Pharma

 2020:  Re-­‐  shaping  Supply  chain  for  future  

Subhrajit  Bose  
NextLink  Solutions    

 
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Pharma’s  future  has  never  looked  more  promising  –  or  more  

ominous.  Major  scientific,  technological  and  socioeconomic  
changes  will  revive  the  industry’s  fortunes  in  another  decade,  but  
capitalising  on  these  trends  will  entail  making  crucial  decisions  
first  

The  pharmaceutical  supply  chain  needs  a  radical  overhaul,  and  we  

predict  that  it  will  undergo  three  key  changes  over  the  next  decade
 
 
• It  will  fragment,  with  different  models  
for  different  product  types  and  patient  
segments    
• It  will  become  a  means  of  market  
differentiation  and  source  of  economic  
value    

• It  will  become  a  two-­‐way  street,  with  

information  flowing  upstream  to  drive  
the  downstream  flow  of  products  and  
services.    
 
 
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KEY  FACTS  

• Generic  competition  has  already  dented  

Big  Pharma’s  revenues  a  trend  that  will  
continue,  as  the  patents  on  products  with  
sales  of  more  than  US$267  billion  expire  
over  the  next  six  years.  
• Many  pharma  companies  have  as  a  result  
started  refining  their  supply  chains.  But  
most  of  the  changes  they’ve  introduced  
have  been  short-­‐term  measures  to  
address  immediate  challenges  like  the  
rationalization  of  larger  manufacturing  
networks  as  a  result  of  acquisitions.  
• Asset  utilization  rates  have  improved.  
Between  2004  and  2009,  overall  
equipment  effectiveness  in  packaging  
increased  from  36%  to  51%.  
• Quality  has  also  risen,  with  the  percentage  
of  rejected  batches  falling  from  1.00%    to  
0.74%  over  the  same  period.  
• But  average  set-­‐up  times  have  increased  
from  79  minutes  to  93  minutes,  and  the  
vast  majority  of  pharma  companies  are  
still  far  from  having  any  kind  of  
‘continuous  flow’,  smooth  production  
scheduling  or  make-­‐to-­‐  order  
manufacturing.  Instead  of  producing  on  
demand,  they  must  hold  large  quantities  
of  inventory,  which  drives  up  their  
The  global  market  for  medicines   working  capital  and  overheads.    
is  growing,  although  demand  is    

moving  to  different  therapeutic  

areas,  a  shift  that  global  
warming  could  accelerate  

 
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India’s  insulin  dependence:  The  number  of  Indians  with  diabetes  is  projected  to  reach  73.5m  in  2025.  The  
direct  and  indirect  costs  of  treating  such  patients  are  currently  about  $420  per  person  per  year.  If  these  costs  
remained  the  same  as  they  are  now,  India’s  total  bill  for  diabetes  would  be  about  $30  billion  by  2025.  But  as  its  
economic  wealth  grows  and  standards  of  care  improve,  treatment  costs  are  likely  to  rise.    
The  US  spends  an  average  $10,844  per  year  on  each  patient  with  diabetes.  If  India’s  per  capita  expenditure  rose  to  
just  one-­‐tenth  of  this  level,  the  total  cost  of  treating  all  patients  with  diabetes  would  be  $79.7  billion  by  2025.  The  
value  of  prophylaxis  in  India  alone  would  thus  be  substantial;  preventing  10%  of  the  population  from  developing  
diabetes  would  save  nearly  $8  billion  a  year.  

EMERGING  OPPORTUNITIES  
The  markets  of  the  developing  world  are  
Demand  for  medicines  that  treat  illnesses  formerly  
altering  even  more  radically  than  those  of  the  
associated  almost  exclusively  with  the  developed  
developed  world.  At  one  time,  infectious  
world  is  thus  expanding  in  the  developing  world,  at  
diseases  were  the  biggest  killers.  This  is  still  
the  same  time  that  some  countries  are  becoming  
true  of  sub-­‐Saharan  Africa  and  South  Asia.    
increasingly  affluent.  
But,  elsewhere,  chronic  diseases  are  now  the  
The  E7  countries  look  especially  attractive.  Our  
leading  cause  of  death,  a  pattern  that  will  
economic  modeling  suggests  that  the  real  GDP  of  the  
become  even  stronger  as  the  population  of  
E7  countries  will  triple  from  US  $5.1  trillion  in  2004  to  
the  developing  world  gets  older,  fatter  and  
$15.7  trillion  in  2020,  whereas  that  of  the  G7  countries  
less  physically  active.    
will  grow  by  just  40%,  from  $25.8  trillion  to  $36.1  
Two  specific  instances  illustrate  just  how   trillion.  Their  wealth  relative  to  that  of  the  G7  will  rise  
much  the  epidemiological  profile  is  shifting.   from  19.7%  to  43.4%  over  the  same  period.    
In  2004,  an  estimated  639m  people  living  in  
developing  countries  suffered  from  
hypertension.    
By  2025,  the  number  is  forecast  to  reach  at  
least  one  billion  –  more  than  twice  the  
projected  rate  of  increase  in  that  same  
population  over  the  same  timeframe.  The  
picture  is  very  similar  when  it  comes  to  
diabetes.    
The  number  of  people  with  diabetes  in  
developing  countries  is  expected  to  rise  from  
84m  in  1995  to  228m  in  2025,  with  India,  the  
Middle  East  and  South  East  Asia  bearing  the  
worst  of  the  burden  (see  above  :  India’s   The  E7  Countries  will  treble  their  GDP  by  
Insulin  Dependence).   2020  

 
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FORCES  DICTATING  DIFFERENT  SORT  OF  SUPPLY  CHAIN  

Even  more  importantly,  few,  if  any,  pharma  companies  have  supply  chains  
capable  of  meeting  tomorrow’s  needs.  Numerous  forces  –  both  internal  and  
external  –  are  reshaping  the  environment  in  which  the  industry  operates,  with  
profound  consequences  for  the  way  in  which  it  manufactures  and  distributes  its  
products.  

•  More  Complex  Manufacturing  and  Distribucon  Process  

New  Product  Types   •  Different  Supply  Chain  for  different  product  types  

•  Incremental  launch  of  new  Medicines  

Live  Licensing   •  Ability  to  change  up  and  down  rapidly  

•  Expansion  of  Health  Management  services  

Emphasis  on  outcomes   •  Leaner  and  more  adaptable  cost  structure  that  preserves  
gross  margins  at  every  stage  of  the  product  lifecycle    

New  Modes  of  

•  Much  wider  distribucon  network    
Healthcare  and   •  Demand-­‐driven  manufacturing  and  distribucon  processes    
Delivery  

Growing  Importance  of   •  Offerings  designed  for  pacents  in  emerging  markets    
Emerging  Market   •  More  widely  dispersed  and  more  robust  supply  chain    

•  Heavier  regulacon    
Greater  Public  Scrucny     •  Robust  risk  assessment  and  risk-­‐management  capabilices  
across  the  extended  supply  chain    

 
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NEW  PRODUCT  TYPES  

Pharma’s  portfolio  is  changing  substantially.  

Biologics  in  general  are  more  susceptible  to  
Industry  analysts  predict  that,  by  2016,  
bioengineered  vaccines  and  biologics  will  account   impurities      in  the  production  process  and  damage  
for  23%  of  the  global  market  (measured  by  value),   during  shipping  than  chemical  entities.  Making  
up  from  17%  in  2009.   gene  and  tissue  based  therapies  is  even  more  
difficult.  Each  sample  must  be  individually  
The  product  base  will  become  even  more  diverse,   extracted,  propagated,  prepared  and  tested  
as  advances  in  nanotechnology;  tissue  re-­‐ before  it  can  be  administered,  so  it  must  be  
engineering,  stem  cell  research  and  other  such   treated  as  a  separate  manufacturing  lot  and  
disciplines  start  to  yield  fruit.   finished  at  a  location  near  the  patient.  
However,  many  of  these  new  therapies  and  the   Many  of  these  specialist  treatments  will  also  need  
devices  used  to  deliver  them  will  require  more   novel  delivery  devices,  since  it  is  difficult  to  
complex  manufacturing  and  distribution  processes   produce  oral  formulations  of  large  molecules.  
than  conventional  chemical  entities.  Indeed,  some   Micro  needles,  Magnetically  targeted  carriers,  
personalised  medicines  and  poly-­‐pills  will  have  to   nano  particles,  polymer  capsules  and  multi-­‐
be  ‘finished’  at  the  pharmacy  or  point-­‐of-­‐care.     layered  medicated  patches  are  likely  to  
New  Drugs  and  Devices   predominate,  but  such  devices  are  much  more  

Cras  faucibus  tempor  magna.  Maecenas  dapibus  sodales  erat.  

Aenean  sem  felis.  

 
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LIVE  LICENSING  

The  launch  process  will  also  become  much  more  incremental,  as  new  methods  for  assessing,  approving  and  
monitoring  medicines  emerge.  At  present,  the  marketing  applications  for  most  new  medicines  are  either  
approved  or  rejected;  the  supply  chains  for  manufacturing  and  distributing  them  are  designed  to  support  
peak  sales  volumes;  and  the  revenues  they  generate  climb  in  a  relatively  simple  curve.  
But  the  binary  system  of  authorising  new  medicines  is  becoming  more  graduated.  The  European  Medicines  
Agency  (EMA)  and  US  Food  and  Drug  Administration  (FDA)  introduced  conditional  approvals  for  certain  
products  some  years  ago.  Both  agencies  are  also  placing  much  more  emphasis  on  post-­‐marketing  
surveillance,  and  we  believe  that  the  current  system  will  eventually  be  replaced  by  a  system  in  which  new  
therapies  are  granted  ‘live  licences’  contingent  on  further  testing  to  confirm  their  safety  and  efficacy  
indifferent  patient  populations.  Once  this  happens,  the  ‘big  bang’  launch  will  give  way  to  a  phased  approach  
in  which  demand  for  a  new  product  rises  as  the  license  is  extended.  The  interval  between  the  initial  launch  
and  peak  sales  point  will  thus  be  much  longer;  the  revenue  curve  will  climb  more  slowly;  and  the  payback  
period  for  capital  expenditure  on  plant  and  equipment  will  be  more  protracted.  So,  rather  than  making  a  
large  upfront  investment  in  a  supply  chain  designed  to  cope  with  peak  volumes,  any  company  launching  a  
new  medicine  will  need  to  build  a  supply  chain  that  can  be  rapidly  adjusted  as  the  license  alters.  

Option  1  
Build  one  facility  to  
accommodate  peak  sales    
Advantages  
• Low  scale-­‐up  risks.    
• Big  site  drives  operational  
efficiencies.    
Disadvantages  
• Large  capital  outlay  for  
un-­‐proven  demand.    
• Low  utilization  during  
growth  of  the  product.    
Option  2  
Adopt  a  modular  manufacturing  
platform  scaling  up  to  support  
each  volume  plateau.  
Advantages  
• Capex  linked  to  known  
market  demands.    
• High  site  utilisation.    
Disadvantages  
• Cost  and  risk  of  
commissioning  more  
sites.    
• Many  small  sites  
increases  cost  base.    
 
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EMPHASIS  ON  OUTCOME  

Financially  stretched  governments  and  health  

insurers  are  simultaneously  becoming  much  more  
demanding;  they  now  want  clear  evidence  that  the  
medicines  they  buy  are  really  effective.  This  has  huge  
implications  for  Pharma.    
The  industry  will  not  only  have  to  manage  the  
manufacturing  and  distribution  of  medicines  and  
companion  diagnostics,  it  will  also  have  to  ensure  
that  patients  get  the  most  from  the  therapies  they  
receive  by  supplementing  its  products  with  a  wide  
range  of  supporting  services.    
The  ability  to  provide  demonstrable  value  for  money  
will  thus  become  a  critical  differentiating  factor,  and  
the  supply  chain  will  play  a  key  part  in  providing  that  
value  by  commissioning  and  supervising  aspects  of  
the  services  patients  need  to  manage  their  health.  

NEW  MODES  OF  HEALTHCARE  DELIVERY  

The  drive  to  cut  costs  and  improve  outcomes  underlies  several  other  changes  taking  place  in  healthcare  
delivery,  with  equally  momentous  consequences  for  the  industry.  Most  of  the  OECD  countries  have  been  
trying  to  reduce  reliance  on  hospitals  and  specialists  since  the  1980s.  Self-­‐administration  of  medicines  is  
also  on  the  rise,  as  patients  are  encouraged  to  take  a  more  active  role  in  managing  their  own  care.  Both  
these  trends  will  continue  as  clinical  advances  provide  better  medicines  for  acute  conditions  and  patients  
become  more  empowered.  Many  diseases,  which  must  at  present  be  treated  in  hospital,  will  then  be  
treated  at  home.  
But  migrating  from  a  system  in  which  care  is  provided  in  a  relatively  small  number  of  hospitals,  clinics  and  
surgeries  to  one  in  which  care  is  provided  through  a  diffuse  network  of  nurses  and  community  carers  has  
enormous  ramifications.  Pharma  will  need  to  distribute  its  products  to  many  more  locations,  including  
patients’  homes.  It  will  therefore  have  to  harness  the  most  efficient  ‘final  mile’  distribution  networks  in  
order  to  deliver  medicines  to  the  door  as  economically  as  possible.  
The  digitalisation  of  healthcare  delivery,  with  greater  use  of  electronic  health  records,  e-­‐prescribing  and  
remote  monitoring,  will  reinforce  the  drive  to  push  healthcare  into  the  community.  However,  it  will  also  
provide  Pharma  with  one  of  the  key  components  needed  to  make  the  transition.  

 
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E-­‐prescriptions  are  effectively  point-­‐of-­‐sale  data.  Access  to  this  data  will  enable  pharma  companies  to  
build  demand-­‐driven  supply  chains  in  which  healthcare  packages  for  different  patients  are  assembled  at  
‘super  hubs’  before  being  delivered  to  their  homes.    
By  2020,  information  about  patients  and  the  medicines  they  need  will  thus  be  as  important  as  the  
products  themselves.  
 

The  Diagram  below  is  not  explicitly  meant  to  cater  Pharma,  but  Logistics  collaboration  
and  regional  Hubs  visualizes  the  vision  2020  for  Pharma  Supply/logistics  network  
planning  and  collaboration  

 
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IMPORTANCE  OF  EMERGING  MARKET  

Designs  for  the  developing   The  growing  importance  of  the  emerging  markets  will  
economies   accentuate  these  challenges.  Although  patients  in  the  
Several  medical  device  companies  are   developing  economies  are  becoming  more  prosperous,  they  
already  designing  and  manufacturing   typically  pay  more  than  half  the  cost  of  their  medicines  
products  specifically  for  people  living  in  the   themselves  –  and  few  can  afford  to  pay  as  much  as  patients  
developing  economies.  Freeplay  Energy   in  the  mature  economies.  Moreover,  the  choices  they  make  
has,  for  example,  developed  foetal  heart   are  often  based  on  different  values  from  those  that  
rate  monitors  and  pulse  oximeters  that  are   influence  the  design  of  products  and  services  intended  for  
driven  by  human  power  and  designed  to   consumption  in  the  developed  world.  Cost  and  the  ability  to  
cope  with  harsh  conditions.  Mindray   buy  on  a  daily  or  weekly  basis  are  more  important  than  
Medical  International,  one  of  China’s   convenience,  for  example.  
biggest  medical  equipment  manufacturers,   If  Pharma  is  to  market  its  products  effectively  in  the  
also  specialises  in  making  inexpensive   developing  economies,  it  will  have  to  understand  the  needs  
patient  monitoring  and  life  support   of  patients  living  in  these  countries  and  tailor  its  offerings  
devices.  And  cardiologists  at  India’s     accordingly;  and  it  can  earn  from  the  medical  device  
Care  Hospitals  have  designed  cheap  heart   industry  in  this  regard  (See  Sidebar  ‘Designs  for  the  
valve  replacements,  minimising  the   developing  economies’).  It  will  also  have  to  build  a  supply  
number  of  disposable  parts  to  keep  costs   chain  that  is  both  more  geographically  dispersed  and  more  
down.  Pharma  can  learn  from  such  role   secure.  The  number  of  recorded  cases  of  counterfeit,  stolen  
models.  It  can,  for  instance,  develop   or  illegally  diverted  medicines  has  already  soared  nearly  
economical  formulations  and  stripped-­‐ nine  fold  since  2002.  
down  services  for  patients  who  can’t  
afford  its  most  expensive  offerings.  

GREATER  PUBLIC  SCRUTINY  

In  fact,  by  2020,  the  ability  to  manage  risk  and  compliance  throughout  the  supply  chain  will  be  more  crucial  
than  ever  before.  While  globalisation  is  increasing  the  risks,  greater  public  awareness  and  more  diligent  
enforcement  are  raising  the  bar.  In  2009,  for  example,  the  FDA  recalled  a  record  1,742  medicines.  A  single  
company  accounted  for  more  than  1,000  recalls  but,  even  when  these  are  stripped  out  of  the  picture,  the  
number  of  recalls  still  rose  by  50%  year  on  year.  
Other  administrations  are  also  tightening  the  rules.  The  Indian  government  recently  passed  a  law  
mandating  the  use  of  track-­‐and-­‐trace  barcodes  on  all  drugs  meant  for  export,  with  effect  from  July  2011,  
following  reports  that  Chinese  counterfeiters  were  selling  fake  medicines  labeled  ‘Made  in  India’  in  several  
African  countries.  

 
   11  

ENVIRONMENTAL  PRESSURES  

The  Green  agenda  presents  other  difficulties.  All  pharma   Water  is  the  new  gold    
companies  already  operate  under  strict  environmental   About  20%  of  people  live  in  countries  that  
controls,  for  obvious  reasons.  But  these  regulations  are   don’t  have  enough  fresh  water,  but  the  
likely  to  become  even  tougher,  given  the  international   situation  will  get  much  worse  over  the  
drive  to  curb  carbon  emissions.  Taxes  on  water   next  decade.  The  global  population  is  
consumption  are  also  likely  to  rise,  as  population  growth;   projected  to  rise  from  6.8  billion  to  7.6  
increased  farming,  rapid  urbanisation  and  climate  change   billion  by  2020.  The  amount  of  food  
exacerbate  the  shortage  of  fresh  water  (See  Sidebar  ‘Water   needed  to  sustain  mankind  is  thus  
is  the  new  gold’).   increasing  –  and  farming  already  accounts  
However,  many  of  the  assets  pharma  companies  own  are   for  about  70%  of  the  world’s  total  fresh  
designed  to  support  specific  manufacturing  processes–   water  consumption.  Rapid  urbanisation  is  
processes  that  typically  consume  considerable  amounts  of   also  driving  up  demand  for  safe  drinking  
energy  and  water.  If  the  industry  is  to  reduce  its   water  and  sanitation  facilities,  and  
environmental  footprint,  it  will  have  to  adopt  new,  more   environmental  changes  like  deforestation  
eco-­‐friendly  processes  and  that  will  require  a  substantial   and  global  warming  are  exacerbating  
investment  in  new  equipment.     these  pressures.    
Indeed,  some  companies  may  have  to  relocate  some  of   Water  shortages  will  have  a  serious  
their  production  facilities  to  completely  different  places.   impact  everywhere.  The  United  Nations  
Global  warming  is  changing  the  world’s  weather  patterns   predicts  that,  by  2025,  1.8  billion  people  
and  many  of  the  traditional  centres  of  pharmaceutical   will  be  living  in  regions  where  water  is  
manufacturing,  such  as  Singapore,  lie  in  regions  that  will   very  scarce,  while  5  billion  could  be  living  
become  more  vulnerable  to  extreme  weather  events.  Even   in  ‘water  stress’  conditions.  The  problem  
if  it  proves  possible  to  engineer  a  better  climate  –  e.g.,  by   will  be  particularly  acute  in  China,  India,  
locking  up  the  ice  caps  or  using  plants  to  suck  up  excess   sub-­‐Saharan  Africa,  South  Asia  and  some  
carbon  dioxide  –  geoengineering  experts  widely  agree  that   parts  of  Latin  America.  But  even  countries  
the  effects  would  be  limited.  Such  measures  would,  at  best,   in  more  temperate  zones  will  suffer.  One  
reduce  peak  temperatures  during  the  transition  to  a  low-­‐ recent  study  suggests,  for  example,  that  
carbon  world.  But  relocating  a  plant  to  a  new  country  or   large  swathes  of  the  southwestern  US  will  
region  is  a  complex  business;  numerous  political,  financial   be  at  risk  of  water  shortages  by  mid-­‐
and  commercial  factors  must  be  looked  at.   century.  
 

 
   12  

REMOVING  ROADBLOCKS  

Timely  access  to  various  emerging  technologies  will  help  Pharma  manufacture  and  distribute  its  products  
more  efficiently.  Some  of  these  technologies  will  enable  it  to  build  quality  into  its  manufacturing  processes,  
while  others  will  enhance  its  throughput  or  facilitate  collaboration  to  realise  economies  of  scale.  

Significant  opportunities  for  improving  the  supply  chain  exist  

 
   13  

NEW  DEVELOPMENT  TECHNOLOGIES  

FORMULATION  THOSE  ARE  EASIER  TO  

MANUFACTURE  

 
Biologics  in  a  bottle  
 
One  of  the  main  obstacles  in  developing  
oral  biologics  is  the  fact  that  proteins  
break  down  in  the  gastrointestinal  tract  
and  cease  to  be  active.  Some  proteins  
also  have  a  very  narrow  therapeutic  
index  and  must  be  delivered  in  doses  too  
precise  to  be  orally  administered.  
Nevertheless,  numerous  companies  are  
trying  to  create  pill-­‐based  proteins.  
Bangalore-­‐based  Biocon  is  testing  an  
During  the  past  60  years,  audio  technology  has  evolved   insulin  pill  in  the  US  and  India,  for  
from  the  vinyl  record  to  the  iPod,  but  the  way  in  which   example,  with  promising  preliminary  
medicines  are  delivered  has  stayed  much  the  same.     results.  Meanwhile,  Novo  Nordisk  is  
Compressed  tablets  containing  a  mixture  of  active   conducting  a  Phase  I  study  of  an  oral  
ingredients  and  excipients  are  still  the  most  common   insulin  pill  formulated  using  Merrion  
dosage  form.  However,  more  sophisticated  drug  delivery   Pharmaceuticals’  gastrointestinal  
techniques  will  provide  the  means  with  which  to  create   permeation  enhancement  technology.  
formulations  that  are  easier  to  manufacture  –  e.g.,   Several  oral  biologics  for  the  treatment  of  
powder  in  vials  and  liquid  droplets  on  blank  tablets.   autoimmune  diseases  are  also  in  the  
Researchers  are  also  working  on  the  ‘holy  grail’  of  oral   pipeline,  including  a  new  class  of  drugs  
biologics,  and  industry  experts  believe  it  will  eventually   called  JAK  inhibitors.  One  such  instance  is  
be  possible  to  produce  stable,  pill-­‐based  versions  of  some   tasocitinib,  which  was  developed  by  
proteins  (See  Sidebar  ‘Biologics  in  a  bottle’).   Pfizer  and  is  now  in  Phase  III  trials.  
Using  formulations  that  can  be  more  easily  manufactured  
will  enable  Pharma  to  minimise  its  investment  in  product  
and  process  development  until  the  later  stages  of  the  
product  development  lifecycle,  when  it’s  easier  to  
estimate  the  potential  value  of  new  products.  And  the  
development  of  oral  biologics  will  eliminate  the  need  for  
cold  chain  distribution  for  such  therapies.  

 
   14  

NEW  DEVELOPMENT  TECHNOLOGIES  

VIRTUAL  PROCESS  DESIGN  AND  VALIDATION  

Meanwhile,  computational  modelling  will  enable  Pharma  to  design  and  validate  manufacturing  processes  
virtually,  using  Quality  by  Design  (QbD)  principles.  In-­‐line  process  monitoring  via  process  analytical  
technologies  (PAT)  will  generate  the  data  needed  to  validate  these  models  and  secure  regulatory  approval.  
The  FDA  has  already  published  a  draft  guidance  in  which  it  proposes  replacing  ‘three-­‐batch  validation’  with  
a  three-­‐stage  methodology  that  involves  designing  a  suitable  process,  using  the  knowledge  gained  in  
development  and  scale-­‐up;  ensuring  the  process  is  capable  of  reproducibly  manufacturing  commercial  
batches;  and  validating  it  continuously  during  routine  production.  By  2020,  this  approach  is  likely  to  be  the  
norm.  
The  conventional  process  of  scaling  up  will  also  be  replaced  by  ‘numbering  up’  –  i.e.,  using  microreactors  in  
parallel  arrays.  Numbering  up  has  several  significant  advantages  over  traditional  techniques.  It  dispenses  
with  the  need  for  costly  and  time-­‐consuming  studies  to  devise  a  process  for  scaling  up  chemical  reactions,  
since  the  process  that  was  used  to  produce  a  few  grams  of  product  in  the  laboratory  is  the  same  one  that  is  
used  to  synthesise  larger  quantities.  In  addition,  using  microreactors  makes  it  much  easier  to  control  key  
parameters  and  thus  improve  yields.  

 
   15  

NEW  MANUFACTURING  TECHNOLOGIES  

Flexible  Production  

Virtual  engineering  will  not  only  accelerate  the  validation  of  new  processes,  it  will  facilitate  the  rapid  
reconfiguration  of  existing  manufacturing  lines  for  different  products.  With  flexible  processes  and  
miniaturised,  modular  components  that  can  be  quickly  connected  or  disconnected  like  pieces  of  ‘Lego’,  it  
will  be  relatively  easy  to  alter  the  order  in  which  specific  unit  operations  are  performed.  Widespread  use  of  
disposable  technologies  will  likewise  reduce  changeover  times  (and  the  consumption  of  clean  water).  
 
Collectively,  these  improvements  will  allow  pharma  companies  to  create  different  supply  chains  for  
different  product  types  and  markets,  manage  sudden  shifts  in  demand  such  as  the  step  changes  associated  
with  live  licensing  and  reduce  their  manufacturing  costs.  They  should  simultaneously  help  the  industry  
fulfill  its  social  responsibilities,  including  the  need  both  to  pioneer  more  sustainable  manufacturing  
processes  and  to  produce  medicines  the  entire  world  can  afford.  

Continuous  Processing  and  Automation  

By  2020,  most  medicines  will  also  be  manufactured  continuously.  Process  tomography  and  other  such  
technologies  will  enable  companies  to  capture  real-­‐time  data  on  critical  processes,  develop  complex  
multivariate  models  and  automatically  compensate  for  unexpected  process  disturbances.  Process  data  
generated  during  the  development  phase  will  be  used  to  ‘teach’  process  control  systems  to  respond  to  
process  disturbances  even  before  commercial  manufacturing  begins.  
Meanwhile,  advances  in  colloidal  and  foam  systems  will  facilitate  the  micro  processing  of  active  
pharmaceutical  ingredients  (APIs).  
Micro-­‐containers  with  embedded  super  paramagnetic  Nano-­‐particles  can  be  treated  with  an  alternating  
magnetic  field  to  release  materials  encapsulated  in  bubbles  within  the  material  and  thus  converted  into  
micro-­‐reactors  for  the  efficient  production  of  thousands  of  individual  doses  of  tailored  biological  products.  
Micro  processing  will  even  make  it  possible  to  formulate  some  medicines  and  poly-­‐pills  at  the  point  at  
which  they  are  dispensed.  Several  companies  have  already  started  providing  pharmaceutical  compounding  
services,  one  such  instance  being  Fagron,  a  subsidiary  of  the  Belgian  Arseus.  But,  by  2020,  the  pharmacist  
will  be  able  to  ‘mix’  medicines  individually  on  the  premises,  using  validated  formulation  equipment  –  much  
as  DIY  stores  mix  paints  to  produce  customised  colours.    

 
   16  

NEW  DISTRIBUTION  TECHNOLOGIES  

Just  as  new  technologies  are  emerging  to  help   Fingering  the  Fakes  
pharma  companies  manufacture  a  wider  and  more    
complex  range  of  medicines,  so  new  technologies   Various  new  tracking  technologies  are  in  the  
are  emerging  to  help  them  distribute  those   works.  One  such  example  is  the  ‘bokode’  –  a  kind  
medicines.  Cloud  computing  will  provide  the   of  data  tag  that  can  hold  far  more  information  
information  platforms  they  need  to  share  data   than  a  conventional  barcode  and  be  read  from  
securely  and  economically  with  suppliers  around   much  further  away.  DNA  labeling  could  also  
the  world,  analyse  the  data  very  rapidly  and   provide  a  way  of  fingerprinting  proteins  and  
respond  to  sudden  changes  in  supply  and  demand,   determining  where  they  have  been  manufactured,  
while  advanced  tracking  technologies  will  enable   if  the  problems  with  selecting  a  DNA  fraction  that  
them  to  monitor  products  from  the  factory  gate  to   doesn’t  affect  a  protein’s  performance  can  be  
the  patient  –  an  increasingly  important  feature,  as   overcome.  DNA  fingerprinting  has  already  been  
the  industry  manufactures  more  biologics  with  high   used  to  identify  ‘counterfeit’  foods;  researchers  in  
unit  values  and  specialist  delivery  requirements   Spain  recently  used  a  technique  called  forensically  
(see  sidebar,  Fingering  the  Fakes)   informative  nucleotide  sequencing  to  test  nine  
commercial  seafood  samples  containing  shark  
meat  and  isolate  those  that  were  incorrectly  
labeled.  

New  patient  interface  Technologies  

Tablets  go  high-­‐tech  
New  ‘patient  interface’  technologies  are  likewise   Proteus  Biomedical  has  developed  a  miniature  
being  developed,  some  of  which  will  bring  pharma   digestible  chip,  which  can  be  attached  to  a  
companies  closer  to  patients  than  ever  before.  One   conventional  medicine  and  used  to  monitor  
instance  is  the  prototype  chip  and  receiver  devised   patient  compliance.  The  chip  sends  a  signal  to  a  
by  Proteus  Biomedical,  which  records  exactly  when   sensing  device  worn  on  the  skin,  which  records  the  
a  tablet  is  metabolised  (see  sidebar,  ‘Tablets  to  go   time  and  date  at  which  the  medicine  has  been  
Hi-­‐tech’).  By  2020,  there  will  be  many  such  patient   ingested  as  well  as  measuring  certain  vital  signs.  
interface  technologies  on  the  market  and  the   The  information  is  then  forwarded,  via  wireless  
information  they  generate  will  help  patients   technology,  to  the  patient’s  doctor.    
manage  their  health  more  effectively,  as  well  as   Novartis  has  previously  tested  the  chip  on  20  
allowing  healthcare  providers  to  monitor  their   patients  who  are  taking  its  blood  pressure  
compliance  in  real  time.  But  they  will  also  provide   treatment  Diovan,  with  impressive  results;  the  
pharma  companies  with  information  they  can  use   company  reported  that  compliance  could  be  
both  to  design  more  robust  products  and  services,   improved  from  30%  to  80%  in  six  months.  
and  to  develop  more  accurate  production  and  
distribution  plans.  

 
   17  

GREATER  COLLABORATION  

Technology  isn’t  the  only  answer  to  Pharma’s  problems,  though;  greater  collaboration  with  the  other  
parties  involved  in  healthcare  provision  will  also  help  the  industry  become  more  efficient.  At  present,  there  
are  three  distinct  supply  chains  for  designing,  manufacturing  and  distributing  pharmaceuticals;  designing,  
manufacturing  and  distributing  medical  devices;  and  providing  healthcare  services  (including  laboratory  
work  and  pathology).  Integrating  these  supply  chains  so  that  all  the  upstream  and  downstream  partners  
can  see  the  full  picture  would  enable  them  to  plan  ahead  more  accurately  and  manage  demand  more  cost-­‐
effectively.  

By  2020,  the  pharmaceuticals,  medical  devices  and  healthcare  services  supply  chains  will  be  fully  integrated  

Creating  an  integrated  healthcare  products  and  services  supply  chain  would  not  be  easy.  But  one  of  the  
main  tools  used  to  manage  healthcare  quality  could  prove  invaluable  here.  Healthcare  providers  in  many  
parts  of  the  world  are  developing  defined  care  pathways  to  standardize  the  treatment  of  patients  with  the  
same  illnesses  and  thus  improve  outcomes.  This  will  ultimately  result  in  the  creation  of  defined  healthcare  
packages  for  each  care  pathway.  

 
   18  

GREATER  COLLABORATION  

With  access  to  each  roadmap  for  each  illness,  and  data  on  the  incidence  of  each  illness  in  a  given  
population,  pharma  companies  and  medical  device  manufacturers  will  be  able  to  predict  demand  for  their  
products  much  more  accurately.  They  will  also  be  able  to  define  a  supply  pathway  for  each  product,  
depending  on  whether  it’s  a  one-­‐off  treatment  (such  as  a  prophylactic  vaccine,  gene  therapy  or  anti-­‐
infective)  or  a  recurring  treatment  for  a  chronic  condition,  which  must  be  supplied  on  an  ongoing  basis.  

The  development  of  care  pathways  will  provide  greater  supply  chain    

There  is  potential  for  collaboration  in  other  ways,  too.  Most  pharma  companies  at  the  moment  
manufacture  and  distribute  their  own  products,  for  example,  but  this  reduces  asset  utilisation  rates  and  
drives  up  distribution  costs,  as  well  as  causing  unnecessary  environmental  damage.    
Conversely,  sharing  manufacturing  and  distribution  resources  would  be  much  more  economical.  A  few  
pharma  companies  have  started  experimenting  with  ‘shared  services’,  primarily  to  support  joint  product  
development  initiatives.  However,  the  vast  majority  of  companies  still  builds,  own  and  operate  their  own  
supply  chain  infrastructure.  
Some  companies  may  choose  to  establish  joint  ventures,  while  others  turn  to  third  parties.  Abbott  
Laboratories  and  Boehringer  Ingelheim  already  manufacture  for  other  organisations,  for  example.  And  the  
contract-­‐manufacturing  sector  is  expanding  very  rapidly.  In  fact,  market  research  firm  BCC  Research  
estimates  that  the  bulk-­‐  and  dosage-­‐form  drugs  segment  will  be  worth  about  $73  billion  by  2014,  more  
than  double  the  $36  billion  it  was  worth  in  2007.  

 
   19  

GREATER  COLLABORATION  

Experience  in  other  industries  has  also  demonstrated  

the  benefits  of  managing  distribution  collectively  (see  
sidebar,  ‘Collaborating  to  cut  the  kilometers’).  And  
Collaborating  to  cut  the  kilometres  
increasing  demand  for  biologics  has  stimulated  the  
 
development  of  specialist  logistics  providers  capable  
In  September  2009,  confectionery  giants  Nestlé  
of  handling  very  sensitive  pharmaceutical  freight.  
and  Mars  joined  forces  with  a  leading  British  
Many  provide  specialised  service  where  each  
supermarket  chain  to  synchronize  deliveries  of  
shipment  is  transported  in  temperature  –  and  
their  products  over  the  busy  Christmas  period  
humidity  –  controlled  conditions,  monitored  from  a  
and  reduce  their  environmental  footprint.  The  
dedicated  call  center  using  web-­‐based  tracking  and  
two  manufacturers  worked  closely  together  to  
reporting,  and  delivered  directly  to  the  customer’s  
coordinate  their  deliveries  to  three  regional  
door.  Moreover,  some  of  the  most  sophisticated  
distribution  centres  so  that  any  part  load  order  
third-­‐party  logistics  (3PL)  providers  –  i.e.,  companies  
that  either  company  received  could  be  
that  offer  freight  management  and  warehousing  –  
combined  in  one  truckload.    
are  expanding  into  supply  chain  management  and  
By  dint  of  collaborating,  they  eliminated  over  
coordination  services.  And  it  is  arguably  these  fourth-­‐
12,000  kilometres  of  duplicate  journeys.  
party  logistics  (4PL)  providers,  as  they  are  known,  
that  can  deliver  the  greatest  improvements.    
When  telecommunications  equipment  manufacturer  
Alcatel  turned  to  a  4PL  to  manage  the  supply  chain  
for  its  e-­‐business  networking  division,  for  example,  
its  supply  chain  costs  fell  from  5.8%  to  5.1%  of  
revenues  within  two  years  in  that  division  
In  other  words,  the  contract  manufacturing  and  
logistics  industries  are  both  maturing  and,  by  2020,  
some  of  the  biggest  providers  will  offer  integrated  
supply  chain  services.  This  will  enable  pharma  
companies  to  share  resources  and  capitalise  on  
economies  of  scale  throughout  the  value  chain.  

 
   20  

CHOOSING  AMONG  THE  OPTIONS  

We  have  established  that  the  vast  majority  of  the  companies  will  have  to  build  supply  chains  with  new  
manufacturing,  distribution  and  services  management  techniques,  and  some  of  the  developments  that  can  
help  them.  But  what  route  should  they  take?  

Four  options  exist  for  restructuring  the  pharmaceutical  supply  chain  

There  are  two  options  for  companies  focusing  on  specialist  therapies  and  treatments  for  orphan  
diseases,  and  two  options  for  companies  focusing  on  mass  market  medicines.  We  believe  that  most  
companies  will  fall  into  one  of  these  two  categories  by  2020,  although  the  large  companies  can  cover  
both  ends  of  the  spectrum.  But  they  will  still  have  to  develop  different  supply  chains  for  different  
product  types.  More  specifically,  companies  that  concentrate  on  specialist  therapies  can  either  exit  
from  manufacturing  and  operate  virtual  supply  chains  or  become  service  innovators.  More  specifically,  
companies  that  concentrate  on  specialist  therapies  can  either  exit  from  manufacturing  and  operate  
virtual  supply  chains  or  become  service  innovators  (see  figure  above).  
Companies  with  a  broad  range  of  products  that  present  different  characteristics  and  therefore  supply  
chain  needs  will  in  the  future  need  to  segment  their  supply  chain  operation,  aligning  to  the  unique  
demands  of  the  product  group.  Pharma  companies  that  operate  more  than  one  supply  chain  option  will  
increase  with  the  breadth  and  demand  of  the  portfolio.  

 
   21  

MANAGING  THE  MOVEMENT  OF  INFORMATION  

The  options  we’ve  outlined  have  several  overarching  implications.  One  of  them  is  the  increasing  importance  
of  information  –  and  hence  the  need  for  robust  information  management  systems.  If  Pharma  is  to  
manufacture  and  distribute  pharmaceuticals  on  demand,  and  oversee  the  provision  of  health  management  
services  for  patients  with  specific  diseases,  it  will  require  accurate  information  about  which  products  and  
services  patients  want,  and  when  and  where  they  want  them.  The  more  customised  the  offering,  the  more  
detailed  the  data  the  industry  will  need.  In  order  to  make  individually  formulated  therapies;  for  example,  it  
will  require  information  about  the  age,  gender,  weight  and  genetic  profile  of  every  patient  for  whom  these  
therapies  are  intended  –  information  that’s  very  sensitive  indeed.  Widespread  use  of  e-­‐prescriptions  will  
provide  the  point-­‐of-­‐sale  data  Pharma  needs  to  make  and  distribute  medicines  to  order.  Outcomes  data  will  
likewise  enable  it  to  refine  its  offerings.  It  will  be  able  to  develop  different  formulations,  delivery  
mechanisms  and  product  labels  for  different  patient  cohorts.  It  will  also  be  able  to  take  a  more  proactive  role  
in  helping  individual  patients  manage  their  health,  with  follow-­‐up  tests,  long-­‐term  monitoring  and  the  like,  
where  appropriate.  But  if  the  industry  is  to  get  access  to  this  data,  it  will  have  to  establish  reliable  
information  management  systems  with  appropriate  security  and  privacy  measures.  It  will  have  to  satisfy  
some  formidable  regulatory  hurdles,  too.  Healthcare  providers  in  the  US  are  required  to  follow  stringent  
rules  for  protecting  information  that  can  be  used  to  identify  a  patient  either  directly  or  indirectly,  for  
example  –  and  there’s  no  reason  to  suppose  pharma  companies  would  be  subject  to  less  rigorous  terms.  
Managing  and  extracting  meaning  from  the  reverse  flow  of  information  will  also  present  a  major  challenge,  
one  that  requires  extensive  use  of  sophisticated  analytical  tools.  Moreover,  Pharma  will  not  only  need  access  
to  much  more  –  and  more  confidential  –  information,  it  will  need  to  share  more  information  with  more  
organisations.  It  will,  for  instance,  have  to  share  data  on  orders  and  product  flows  with  contract  
manufacturers,  data  on  load  planning  with  distributors  and  data  on  patients’  health  with  service  providers  
(see  figure  below).  In  short,  it  will  have  to  control  the  management  and  transfer  of  information  as  carefully  as  
it  controls  the  physical  movement  of  its  products.  

 
   22  

CONCLUSION  

So,  what’s  the  bottom  line?  The  sort  of  medicines  

Pharma  makes  is  changing  and  the  financial  pressures  
it  faces  are  increasing.  Specialist  therapies  can’t  
generate  the  same  economies  of  scale  as  mass  
manufacturing.  Cash-­‐strapped  healthcare  payers  are  
also  scrutinising  outcomes  much  more  rigorously  and  
exploring  new  reimbursement  mechanisms,  while  
healthcare  providers  are  developing  care  pathways  to  
standardize  and  improve  the  treatment  of  disease.  The  
supply  chain  is  simultaneously  becoming  more  
important,  as  the  medicines  the  industry  makes  get  
more  complex  and  the  opportunities  for  generating  
value  from  pure  product  offerings  diminish.  Biologics  
and  personalised  treatments  are  more  difficult  to  
manufacture  and  distribute  than  small  molecules,  and  
services  will  comprise  a  greater  share  of  the  economic  
value  many  companies  create.  We  believe  that,  by  
2020,  most  pharma  companies  will  therefore  have  
different  supply  chains  for  different  product  types.    
The  precise  routes  they  pursue  will  vary,  depending  on  
their  portfolios,  pipelines  and  expertise.  But  whichever  
road  they  take,  they  will  need  to  get  closer  to  patients,  
since  reliable  demand  data  is  a  prerequisite  for  making  
to  order  and  intimate  personal  details  are  a  
prerequisite  for  making  customised  therapies.  They  
will  also  have  to  provide  a  wide  range  of  services  to  
help  patients  comply  with  their  medical  regimens  and  
monitor  the  effectiveness  of  their  interventions  –  
activities  that  have  traditionally  been  the  province  of  
healthcare  providers  and  payers.  And  they  will  have  to  
ensure  the  healthcare  packages  they  develop  are  fully  
integrated  with  the  care  pathways  for  every  disease  
they  address.  The  most  successful  pharma  companies  
will  be  those  that  seize  the  initiative  and  start  building  
agile,  efficient  supply  chains–  either  virtual  or  physical  
–  to  support  this  vision.  They  will  be  those  that  use  
their  supply  chains  to  differentiate  their  brands  and  ‘go  
the  final  mile’,  those  that  recognize  information  is  the  
currency  of  the  future.  

 
   23  

REFERENCES  

• Kasra  Ferdows,  Michael  A.  Lewis  &  Jose  A.D.  Machuca,  “Zara’s  Secret  for  Fast  Fashion”,  Harvard  
Business  Review  (February  21,  2005),  http://hbswk.hbs.edu/archive/4652.html  
• AMR  Research  rated  Apple,  Procter  &  Gamble,  Cisco  Systems  and  Wal-­‐Mart  top  of  the  class  in  its  
2010  supply  chain  league  tables.  For  further  information,  please  see  “The  AMR  Supply  Chain  Top  25  
for  2010”,  http://www.gartner.com/DisplayDocument?ref=clientFriendlyUrl&id=1379613#1_0<!-­‐-­‐  
entry  label  3-­‐-­‐>  
• EvaluatePharma,  “World  Preview  2016”  (May  2010).  
• Agnes  Shanley,  “Toyota’s  Meltdown:  Lessons  for  Pharma  on  its  Lean  
Journey”PharmaManufacturing.com  (2010),  
http://www.pharmamanufacturing.com/articles/2010/091.html?page=print  
• EvaluatePharma,  op.  cit.  
• The  EMA  and  FDA  introduced  conditional  approvals  under  Regulation  EC  507/2006  and  the  
Prescription  Drug  User  Fee  Act  (PDUFA)  III,  respectively.  
• The  EMA  published  its  “Guideline  on  Risk  Management  Systems  for  Medicinal  Products  for  Human  
Use”  in  November  2005.  The  FDA  adopted  a  similar  policy  in  2007,  when  it  secured  permission  to  
require  Risk  Evaluation  and  Mitigation  Strategies  that  may  include  monitoring  of  all  adverse  events,  
drug  interactions  and  side  effects.  
• World  Health  Organisation,  “Primary  healthcare  now  more  than  ever”  (2008).  
• The  World  Health  Organisation  reports  that  private  expenditure  on  healthcare,  expressed,  as  a  
percentage  of  total  health  spending,  is  75%  in  India,  59.3%  in  China,  55.8%  in  Mexico  and  52.1%  in  
Brazil.  It  is  even  higher  in  many  parts  of  Africa  and  South  East  Asia.  For  further  information,  please  
see  “World  Health  Statistics  2009”,  http://www.who.int/whosis/whostat/EN_WHS09_Table7.pdf.  
• Pharmaceutical  Security  Institute,  “Incident  Trends”,  http://www.psi-­‐inc.org/incidentTrends.cfm.  
• “Lift-­‐off”,  The  Economist  (November  4,  2010),  http://www.economist.com/node/17414216  
• FDA,  “Guidance  for  Industry  Process  Validation:  General  Principles  and  Practices”  (November  2008).  

About  Author  

Subhrajit  Bose  is associated with NextLink Solutions as the Managing

partner of the company and is based out of Switzerland. He is also a lead
architect for the company’s sustainability division. Professionally, he is
being working as an Enterprise/Solution Architect for over 16 years now
specializing in sustainability and supply chain. Compliance, Health/safety,
Product Stewardship, Risk Management, Recycling Management, Foreign
Trade Management has been within his areas or expertise. He followed
knowledge based consulting by targeting industrial areas before
technology solution. He has a proven track record of successfully
implementing solutions in over 19 engagements across the globe. His
recent publication ‘Sustainable 2020: Future Supply Chain through a
Spyglass’ has received major accolades and sold over 1200 copies
worldwide.

http://www.lulu.com/shop/subhrajit-­‐bose/sustainable-­‐2020-­‐future-­‐supply-­‐
chain-­‐through-­‐spyglass/hardcover/product-­‐20173642.html    
 
  

ABOUT  NextLink  Solutions  

 
Sitting on Six Distinct Pillars of ‘Quality’, ‘Customer’, Integrity’, ‘People’, ‘Ambition’, ‘Partners’, it
pioneers through its 360 degrees deep industry experience. NextLink has earned its popularity by
transforming risk to advantages, problems to ambitions and expectations to reality. NextLink also
boast of having the best of industry-experienced consultants who are continuously deepens and
strengthens company’s consulting pillars by assimilating several Fit Practices and convert them to
best practices. With its large population of industry expert’s and technology consultants and
physical presence in EU,UK and India NextLink delivers commits continuity in quality.

Next Link’s Pharma Strategic Business Unit

Businesses across EU/UK, over the last decade, have established us as a trusted partner to address
their business challenges using our deep industry domain competency and technology expertise. We
have over 60 dedicated consultants serving businesses in pharma industry. Having a strong
relationship with many large customers (such as Roche, Novartis, Alexion Pharma etc.) spread
across Europe, UK, the Pharma SBU has been continuously investing in building competencies to
help our customers do business better.