From The Editor | February 1, 2016

UPS Pain In The Chain Survey: Pharma Makes Gains In Compliance, Partnerships

Ed Miseta

By Ed Miseta, Chief Editor, Clinical Leader
Follow Me On Twitter @EdClinical

UPS Pain In The Chain Survey: Pharma Makes Gains In Compliance, Partnerships

UPS' Pain in the Chain survey is one of the best ways to understand where life science companies stand on the issues making logistics a headache and keeping executives up at night.

Since 2008, the survey of healthcare and life science supply chain professionals has attempted to determine the needs of these companies. It has since become a popular and helpful barometer of supply chain issues afflicting the healthcare industry.

The recently released 8th iteration of the survey was conducted between April and June 2015. A total of 421 interviews of logistics executives were conducted in 16 countries. To gain further insights into trends, challenges, and opportunities, 15 separate qualitative interviews were conducted in North America.

The survey, as you might expect, has both good and bad news for the industry. First the good news, or areas of success: the industry is adept at dealing with compliance issues and forming needed partnerships. Healthcare companies appear to be more successful with regulatory compliance. This finding is welcome news to an industry that is likely to experience growing regulation, scrutiny, and compliance burdens moving forward. With Good Distribution Practices taking hold in Europe and Brazil's strict serialization law coming online, new and increasingly stringent regulations will continue to be difficult for companies to navigate. Still, companies seem to be prepared for the changes and are thus far reacting well to them. Success in addressing regulatory compliance issues showed a 13 percentage point increase over the previous report.

Compliance with regulatory requirements is certainly a high priority for pharma companies, as illustrated by one pharma executive who remarked, "Complying with regulations is paramount. The product has to meet our own specs, and also the specs of the ministry of health in the destination country. It's an everyday concern for us."

Digging into the regulatory concerns a bit more, international regulations causing the most pain for executives was the European Union's (EU) Good Distribution Practice, noted by 39 percent of executives, and Brazil's serialization initiative, cited by 24 percent. They were followed by China's Medical Device Good Supply Practice (19 percent), U.S. Drug Supply Chain Security Act (16 percent), EU’s Medical Devices Directives and Requirements (16 percent), and Korea's Medical Device and In Vitro Diagnostics Practice (7 percent).

The survey also discovered perspectives can vary greatly across regions. In Western Europe, 71 percent of respondents have a GDP compliance agreement, and think transportation practice reflects the agreement. Those Western Europe respondents also ranked China, Russia, Brazil, and the U.S. as the most difficult countries in which to do business. Respondents in Latin America tapped China, Brazil, and the U.S. as the most difficult.

When asked about how their companies address regulations, from different perspectives, the responses were quite varied. It was highest, at 20 percent, when viewed from the manufacturing perspective. It was lowest, at just 14 percent, when viewed from the perspective of personnel understanding the regulations. Falling in between were the transportation, distribution, and IT perspectives.

IT Solutions Help Security

Another success story involved product security. The success rate in this area saw a whopping 20 percentage point increase over the 2014 results. The survey notes IT-based solutions, such as serialization and bar coding, coupled with cooperation with law enforcement, have likely contributed to improved product security. Still, other challenges remain, including physical protection from theft (noted by 4 percent of respondents) and poor supply chain visibility – too many supply chain handoffs -- noted by 40 percent. The presence of parallel trade ranked third at 37 percent.

The primary challenges also varied by region, with physical protection from theft and parallel trade ranking highest in Western Europe, and visibility challenges ranking highest in North America. When asked what strategies have made them most successful in addressing security concerns, respondents pointed to IT investment (67 percent), cooperation with law enforcement (41 percent) and visible authentication (holography, security links, and more) coming in third at 38 percent.

The final success factor was logistics and distribution partnerships, which are being used as a strategy to address challenges associated with compliance, product damage, cost management, and spoilage.

Areas Of Improvement Remain

Unfortunately not every area of the report was a success factor. Cost management was identified as a primary concern, and even though the level of concern has declined, survey respondents indicated rapid business growth, fluctuating fuel and raw material costs, and increasing regulatory requirements were challenges still needing to be addressed. These concerns went across all geographic regions, including North America, Western Europe, Latin America, and Asia. To address these challenges, respondents point to several ongoing strategies, including utilizing logistics and distribution partnerships (57 percent), leveraging a supply chain optimization analysis (55 percent), and IT investment (51 percent).

Damage and spoilage can be costly line items for pharma, especially as products become more complex and companies continue to under-utilize solutions such as in-transit monitoring and intervention. The companies that are seeing success in this area point to high-quality carriers, faster shipping service levels, and the use of temperature-monitoring devices. Almost two-thirds of respondents reported having internal initiatives to verify control room temperature requirements were met.

Finally, while contingency planning remains an important concern, many pharma companies may still find it hard to justify investments in this area. Disruptions to the supply chain can have impacts that are limited and unpredictable. The report notes that although unplanned events continue to impact the supply chain, a large percentage of supply chain decision makers still do not consider the subject important enough to make the necessary investments in contingency planning.

As this industry continues to move forward, one thing is certain: more innovative and sophisticated products will continue to enter the market, compliance and regulatory guidelines will remain stringent, and the stakes will only get higher for all parties involved. Innovative solutions put forth by both pharma companies and logistics partners are the best way to ensure success throughout the supply chain.

 The complete 2015 Pain in the Chain survey can be viewed here.