Q&A on supply chain considerations for pharma companies as the vaccine rollout gets underway

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January 19, 2021

As COVID-19 vaccine manufacturers and distributors focus their attention on getting millions of vaccines to individuals across the globe, the worldwide vaccination campaign could create a second wave of medical supply chain disruptions. HRI spoke with PwC principals Wynn Bailey and Rafael Lander and director John Anderson on what pharmaceutical and life sciences companies can expect and how to help avoid disruptions. Our conversation:

PwC Health Research Institute (HRI)

With all eyes and effort on the COVID-19 vaccine supply chain, how is it affecting the broader pharmaceutical supply chain?

Wynn Bailey, PwC principal

Most pharmaceutical company supply chains have done a pretty good job of dealing with the COVID-19 pandemic itself since it began in early 2020. They’ve been able to run their business with mitigation efforts of what were expected to be fairly disruptive events.

The medical supply chain has largely been able to respond and adjust where necessary to those disruptions. Now we have the rollout of the vaccine, which is the most critical and significant public health effort in modern times, and it’s at a scale we’ve really not seen in the industry before. With that scale and the need to get individuals vaccinated, there may likely be some unintended consequences to the medical supply chain for other non-COVID-related products.

What our clients are starting to worry about is if resources used by the vaccine could become constrained for other medical products such as raw materials, dry ice, vials and other resources, as well as capacity with respect to contract development and manufacturing organizations, or CDMOs, and warehouse space or transportation capacity that may be getting allocated to the vaccine itself for cold-chain suppliers.

John Anderson, PwC director

I would add that there are likely going to be some additional things that occur and pile onto some of the current shortages of PPE [personal protective equipment]. For example, gloves, in general, are already in shortage due to the COVID-19 effort. As healthcare workers vaccinate people, everyone who performs a vaccination will need gloves to deliver that. These gloves are also needed by pharmaceutical companies as part of their day-to-day drug manufacturing as well, and the dry ice needed to keep some of the vaccines at ultralow temperatures is also used for clinical trial sample shipments. Taken together, it will likely increase the stress on some of the components in the supply chain that, in some cases, are already under demand pressure.

HRI: What about transportation and logistics? Will these also be affected by the rollout of the vaccine?

Wynn Bailey: Absolutely. Cold chain services like transportation, warehouses, large distributors who hold a lot of supply of day-to-day pharmaceuticals—they don’t have a lot of excess capacity, and there is some concern about whether transportation and some of these other services will be constrained. 

HRI: What sort of timeline are you looking at for the potential knock-on effects of vaccine distribution across the broader medical supply chain?

Rafael Lander, PwC principal

Minimally, we’re looking at a year and possibly into two years. The healthcare industry across the globe is trying to vaccinate 7 billion people. Most of the vaccines take two doses per person, so up to 14 billion doses that will need to be distributed and manufactured. This will take time, and with that there is likely to continue to be a strain across the supply chain.

Wynn Bailey: The challenges might move geographically over time as distribution and vaccination move across the globe. For example, we are starting to see vaccinations start in the Northern Hemisphere and then, as the supply and distribution of the vaccines accelerate, we could start to see vaccinations move to the Southern Hemisphere, where these potential constraints on resources could then soon follow. 

HRI: How are or should companies be responding?

Wynn Bailey: There’s a premium that you put on prioritization in terms of your products and/or the populations or individuals that they serve. The companies that are getting ahead of the curve are assessing the supply chains for their business-critical products. For example, maybe these are critical to patients because there may not be alternatives. They’re assessing them to understand what vulnerabilities they may have: Is it warehousing? Is it transportation? 

Then they’re identifying where those challenges are and coming up with prioritization to determine what to address, because they can’t address them all, and they’re developing mitigation strategies. These could be tried-and-true strategies such as aggressive inventory builds, but these could also include working with their customers to understand if customers want or can increase the amount of product on hand, particularly where there is sufficient shelf life.

Other methods might include looking at backup options for supply or alternative sources of supply. It’s not a short-term fix, but if you think about a two-year timeline, there could be a benefit to looking at alternative suppliers or developing alternative suppliers if none exist currently.

They might also consider whether there are alternative transportation methods, or alternative formulations that give some flexibility to mitigate the risk as well as some thoughtful prioritization of patient groups. 

And if they get into a situation of whether they have to prioritize certain patient groups for a therapeutic product, they may have to consider how they decide how they get to market and how they communicate that to customers. 

John Anderson: Companies should be aware of the issue. Do that risk assessment because, if not, as this actually comes to fruition and becomes more and more impactful on the supply chain, they could be even further behind the curve.

HRI: Are these just short-term fixes or, as pharmaceutical and life sciences companies work through this, could some of these adjustments be implemented to modernize and create a more resilient supply chain in the future, potentially avoiding or limiting the impacts of another pandemic and/or similar scenario?

Wynn Bailey: One thing that companies have learned through this is the value of focused efforts around supply chain resiliency itself. Most companies don’t have a core competency around supply chain resiliency, but from this, the lesson is going to be the value of having that capability in place. It becomes a core competency just like supply planning might be.

John Anderson: There is going to have to be a discussion or consideration on the costs and benefits, the trade-offs of some of these strategies. What does it mean to the overall price and margins for your product? It’s not free. If you dual source, there are a lot of impacts to your leveragability of your spending, with impacts on total costs and how you split that up. It’s not just about how we do this, but also how we maintain that impact and control as we put that resiliency in place.

Rafael Lander: The pandemic and this subsequent response highlight supply chain issues that are not even specific to pharmaceutical companies but also more generally. We’ve gone to a world where just-in-time is such an important aspect to supply chain management in most industries with very little flexibility built in. 

We’ve been able to afford that because of a better-integrated system that allows us to do supply and demand planning. It works well in normal times, but during the pandemic, some of those things broke. We built our systems for perfection, and when the world wasn’t perfect, they struggled to keep up. Companies across industries tried to enhance margins as aggressively as possible by driving supply chains to the nth degree of efficiency. What we learned is that they need to have a more balanced view of the supply chain but tempered with what consumers are willing to pay for goods and services.

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Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Crystal Yednak

Senior Manager, Health Research Institute, PwC US

Erin McCallister

Senior Manager, Health Research Institute, PwC US

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