but these companies are also trying to develop new drugs; at the same time, Simon said, branded drug companies are developing their own generics.
Finally, cost and warehousing is causing the healthcare supply chain to adapt.
“One of the things that is driving the capabilities around the world of these healthcare goods is the merging of the transportation and the warehousing and storage of these products,” Simon said. “The owners of these products… they’re looking to manage the transportation and the storage of these products in a combined solution set.”
Modal shift is still a present factor in FedEx’s healthcare worldview, but it isn’t as much of an issue as it is elsewhere in the company. Richard Smith, who is the managing director of FedEx Express’ life sciences and specialty services division, pointed out that customers have only dabbled in ocean “with mixed results.” These shippers have usually come back to the air side because of the limited visibility and slow transit times that come with ocean transport.
Customers also have a hard time keeping their goods cold enough when transporting them by sea, and if something in the supply chain goes awry, it’s much harder to fix an issue when goods are traveling by ocean carrier than when they are being carried by plane. Richard said customers do, however, source some stable generics by ocean, and Asmus added raw materials and pharmaceutical ingredients usually travel by ocean.
All of the changing elements in the healthcare world — the shifting centers of demand, the introduction of more specific and scientific drugs — call for supply chain adaptability, Simon said. He added shipments are becoming smaller and need to be sent out more frequently, so services need to have a level of customization afforded to the shippers. This reality calls for an upgrade in infrastructure in developing countries and a dedication from the service provider to new technology, and greater visibility in the supply chain.
Health of healthcare shipments
