For the pharmaceutical and biotech sector, the increasing value of individual products in terms of development and replacement cost, as well as their intrinsic value, is also placing a further element of potential ‘risk’ that all participants within the supply chain must adequately deal with. In addition, the continuing threat posed by counterfeiting is causing manufacturers to constantly review the distribution-to-market processof their products.
There are of course many ‘guidelines’ and ‘recommendations’ for the safe transportation of temperature sensitive commodities, but what is becoming increasingly clear is that consumer safety (particularly as seen by the WHO, FDA,& EU) is placing clear responsibility on producers and manufacturers for effective management of their cold chain.
Manufacturing growth & globalisation
A recent assessment of the global pharmaceutical market by Ernst & Young forecast that it will grow to US$897 billion by 2011, equivalent to a cumulative annual growth rate of 6.9 per cent. Furthermore, strong growth in the 10 European markets commodities, but what is becoming increasingly clear is that consumer safety (particularly as seen by the WHO, FDA,& EU) is placing clear responsibility on producers and manufacturers for effective management of their cold chain.
Manufacturing growth & globalisation
A recent assessment of the global pharmaceutical market by Ernst & Young forecast that it will grow to US$897 billion by 2011, equivalent to a cumulative annual growth rate of 6.9 per cent. Furthermore, strong growth in the 10 European markets that joined the European Union in 2004 will help boost European sales over the next fi ve years.
The market also remains polarised between ‘big’ and ‘small’ organisations with the top 10 companies accounting for almost 75 per cent of total global sales. Furthermore, mergers, acquisitions and partnerships have been a clear strategic growth tactic within this sector and are likely to remain so.
Growth of this nature as well as other market factors means the pharmaceutical industry faces continued pressure upon its cost structure – perhaps not surprising given the huge investment in the development of new products and the need to maximise the return on that investment before patent expiry. Outsourcing production to contract manufacturers is a signifi cant part of many major pharmaceutical companies’ strategy.
The most ‘popular’ regions for outsourcing include India – where there are more FDA approved sites than any country outside the USA – China and increasingly, Eastern Europe. Asia-Pacifi c is now the third largest production regionbehind the US and Europe.
Compare this to the top regions for sale of pharmaceutical products – North America followed by Japan and Europe – and the logistical challenges of efficient distribution to distant markets, whilst maintaining product integrity and efficacy become much more apparent.
Transportation and distribution of temperature sensitive products – and across an increasingly wide thermal span – will therefore need to remain at the very top of the agenda, particularly since it is forecast that by 2011, the market for contract manufacturing will have grown to US$45 billion.
Air cargo connection
For pharmaceutical products distributed by air, there is still too much mystique about how the air cargo world operates, particularly its complex process and procedures which need to be de-mystified, especially given the pressure upon manufacturers to be using a qualified shipping solution. Th is was clear from the recent work by the International Air Transport Association (IATA) when it formed an industry-wide committee to devise a new set of regulations specific to the pharmaceutical sector.
Manufacturers showed considerable misunderstanding about how airlines operate, particularly in areas such as outsourced ground handling and the potential for increased risk. For airlines, there were some clear and wrong assumptions about the temperature sensitivity of specific products that needed to be addressed.
Through its Pharmaceutical Cold Chain Interest Group (PCCIG) the Parenteral Drug Association (PDA), has taken the initiative to create a document known as TR39 which sets out to clarify the responsibilities of supply chain participants. Rapidly gaining ground as a leading reference, its aim is to harmonise the many global, country and state specific guidelines for distribution.
Shipment value & risk
One of the key drivers for the use of air cargo over other modes is naturally the weight to value ratio of shipped goods. For the pharmaceutical and biotech sector where product research and clinical trial phases take an average 7-8 years to complete, the development cost of these products is extremely high. In addition, a natural desire for production cost savings, together with the recent spate of merger and acquisitions within the pharmaceutical industry, can lead to larger shipment sizes and it is not unusual for a single LD3 aircraft container’s contents to be valued well in excess of US$8 million.
But with these products, risk is not just about the costs of research and production. Many pharmaceutical and biotech products have a correlated sensitivity to temperature and high value which diff ers with individual commodities. Protein based products, for example have a high temperature sensitivity and signifi cant value.
The risk of failure must therefore be mitigated by a logistic process that takes boThelements into account and this can sometimes be exacerbated by the location of manufacturing sites.
Risk assessment as part of a Quality Management System, should therefore not only include all the usual elements of the cold chain (manufacture, production, environmental thermal mapping, packaging, handling and transport etc.), but also incorporate an appraisal of the security processes being used by each and every participant in the logistic chain.
The way forward
For the air transportation of pharmaceuticals, what emerges is a common goal – to create a more coordinated approach and simplifying the complexity of the air cargo cold chain whilst also meeting regulatory and product efficacy requirements.
For some logistics providers, meeting the needs of the pharmaceutical business may seem a daunting challenge- but this need not be so if independent logistics knowledge of this sector is sought at an early stage.
The work undertaken for IATA on chapter 17 has undoubtedly opened the opportunity for greater dialogue between airlines, manufacturers and service providers. It must be grasped for the future benefit of all.
Tony Wright is MD of Exelsius (www.exelsius.co.uk), a cold chain management consultancy and a former executive of British Airways World Cargo & senior VP of Envirotainer. Mr Wright can be contacted at: [email protected].