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Pharma supply chain management, a crucial process

Dr Mital N. Patel Arya Masurkar & Prachi Kothari
Thursday, November 24, 2022, 08:00 Hrs  [IST]

The term Pharma Supply Chain refers to a strongly interconnected network of services and facilities which aids in the manufacturing and making available prescription medicines or medicines in general to patients. It is an extremely complex network having a wide range of stakeholders involved, including manufacturers, distributors and pharmacy benefit managers.

Pharma supply chain management is a very crucial process since improper distribution of medication negatively impacts the company’s reputation and credibility as well as customer satisfaction and loyalty. An efficient supply chain is very important for a pharma company in terms of cost and asset management. It can help to reduce the costs and increase customer service level.

The pharma industry is one of the busiest sectors and has millions of shipments daily. Keeping this in mind, the industry will have to balance out the increase in the number of raw materials and finished product costs along with a lack of qualified professionals. Hence it is essential that the pharma supply chain leaders consider innovative and advanced methods for  procurement and operations management, so that they can maintain their competitive position in the global market. By handling the demand and supply in a much more nimble way, pharmaceutical companies can effectively create and deliver value and address long-term sustainability challenges.

Working and flow of material in pharma supply chain
The flow of material in the supply chain of a typical pharma company includes raw material sourcing, manufacturing, distribution and dispensing logistics and dispensing. Raw material sourcing involves obtaining active pharmaceutical ingredients and excipients from various suppliers. The vendor supplies raw materials essential for the manufacturing process to the manufacturer. Manufacturing includes the manufacturing of raw materials, finished products and packaging in the plant.

When we talk about product pricing, future competition, marketing cost and wholesale acquisition cost, it should be noted that manufacturers have the most influence over the above mentioned terminologies. Next in line comes the Site of origin, where the manufacturing of pharmaceuticals is carried out. After manufacturing and packaging, the finished products are shipped to wholesale distributors. Distribution logistics involve a carrying or forwarding agent which sells the product to a stockist, also known as primary selling.

The stockist sells the same product to big retailers, hospitals, clinics or chain pharmacies directly or via 3rd party distributors, also known as secondary selling. The end users, that are the patients, are the final recipient of the chain. Selling products from the stockist to the patients is known as tertiary selling. This structure is mostly common with only a few minor modifications from company tocompany.

Pharma supply chain can be broken down into two parts. One being the raw material supply chain and the other one being the finished product supply chain. It is common for pharma companies to source their raw material from multiple suppliers as the finished product is processed from various different ingredients.

Hence the raw material supply chain plays a significant role in the overall dynamic of the pharma supply chain. As some of the raw materials can be sold as finished products themselves, this supply chain has end users at an intermediary level as well. Finished goods supply chains are the backbone of a good pharma organisation. It is logistic intensive with end users being hospitals or retail pharmacies. Clearing and forwarding agents make the operations most effective as the product volume in this industry is low.

Challenges faced in pharma supply chain
Keeping up with the growing competition due to the rapid development of new products and faster technological advances has become a huge challenge in the pharma industry. Poor supply chain visibility decreases the traceability of the products. This leads to the possibility of drug shortages, low quality compliance, drug counterfeiting, etc. Hence the traceability of the product pipeline should be at par to avoid such instances. Counterfeiting is very common in the pharmaceutical supply chain.Counterfeiters usually target the markets where the ability to detect defective products is quite low.

They target those areas where the penalty for engaging in counterfeiting is very less and there is no strict police checking. Hence the companies that have their supply chains at global level are at a higher risk and must take necessary actions. Keeping medicines that require a low storage temperature as they are heat sensitive in a cold environment while shipping is another challenge that pharmaceutical companies face especially due to an increase in the need of such products. Such companies need to adopt cold chain shipping to deal with the degradation and contamination issue.

Healthcare providers andGovernment have been putting pressure on the pharma companies to lower their product prices. Other logistical issues in delivering the product, changes in the demand pattern, inability to plan lead-times and shortage of labour also adds on as challenges faced by the pharma supply chain.

Future trends in pharma supply chain industry
Due to the rise in technology, healthcare on-demand is growing very sharply as many online providers are offering on-demand distribution services. During the pandemic, availing healthcare services at home like online pharmacies, remote monitoring and point of care diagnostics have gained popularity and are still rising because of its elevated accessibility and convenient treatment possibilities.

Hence, on-demand delivery is a trend that is expected to grow further in 2022 and beyond. Packaging automation is the smart manufacturing of the entire packaging process. The machines should be smart enough to deliver real-time diagnostic information with simple integration and quick data processing. Improving the packaging process will reduce consumer risks by reducing product labelling errors.

Plus, automation in the pharmaceutical process will save both money and time making it cost effective. It also prevents threats and boosts productivity with operational flexibility.

In a post pandemic world where people require faster innovative technologies, warehouses are implementing artificial intelligence so pharmaceutical companies won’t face a labour shortage which also reduces the dependency on the human workforce. End to end data traceability will enable the experts to make better decisions when it comes to delivering medicines to the patients in time.

Artificial intelligence also helps to have a better control on the supplier risks. Over the past decade, the pharma industry has been improvising its supply chain management and strengthening the network. Nevertheless, it continues to face the problem of efficient product tracking. This has proved to be a huge loss for the pharma companies because of the entry of counterfeit drugs in the market. Blockchain technology has helped provide an efficient solution to this threat.

It helps in detecting counterfeit and low standard drugs which may not help the patients to fight the disease but may have various life-threatening side effects. According to a report released by the World Health Organization, every 10th drug consumed by a patient is a counterfeit drug. Hence, blockchain technology comes into picture. It has the full capacity to track and handle the supply chain process at every step starting from production and ending at delivery of drugs.

(DrPatel isassistant professor, SPPSPTM, NMIMS Deemed to be University; Masurkar and Kothari also belongs to the University)


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