Patient centric networks and some fascinating supply chain stories from LogiPharma Europe 2019
I just returned from the LogiPharma Europe 2019 conference held in Montreaux, Switzerland. Patient centricity dominated the conversations at this year’s event. This is driven by a number of factors. The payor’s shift from volume-based payments to outcome-based certainly is a major driving force. The rise of digital technologies and the rapidly evolving field of personalized medicine are certainly contributing factors as well. Here are some insights from the event along with several real-life examples.
- Logistical challenges in personalized medicine: Tamas Masztis, Sr.Director of EU supply chain for Kite Pharma spoke about the challenges in managing the supply chains of personalized medicine. Kite pharma pioneered CAR-T cell therapy for patients with certain types of cancer. The therapy starts with T-Cells extracted through apheresis from the patient’s blood. The cells are brought to a lab where they are genetically re-engineered to recognize and attack the cancer cells. Then the re-engineered cells are injected back into the patient’s body. This is an extreme case of personalized medicine with the following characteristics for logistics:
a. The cells once extracted are frozen to extremely low temperatures of -150 Celsius to prevent damage. Extreme cold logistics is a must have!
b. The production happens in batch sizes of one as what each patient receives are his or her own cells
c. The chain of custody and identity cannot be broken. There is zero margin for error!
d. It takes 17 days from extraction to infusion in a supply chain that starts and ends with the patient in the US. In case of EU it is currently about 29 days
e. There is no on-hand inventory that the demand can be filled from, as each batch is unique to a patient
f. The biggest barrier to scaling up this process to new manufacturing facilities is the process variability. It is extremely hard to get the process variability in control. It took Kite Pharma over two decades to reach full-scale production from the R& D stages
g. This is a heavy human touch supply chain wherein the skills, all the way from handling and processing of the batches, shipping, receiving, processing, and patient administration are all highly specialized. Instead of traditional customer service approach, such hyper-personalized supply chain requires “case managers” who stay on top of the logistics, until treatment is administered to the patient.
Mastzis made the observation that due to the highly specialized nature of this therapy and the volumes involved, there aren’t very many suppliers with the appropriate capabilities in the market. However, he expressed hope that with anticipated massive growth in this space, there will be more supplier capabilities emerging.
In an equally fascinating example, Ralf Heumann of Bayer spoke about a radiopharmaceutical product in their portfolio which has a shelf life of 28 days. The product is used for cancer treatment. Due to radioactive decay, it loses about 4% of active ingredient per day once it is manufactured. The product needs to be matched with the appropriate patient weight for administering the therapy. Hence one of the supply chain challenges is to match the individual patient need with the correct lot accounting for the lead time, anticipated decay of active ingredient due to the lead time, and remaining shelf life. As transformative as personalized medicine is, it makes the job of supply chain professionals extremely challenging.
- Cost-to-Serve is top of mind for Pharma companies: During his mainstage presentation, Rob Coyle, SVP of Pharma & Healthcare strategy at Kuehne + Nagel said that Cost-to-Serve is top of mind for every single pharma company he spoke with in the past year or so. A view that was echoed by several attendees in their presentations and in my offline conversations with them. Increased pricing scrutiny in the pharma industry, increased competition from generics and biosimilars seem to be some of the key factors. This is bringing supply chain costs to the forefront in the pharma industry.
Philippe Irissarry of Eli Lilly spoke about how his company shifted a portion of its transportation from air to ocean through establishing an ocean hub in Asia, saving significant sums in the process. The tradeoff is an extra month lost in shelf life due to the slower mode of transportation which several in the audience questioned. To this Irissarry responded that the tradeoff of cost-benefit against shelf life loss and inventory risk will need to be factored in designing such a network and products with longer shelf life lend themselves better to such model. He also said that this has significantly simplified the job of his logistics personnel as, now they need to handle one ocean shipment instead of, say, ten air shipments. Several pharma companies that myself and my colleagues spoke with, expressed tremendous interest in more frequent redesigns of their networks and associated supply chain policies, along with intermediate to long-range demand sensing and forecasting to plan capital expenses.
- The “Physical Internet”: I always look for the latest buzzwords when I attend conferences. This time it was “Physical Internet”. As a testimonial to how Pharma companies are looking to CPG for best practices, Sergio Barbarino, a P&G research fellow was an invited speaker. He elaborated on this emerging concept in his keynote. The basic idea is that the digital internet works in a seamless and efficient manner where data travels between various networks and reaches its destination. This is feasible due to platform independence, as a result of standardization and established protocols in the digital internet. However, the physical logistical networks are full of inefficiencies owing to how companies shipping goods operate in a closed manner resulting in 20% of the trucks traveling empty at any one time, in what is known as dead-heading. In a blog post on this topic, Zach Zacharia of Lehigh University cites the example of how potato chips and rolled steel will need to be loaded into the same 40-foot container so that both the weight and volume limits can be optimized to the maximum extent. However, this calls for a degree of openness, collaboration, and standardization such as what is found on the digital internet. The invention and standardization of shipping container from several decades ago was perhaps the most innovative standardization in the logistics space to-date, as elaborated in a must-read book, The Box by Marc Levinson. The environmental benefits from a “physical internet” through reduced deadheads can be quite significant!
- Industry preparing for Brexit: Since medicines are considered essentials, pharma industry as a whole is under pressure to ensure supply continuity in the event of Brexit. Caroline Panah, Director of Global Manufacturing & Supply Chain Strategy of GlaxoSmithKline, shared her company’s preparedness for Brexit. While lots of parallels are bring drawn between Y2K problem and Brexit, she categorized Y2K as a project with a definitive end date. However, Brexit is a project with no clear end date. Besides, the impact of Brexit will be felt for years to come as opposed to Y2K which was clearly a discrete event. She shared her experience of working with cross-functional teams consisting of Supply Chain, R&D, Tax & Trade, and others working hand in hand to ensure product supply. Given how divisive the topic has been, she commented that her teams have been very collaborative and kept their personal views out of the way from being prepared. She said that with the preparedness they have in place, knee jerk reactions to emerging news chatter and the number of questions her team handles related to Brexit have been significantly reduced. With no clear answer in sight, being prepared for a range of scenarios is a must for pharma companies. Sound advice indeed!
- Getting product launches right is a must for pharma: Peter Schuepbach, representing biosimilars group of Richter Gedeon spoke about the importance of getting product launches right. He gave an example of two companies wherein company A got FDA clearance first but was not prepared well for the product launch, resulting in significant out of stocks whereas company B that got FDA clearance a few months later, but with better preparedness for the launch, eventually ended up gaining an 80% market share. The problem seems to be more acute in the generic pharma and biosimilars space wherein a patent expiry triggers a race to the market. I spoke with few generic pharma manufacturers who said the way they ensure preparedness is collaborating closely with their procurement organization, giving their CMOs (Contract Manufacturing Organizations) and LSPs (Logistics Service Providers) the right level of visibility and capacity commitments, along with securing supply of vials, syringes, and other components. One of the executives also commented that securing Active Pharma Ingredient (API) ahead of launch can significantly compress market leadtime upon regulatory approval. He spoke about the fact that typically API has a long shelf life (up to 5 years in some cases) and hence carrying, say 6 months of inventory for API will not be a significant risk. All in all, getting product launches right is pivotal for pharma companies and it requires a very tight cross-functional collaboration both internally and externally.
- An unusual collaboration saving lives: Philippe Francois, VP of supply chain for Global Fund, shared the fund’s mission of ending AIDS, Tuberculosis, and Malaria as epidemics. It is formed in collaboration with governments, private sector, and individual donors. It invests about US$4 billion a year in delivering life-saving drugs to hard to reach corners of the world. To this effect, an interesting collaboration emerged between Coca-Cola and the Global Fund in the form of “Project Last Mile” to distribute life-saving medicines and vaccines to sub-Saharan African countries leveraging Coca-Cola’s massive logistical reach. Mouna Jarmouni from Francois’ team spoke about how they are leveraging advanced algorithms in network design, route optimization, and demand planning to plan their logistical operations. An inspiring mission that saved 27 million lives to date!
Apart from participating in several interactive sessions, I had an opportunity to connect with several of our customers, partners, and industry peers. I also presented to a packed room on the topic of emerging challenges in the pharma industry and must have supply chain capabilities. It deserves an entire writeup by itself. So, I will spare the details for now. All in all, it was a fantastic, intellectually stimulating, and fun-filled event!