TORONTO, March 7, 2011—While recent attention has focused on issues such as the challenges associated with drug discovery and the regulatory review process, pharmaceutical companies have invested comparatively little in updating their manufacturing and distribution operations, according to a new report by PwC. Many of these operations are inefficient, under-utilized and ill-equipped to cope with new medicines, cost pressures and health reform expectations, according to the latest report in the Pharma 2020 series, Supplying the future: which path will you take?
Representing a significant amount of the cost base of most bio-pharmaceutical companies, the supply chain is the link between the laboratory and the marketplace and includes everything from sourcing raw materials to manufacturing and packaging to inventory warehousing, transportation and distribution. The growing importance of emerging markets, new modes of healthcare delivery, live licensing developments and environmental concerns, are all placing pressure on current pharma supply chain models with the risk that many will break if new changes are not implemented.
As demand grows for more customized products and services, the next generation pharmaceutical supply chains will become an increasingly important source of differentiation for makers of medicines, and will be a more prominent part in the strategic thinking of industry leaders, according to PwC. As a result, the report says that over the next decade, many companies will be required to strategically reassess and radically change their manufacturing and distribution model.
“The current pharmaceutical supply chain worked well when the ‘blockbuster’ paradigm prevailed, but pharma’s focus in a post-health reform world is shifting from products to patients, and their supply chain processes need to adopt the speed and agility of other, more consumer-oriented industries such as consumer electronics and mass retailing,” said Miriam Pozza, pharmaceutical and life sciences advisory services leader for PwC. “In a world where outcomes count for everything, health organizations need to acquire a much deeper understanding of patients and their healthcare needs. Information is the new currency, and the data behind the product may soon be as valuable as the product itself.”
PwC predicts that the pharmaceutical supply chain will undergo three key changes over the next decade. It will become fragmented, with different models for different product types and patient segments; it will become a means of market differentiation and source of economic value; and it will become a two-way street, with information flowing upstream to drive the downstream flow of products and services, and the management of information transferred between the pharma company, the patient and healthcare provider will become as important as the movement of product.
“The most successful pharma companies will be those that recognize the underlying value locked in their supply chain and can leverage it as a value and brand differentiator rather than just a cost,” said Gord Jans, pharmaceutical and life sciences leader, PwC. “Companies that recognize information is the currency of the future, will be those that go the final mile and stand out by 2o2o.”
In its report, PwC also outlines six trends that will fundamentally change the way pharmaceutical companies make and distribute their products and four potential scenarios that pharmaceutical companies might explore as a way to restructure their supply chains. Depending on their product and channel portfolio, most companies will have to manage to more than one scenario simultaneously.
The report provides an in-depth explanation of these scenarios and is available for download at www.pwc.com/pharma2020supplychain. All of the reports in the Pharma 2020 series are available at www.pwc.com/pharma2020.
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