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Home » 'Perfect Storm' in Pharma Vertical Raises Value of Supply Chain Management

'Perfect Storm' in Pharma Vertical Raises Value of Supply Chain Management

March 11, 2014
SupplyChainBrain

The pharma/bio-tech industry and its supply networks are undergoing fundamental changes driven by the transformation of the healthcare market's overall structure and economics. Companies must formalize processes, technology, talent and governance for enterprise transformation and change management requirements across all functions and processes. It's time to "break the rules", to assess, evaluate and transform organizations to respond to the new market requirements.

Pharma/bio-tech's supply chain challenge is managing resources within the context of many "C" challenges resulting from the market's "perfect storm." Let's look at the first, cost. As the number of products falling off the patent cliff exceeds new product introductions, companies are hemorrhaging profits, pressuring them to implement cost saving process improvement initiatives, such as Lean-Six Sigma, to achieve operations excellence. This requires careful analysis to segment and define the company's various supply chains. Segmentation will enable supply chain leadership to develop the strategies, metrics, processes and resource requirements to serve each segment.

At the same time, compliance with FDA regulations and the change in the healthcare market structure, driven by the Affordable Care Act, are changing the economics of healthcare delivery, challenging traditional payer, provider and manufacturer relationships, processes and supply networks in every segment. The healthcare industry is waking up to a highly regulated, highly risky, "retail-like" market. There are more healthcare delivery options springing up every day, from hospitals, to focused procedural facilities, to the local drugstore. Patients have more options for delivery and dispensing than ever before, resulting in proliferation of ship-to locations and new supply chain monitoring challenges and costs.

The result is a cold chain that has more complexity in procurement, pedigree, production, packaging, storage, shipping and transformation than ever before. Data logging and tracking of temperature-controlled and regulated products is technically challenging with high risks. Variation in temperature of in-transit products can cost millions; a power loss to a warehouse can cost hundreds of times more. On top of all that are security risks from cargo theft, counterfeiting, and product recall. Connectivity with every end-to-end participant in the continuum of patient care requires tracking and tracing all of the information about delivery, dispensing and payment, pressuring operations and technology at every level.

Finally, there's the transformation of healthcare from fee-based services to payments based on outcomes, challenges with EMRs and EHRs, and the overall new-found focus on the patient as the driver: the pharma/bio-tech industry faces a mandate to document and improve supply chain processes for different segments and strategies to meet the new requirement of the 21st Century healthcare industry supply/cold chain.

                                                         The Outlook

In 2014, expect the pharmaceutical/bio-tech supply/cold chain to experience fundamental changes driven by the regulatory, risk and economic pressures stemming from the FDA and the Affordable Care Act. In response, senior management will take new interest in supply chain management as a strategic lever to adapt to the market transformation. Companies proactively initiating enterprise transformation programs will capture the opportunity while companies that react to the new market may risk falling off an operations cliff.

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Technology SC Planning & Optimization Business Strategy Alignment Global Supply Chain Management Regulation & Compliance Pharmaceutical/Biotech
KEYWORDS Affordable Care Act Business Strategy Alignment FDA Global Supply Chain Management pharmaceutical regulations Pharmaceutical/Biotech Principal Essentialist Regulation & Compliance Rich Sherman SC Planning & Optimization Supply Chain Analysis & Consulting supply chain management IT Supply Chain Management: Pharmaceutical/Bio-Tech Supply Chain Optimization Technology Trissential
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