Managing Pharmaceutical Logistics
Pharmaceutical makers face a variety of challenges, including temperature control, security, chain of custody, and regulatory compliance. Strategic supply chain management can assist in finding a solution.
Pharmaceutical companies must carefully blend substances under specified conditions while navigating a tangle of rules and quality standards.
Pharmaceutical warehousing companies must meet similar requirements. Many pharmaceuticals are temperature sensitive, some are exceedingly precious, and all are subject to a tangle of government rules. Every detail matters in the pharmaceutical supply chain.
According to Cathy Roberson, senior analyst at UK-based Transportation Intelligence Ltd. and author of the Global Pharmaceutical Logistics Report 2012, pharmaceutical logistics is such a specialized discipline that drug manufacturers have long been hesitant to outsource to third-party logistics (3PL) service providers.
However, several recent industry shifts are forcing drug companies to reconsider their tactics. Some prominent medications are losing their patent protection. Manufacturers are attempting to make up the deficit by decreasing costs in the absence of blockbusters like Lipitor and Plavix. Outsourcing logistics operations is one method they achieve this.
A double dose of globalization adds to the confusion. Drug manufacturers in the United States and other industrialized countries are now producing more pharmaceuticals in India, China, and Brazil. They’re also expanding into new international markets. According to Roberson, “these variables result in lengthier supply chains.”
With these new hurdles, pharmaceutical companies are turning to 3PLs who understand international shipping and have pharmaceutical supply chain divisions.
The market for pharmaceutical logistics services was valued at about $52.3 billion in late 2011 when Roberson completed her research, and it was predicted to reach $57.1 billion by 2012.
Of course, many pharmaceutical companies still manage some or all of their supply chains in-house. Regardless of the method chosen, a company’s supply chain staff faces a number of unique obstacles. There is no magic cure for these problems, but the industry has come up with several useful remedies.
Take a peek at the current situation of pharmaceutical logistics.
MANAGING INTERNATIONAL HEADACHES
The pharmaceutical industry’s global nature stymies manufacturers with a difficult array of regulations controlling drug transportation in different nations, in addition to requiring drug makers to send their products across borders and across great distances.
“Pharmaceutical sector service providers must be aware of around 70 distinct sets of laws,” says Larry Sweeney, chief operating officer of DDN, a Menomonee Falls, Wisconsin-based company that provides supply chain services to pharmaceutical, biological, and medical device firms.
Sweeney understands the difficulty from the manufacturer’s perspective as the former director of logistics and distribution at Genzyme. Members of the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) have been working hard in recent years to bring the guidelines closer together.
The pharmaceutical sector is likewise working to establish global standards for tracking drug pedigrees. Different countries and states in the United States have developed their own serialization criteria. This usually entails affixing a two-dimensional bar code or other device to a unit of the product so that it may be monitored along the supply chain.
Serialization is used in some areas to track the chain of custody and keep counterfeit medications off the market. Governments outside of the United States use this strategy to combat reimbursement fraud.
Although the industry has experimented using RFID tags for serialization, the technology has created concerns, including the possibility that prolonged exposure to RF waves could harm certain biological products.
“Some products, such as liquids or containers with metal lids, have reflected radiation and prevented the RF tag from being read,” Sweeney explains.
GETTING RID OF PAIN WITH SECURITY
Half of the security difficulty facing medication producers is keeping inauthentic merchandise out of the supply chain. Shippers also have to cope with the inverse problem of keeping legitimate merchandise where it belongs.
Due to the high value of many pharmaceuticals, loss prevention is a top priority. Tim Mitchell, president of Sentry BioPharma Services, recounts the case of a prominent pharmaceutical company that lost $75 million in merchandise after thieves broke into a warehouse after hours, bored a hole in the roof, and hoisted the product out using a gantry. “Those things go offshore to other markets right away,” he says.
Sentry constantly modifies its security tactics to be one step ahead of the thieves. “For example, sensors are monitored 24 hours a day, seven days a week across our facilities,” Mitchell explains. “Management gets brought in if there’s any strange sound—even if it doesn’t set off an alarm.”
According to Jim Saponaro, vice president of operations for Exel’s life sciences and healthcare sector, the company applies any level of protection that each individual customer requires. GPS tracking, biometric scanning, video analytics, motion detection, infrared detection, and roving security patrols are some of the strategies and technology it employs.
“For outgoing shipments, we also deal with First Watch, a vendor that offers tracking devices and screens drivers and equipment,” he explains.
Keeping medications secure entails not only preventing them from falling into the wrong hands, but also keeping them at the right temperature. “A two-degree Celsius temperature difference is all it takes to destroy a lot of drugs,” says Scott Szwast, director of healthcare markets for Atlanta-based UPS.
According to some industry experts, seven out of ten of the most popular pharmaceutical items will require temperature-controlled transportation by 2014.
Maintaining the ideal temperature for transporting or storing pharmaceuticals is difficult for anyone, but it’s significantly more difficult for corporations exporting from warmer climates, where many products are now manufactured. “A long X-ray screening process at the airport might cause issues when transferring cargo out of areas like Hyderabad and Bangalore,” says Richard Smith, managing director of FedEx life sciences, specialty services, and global trade services in Memphis.
Companies lose an average of $150,000 on a simple box transportation when temperatures drop. Damages to large freight shipments can be in the millions of dollars. Shippers and their service providers have developed complex strategies for maintaining the cold chain to prevent these losses.
They begin with storage facilities that are adapted to the requirements of various products. Sentry, for example, has constructed a -45C room to its Minneapolis headquarters. Rooms are available in ambient (15C to 25C), refrigerated (2C to 8C), frozen (-15C to -25C), and ultra-low (-70C to -90C) temperatures in that building.
Companies employ equipment like refrigerated trailers, insulated packing, thermal blankets, and dry ice to keep shipment temperatures consistent while in transit.
FedEx Express may add more dry ice to a package, refreeze gel packs, or place things in temperature-controlled facilities if a flight delay, FDA inspection, or other circumstance causes a pharmaceutical cargo to be delayed. “In our hub’s foreign sector, we even have temperature-controlled trailers,” Smith explains. “To protect products facing clearance delays, we load them into trailers.”
According to Mark Wiesman, president of DDN, some companies have produced active packaging, which includes a power source to keep the temperature inside constant. Shippers can manage different medications at different temperatures within the same trailer or container using active packaging.
Many businesses also employ sensor-based systems to track a product’s temperature during its trip and, in some cases, to issue an alert if the temperature varies too much. Exel, for example, monitors temperatures within its customers’ packaging with a device called TempTale. “The device keeps track of the shipment’s temperature and verifies that it was in compliance from pickup to delivery,” Saponaro explains.
Other environmental exposures are also monitored by some sensor-based solutions. “Nowadays, technologies can tell whether a product has been exposed to light—which is bad news for a biologic product—or whether it has been subjected to excessive vibration,” Wiesman explains.
106 PALLETS IN FIVE DAYS
When Cadence Pharmaceuticals Inc., San Diego, worked with FedEx to deliver an exceptionally large consignment of their medication OFIRMEV from Italy to the United States in early 2012, temperature control was a critical consideration. According to Dave Dezan, Cadence’s director of supply chain operations, the medicine, an injectable form of acetaminophen, must be kept at a controlled ambient temperature of 20C to 25C, plus or minus 10C.
OFIRMEV is typically transported by Cadence in temperature-controlled intermodal containers, which keep the product in the same environment while it travels from truck to ocean vessel and back to truck. However, in this situation, the corporation needed to move 106 pallets so rapidly that shipping them by sea was not an option.
“We considered carrying product on passenger airlines utilizing single pallets and temperature-controlled containers,” Dezan says. Cadence ultimately chose to hire a complete Boeing 777 aircraft.
Cadence and FedEx devised procedures to keep the shipment within the specified temperature range while in transit and during mode-to-mode transitions. Two FedEx temperature specialists travelled to Italy to oversee the shipment from the manufacturer to Cadence’s third-party logistics center in Memphis.
The experts came at the factory with the required number of trucks as well as one spare. They watched as pallets of merchandise were readied for flight transport and wrapped in thermal blankets at the airport.
Dezan explains, “They put temperature loggers inside the plane and made spot checks on the loggers we had on our merchandise.” “And they were on the trip from Italy to Memphis while the product was being flown.”
The professionals in Memphis kept an eye on the package as it was unloaded, unwrapped, loaded onto trucks, and transported to Memphis for security and Customs clearance. Cadence collaborated with FedEx to submit documentation to the FDA ahead of time, allowing the clearance process to move more quickly.
FedEx kept the cargo on temperature-controlled trailers while waiting for approval to move the consignment to Cadence’s 3PL. “They kept an eye on the temperatures as well as the fuel levels in the diesel generators to make sure the shipment stayed within the proper temperature range,” Dezan recalls.
Cadence had hoped for a quick delivery, and she got it. “Pickup began on Friday, and product arrived at our third-party logistics center on Wednesday,” Dezan explains. “It doesn’t get any better than that for that type of shipping requiring FDA certification.”
Getting a product to market as quickly as feasible is critical in various areas of the pharmaceutical industry. This is especially true when it comes to generic medications.
“Generics have a very narrow earning window,” Saponaro argues. “When a drug’s patent expires, the first to market wins. Manufacturers have a 30- to 60-day window to generate massive profits before things settle down.”
In some situations, the FDA grants a business exclusive rights to sell a generic for 180 days before allowing other companies to enter the market. This makes getting the product to market much more critical.
“Every day a business loses sales is a tremendous loss of value,” Wiesman argues. “Prices drop considerably when the market is extended to other generic manufacturers.” Price reductions of up to 80% will occur soon as a result of competition.
While time is of the essence, a generic medicine producer faces a number of roadblocks that might cause the race to market to be slowed. For one thing, the medicine must pass FDA approval before it can be sold in the United States.
Before the introduction, the FDA may also request minor revisions to the labeling. “Rapidly changing labels would necessitate significant logistical efforts,” Wiesman argues.
BUT THERE WAS NO ERROR IN THE TESTING
Clinical trial assistance is a logistics function that is unique to the pharmaceutical sector. Rather than distributing huge quantities of a drug to the general public, manufacturers conducting clinical trials send goods to labs, hospitals, and, in some cases, patients’ homes.
Demand for shipping to clinical trial sites fluctuates, and each project is different. “A number of studies are ongoing at the same time, each with its own set of requirements,” Saponaro explains. “Every time I learn something new.”
Sentry BioPharma’s depot services for clinical trials are one of the company’s fastest-growing business segments. The organization assists clients in transporting products from manufacturing facilities all over the world to various places in different countries.
Some places are becoming increasingly popular. “Our clients in the United States and Canada need product sent to test facilities in Central Europe, where it appears to be easier to obtain test subjects for these programs,” Mitchell adds.
Mitchell uses the example of a London-based drug company transporting product to trial locations in the United States and Canada to highlight the challenging logistics of a clinical study. Sentry receives the drugs and other supplies from the manufacturer, and the 3PL creates the test kits for the trials.
Mitchell explains, “We label the naked vials.” “After that, we randomize the kits, serialize them as needed, and assemble them.”
Sentry then keeps the kits at the right temperature until orders to send them to trial sites arrive. The cargoes aren’t enormous, but they must be handled with considerable caution. “If one shipment goes out of temperature, it might jeopardize a patient or the trial,” Mitchell warns.
RECALLED OR EXPIRED
In many sectors, reverse logistics is an important part of supply chain management, but the pharmaceutical version has certain unique characteristics. Prescription medications that are about to expire can’t be disposed of in the same way that summer sandals can’t be disposed of in September at a shoe store.
“You can’t have a sidewalk sale for pharmaceutical products that aren’t selling,” says Larry Hruska, president of Pittsburgh-based GENCO ATC’s pharmaceutical services division.
Over 80 pharmaceutical manufacturers and most major drugstore chains have contracts with GENCO ATC to manage pharmaceutical returns. “Any product that is returned to one of those producers from any pharmacy in the country has to be returned to us,” Hruska adds.
When a pharmacy agrees to carry a drug, the manufacturer ensures that the drug will be sold by agreeing to repay the pharmacy for any unsold product that reaches its expiration date, as long as the drugstore follows specific standards. These rules specify how soon before or after the expiration date the pharmacy may return the merchandise.
When GENCO ATC gets a shipment from a pharmacy, it first double-checks that the customer has sent the product to the correct manufacturer. It also analyzes whether the goods is genuine and whether it arrived within the specified time frame.
“Then we send that information to the manufacturer via electronic data interchange so they know how to credit the pharmacies,” Hruska says. GENCO ATC then incinerates the product once that process is completed.
When the FDA or a medication company needs recall a product, a similar procedure is followed. All pharmacies, physicians, and hospitals that stock the medicine receive recall warnings from GENCO ATC. Those parties return cards with the amount of product they’re returning. The product is then returned to GENCO ATC.
“When the goods is returned, we compare it to what they stated they were returning to make sure that all product has been removed from the supply chain,” Hruska explains. The product is held by GENCO ATC until the FDA allows its release, after which it is incinerated.
Security is a major concern during the reverse logistics process at GENCO ATC since it handles many high-value products that include prohibited drugs. “Our building is as secure as Fort Knox,” Hruska explains. “All workers are subject to pre-employment background checks and drug tests, and they may be subject to random drug tests at any time.”
A recall may require a medicine producer to destroy perfectly fine stock along with the bad because the lot number is usually the most exact identifying tied to a pharmaceutical product. DDN’s Sweeney, for example, recalls a prominent pharmaceutical company that had to return thousands of packets of a medicine because some containers included the wrong number of tablets.
Only one or two of the company’s ten packaging lines were affected. “However, due to the lack of serialization on the packages, the company was unable to determine which packages were from the damaged lines and were the only ones that needed to be recalled,” he explains.
Recalls will be far more exact in the future, when each package is assigned a unique serial number.
What else is in store for the pharmaceutical supply chain in the future? Are there any new security systems? What if there were even better ways to keep track of and document temperature? Cloud-based pedigree management systems? Logistics specialists and their partners will be right behind manufacturers as they produce more and better pharmaceuticals, filling prescriptions to assure the safety of those important shipments.