The pharmaceutical industry has learned a lot of lessons since early 2020, but it doesn’t seem like those lessons are leading to changes – at least not fast enough – says Gary Hutchinson, President, Modality Solutions.
My colleague Ashley Barey and I recently sat down with Gary to discuss why it is taking so long for the pharma industry to change its supply chain model despite overwhelming proof the current model isn’t working. He did not hold back in pointing out some current process and technology deficiencies, nor did he refrain from offering what I feel are very practical recommendations on what the pharma industry (and all cold chain industries) should be doing differently going forward.
So, if you’re interested in learning about the good, bad and the ugly of today’s cold chain monitoring and quality control for temperature-sensitive drugs or you want to find out the “good, better and best” approaches to pharma supply chain management moving forward, read the excerpts from our discussion below. I included an audio clip from part of our conversation, as I felt it was important for you to actually hear what Gary has to say about the risks versus benefits of change. What he shared will either lead you to shake your head in amazement or nod in agreement (or maybe a little of both).
Mike: Gary, what do you see as the biggest challenges being faced by the pharmaceutical industry today?
Gary: As an industry, we were significantly unprepared for the supply chain disruption caused by the pandemic. We were used to a time-definite, on-demand logistics model for pharma. If you paid for one-day service, you got one-day service. If you paid for two-day service, you got two-day service. There was unlimited capacity in the air networks and the ground networks to deliver drug products – if you were willing to pay for premium freight. But that just doesn't exist anymore in any industry, including ours, and my concern is that once the global supply chain network sort of clears itself up, we’re at risk of the pharma supply chain being right back to where we are today.
Mike: Why do you say that?
Gary: I think everyone is suffering a hangover from COVID-19, and, as an industry, we have our collective heads in the sand. I don’t see a lot of new thinking about the supply chain post-pandemic. It’s almost as if everyone is just hoping this type of disruption doesn't happen again. Or they hope that, if it does, it'll sort itself out. Some people also feel that if something of this magnitude were to occur in the future, they will rely on a strong supply chain and logistics teams to figure it all out like they have before. And, in my opinion, that's just wishful thinking on everyone’s part. Our initial – and continued – unpreparedness is going to leave us dealing with at least another 18 months of side effects.
Mike: So, as the system starts to clear up 18+ months from now, do you think companies will revert to just-in-time inventory demand systems? Or do you think they’ll continue to put more inventory in cycle and accommodate for potentially longer transit times?
Gary: Well, let me challenge the premise of the question a bit because it assumes the inventory availability issues we’re experiencing today are due to a lack of inventory – that’s not necessarily the case. An inventory stock up won’t cure this ill because it won’t automatically guarantee that drugs are being stocked where they’re needed most.
The pharma industry is seeing more demand for advanced medicines, which includes time and temperature and environmentally-sensitive therapies. So, whether you have a year’s worth of inventory or a month’s worth of inventory in the warehouse doesn’t really matter if they aren’t shipping on time to the customer or the product isn’t arriving on time. And if the chain of custody – meaning quality control – isn’t being fully maintained, then does it really matter how much product you have to start with? You’ll end up having to dispose of it due to safety questions and concerns.
In other words, we need to focus on fixing the transport issue right now if we want to improve inventory availability and cure the ailing supply chain.
Mike: You make a very good point. The way medicine is changing, the focus doesn’t necessarily have to be on adding more inventory to the supply chain but rather moving available inventory more rapidly to the customer.
Gary: And it may not even be about more rapid movements, but rather “time-definite” movements. If you’re a distributor, healthcare provider or even patient downstream in the supply chain, and you know it's going to take two days for the drugs to arrive – and you can count on it being there in two days – you can plan for that. If it's one day, or even if it's five days, you can plan for that, right? The issue is when you plan for one day and it takes five days to arrive, or you plan for two days and it doesn’t get there until seven days later, you’re left in a bit of a panic.
Of course, a bad situation turns worse when you lose visibility into the location of the delayed shipment as it puts a level of stress on the organization and on the supply chain network that is hard to reduce. How are you supposed to get an order back on track – or communicate an updated status to a customer – when you don’t even know where it is and whether the product can be recovered and the order salvaged? It’s a tough position to be in, and a position that needs a solution - fast.
It wasn't very long into the pandemic when all the major integrated shipping operators in the world stopped their time-definite service. They would tell customers, “You can buy next-day service or pay for expedited air freight, but we know our on-time delivery rate is so low that we’re not going to guarantee on-time delivery anymore. So, buying next-day service is essentially just buying a priority position. It doesn't mean we're going to able to get it there next day or in two days.”
Mike: Do you think it has sunk in with pharma decision-makers that we may never get back to a time-definite delivery model? I only ask because one of Zebra’s independent software vendor (ISV) partners has noticed that pharma companies aren’t necessarily reacting or adapting to these shipping variances like they should – they aren’t adjusting their packaging, planning differently or changing their on-time delivery guarantee promises to customers.
Gary: I don't think the pharma industry is addressing shipping issues in a serious manner. Pharma companies are expecting somebody else to save them; they believe the integrated carriers or freight forwarders are going to solve this supply chain problem for the entire industry. And other than absorbing the shipping rate increases, pharma companies aren’t really doing anything meaningful to harden and improve their delivery networks. They’re basically just throwing money at the problem by absorbing the shipping rate increases, paying premium freight services to try to jump to the head of the line, and perhaps switching to better packaging or using different monitoring and quality control strategies to accommodate for the longer transit times.
But the industry is not addressing what I see as the root cause of inventory availability issues, which is the lack of a more pharma-specific or pharma-dedicated supply chain network system.
Mike: There are some 3PLs and other freight forwarders that do specialize in pharma. Is that where pharma customers should be looking if they want to address their distribution issues?
Gary: I think that’s a good start. However, I would guess that less than 5% of pharma freight is being moved via dedicated pharma networks today. The rest is being moved using a general cargo network, which is just using an overlay of specialized packaging, specialized handling, and specialized monitoring and controls. Though it works, it doesn’t address the root cause of the frequent shipment delays and drug availability issues we’re seeing. As long as pharma products are being mixed in with general cargo and fighting for priority with general cargo, we’re not going to get back to the expected on-time delivery performance that everyone wants.
Mike: Do you believe cargo carriers and freight forwarders would be willing to develop/support a dedicated pharmaceutical cold chain/supply chain network?
Gary: I don’t think the pharma industry has enough tonnage to move the needle with the general cargo providers and convince them to build a dedicated pharma network. The margins for pharma shipments have significantly improved in recent years. But, at the same time, as long as pharma companies are willing to pay a premium to get that priority position and maintain clean freight, is there really motivation for freight companies to overhaul their networks or add more dedicated pharma services? I don’t know.
Mike: In other words, unless the pharma industry builds its own shipping network and establishes the plot processes to create and sustain that time-definite logistics model once again, it’s going to be hard to put the right controls in place to mitigate the reliability issues we’re seeing today.
Gary: I think that’s where we are.
Mike: With that in mind, what advancements in technology do you think are going to most positively impact pharmaceutical logistics over the coming three to five years?
Gary: Well, I don’t think we’re seeing enough technology innovation occur in the pharma supply chain. In fact, I marvel at how rudimentary data logger technology remains to be and how it’s almost putting a stranglehold on pharma companies’ ability to do things differently.
Pharma companies have access to all this data about their shipments, but they aren’t using it – or not using it the way they should – because they are lacking predictive analytics capabilities.
Mike: With all the innovation that’s going on in other industries around machine learning/AI/neural networks, do you think there are systems out there today that can offer the pharma industry better predictive analytics capabilities?
Gary: Absolutely. All these AI/machine learning systems need only data to perform, and we know the monitoring controls industry is sitting on a treasure trove of data. So, rather than selling monitoring services, they could be selling predictive analytics services that would be so helpful in the type of dedicated pharma network we were just discussing.
If logistics managers and supply chain professionals can get some analytics and look at some predictive scenarios, then they can start making better shipping decisions in real time to minimize the risk of delays. It seems like the industry made the investments to achieve near 100% monitoring of product movements then just said, “okay, we’re good.” Companies haven’t done anything with that data other than report back to stakeholders what happened with each shipment. They aren’t seriously thinking about how to make tomorrow’s trip better based on the five years of data they have.
They should be saying, “I think I've got enough data here to have a pretty good idea what's going to happen tomorrow with some other independent variable inputs,” and they tell a logistics manager, “You can ship that package, but you’re going to put that package at risk because the chance of a time definite delivery is low.”
Mike: So, you’re saying pharma supply chain organizations should use product movement data similar to how airlines or others in the travel industry use their performance data to advise people about on-time arrival rates during flight selection.
Gary: Exactly. When you book a ticket, an airline rep might say, “You can book that ticket, but that first flight is late 40% of the time now, so you're never going to make your connection. I mean, I'll book the ticket if you want, but know it’s a risk.” They use predictive analytics to inform that customer’s decision.
Within the monitoring controls industry, I think it’s a missed opportunity if the available pharma shipment data isn’t being turned into actionable information. If we keep defining “monitoring” as “here is what happened” during past shipments and then make a go/no go decision or make some of product quality disposition based on that past data instead of actively thinking, “How do I avoid that past scenario in the future?” I don't think we’re ever going to change the game.
What’s it going to take to change the game? What value proposition is going to convince the entire pharma industry to innovate and invest in more advanced monitoring and quality control systems? Listen to Gary’s perspective as a pharma industry insider: