[pullquote align=”left|center|right” textalign=”left|center|right” width=”30%”]The key to overcoming biopharma distribution challenges is understanding the underlying causes.[/pullquote]
Why is biotech and pharmaceutical (biopharma) distribution experiencing surging demand and rising cost?
Even with the downturn of the economy, the demand for biopharmaceuticals is growing at 15-20% which is increasing the demand for distribution. At the same time, costs are rising. It is not a simple matter of just spending wisely and negotiating harder for the best deal. The factors discussed in this blog emerge from the internal and external challenges to the biopharma industry. These challenges reach beyond what one company can control.
Biopharma Distribution Challenges – Internal
Internal challenges to the company emerge from three key topics:
- Top three business problem areas
- Poor planning
- Not flexible to changing needs
- Lack of focus on the mission or goals
- Four business components inside distribution
- Competent staff
- Proper equipment & facilities
- Effective computers systems & software
- Efficient process flow
- Two unique parts of biopharma distribution
From a logistics standpoint, distribution should use the right tools for the right job yet not lose sight of the outcome. If a current procedure requires a nail to be driven, a hammer should be used instead of a screw driver. However, if you can buy the assembled parts already nailed and at a lower price, this would definitely improve the outcome.
Biopharma Distribution Challenges – External
External challenges occur in two places: first, within biopharma and second, outside the biopharma industry.
- Within the biopharma industry :
- Political pressure and economic penalties are focusing on cutting healthcare costs. Meanwhile a new category of biopharma products has emerged increasing costs for an older, larger sector of the population. Projections show that by 2100 around 28% of the world’s population will be over 60.
- Cold chain shipments are larger and heavier than others, adding more charges to each new distribution shipment. In the future, the majority of new products will be cold chain. It is projected that cold chain products will expand from less than 5% of biopharma sales in the 1990s to over 50% of biopharma sales by the 2020s.
- The clinical trends for this decade are toward higher costs to operate and a greater number of clinical studies and shipments.
- Outside the biopharma industry:
- Fuel prices, labor costs and technology/equipment costs are high and growing.
- The US and EU has created: an adverse environment for businesses, encumbering regulatory requirements and allowed a transportation infrastructure to decline.
- Initial costs for technology and innovation (T&I) are very high. However, T&I with digital applications, over the long-term should drop costs below today’s cost per unit. Some examples of T&I are: the use of drones, 3D printing, GPS, and artificial intelligence.
Overcoming Biopharma Distribution Challenges
The growing demand for distribution, the changing shape of networks, and increasing costs create a condition that is expensive and less productive over time. If not corrected, this will result in a loss of demand or service.
New developments hint that technology and innovation factor could reshape distribution to handle greater capacity with accuracy and quality at a lower cost. Could T&I be the solution to distribution’s future?
Look for the full article in the November/December 2013 edition of Pharmaceutical Outsourcing.
About The Author C. Ray Goff Jr. has over 25 yrs. distribution, SCM and project management experience at major biopharmaceuticals. Ray is a speaker, writer and thought leader. Click here to view some other great articles by Ray.