The global pharmaceutical has witnessed significant growth in the last decade. At the end of 2020, the total global pharmaceutical market was valued at about 1.27 trillion US dollars. It has increased three-fold from 2001 when the market was valued at 390 billion US dollars
Pharma companies are now rearranging their operations and recovering from the COVID-19 impact. The market is likely to reach 1.7 trillion US dollars in 2025 at a CAGR of 8% from current levels.
Such robust growth was witnessed in India pharmaceutical Industry as well, as per IBEF India’s domestic pharmaceutical market is estimated at 42 billion US dollars in 2021 and likely to reach 65 billion US dollars in 2024 and further expand to reach 120 billion USD dollars by 2030.
India’s biotechnology industry comprising biopharmaceuticals, bio-services, bio-agriculture, bio-industry, and bioinformatics. The Indian biotechnology industry was valued at US$ 64 billion in 2019 and is expected to reach US$ 150 billion by 2025.
India’s drugs and pharmaceuticals exports stood at US$ 17.57 billion in FY21 (From December 2020 to April 2021).
Medicine spending in India is projected to grow 12% over the next five years.
CHALLENGES IN THE PHARMACEUTICAL SUPPLY CHAIN IN INDIA
Every business has challenges, but the challenges prevailing in the pharmaceutical Industry is extremely complicated. Pharma Industry is still relying on supply chain and manufacturing paradigms that have been around for many years. With various stakeholders involved and complex network design, it’s extremely difficult to align everything for an efficient supply chain.
If we analyze the cost distribution of a pharma product it roughly costs about 30% for the supply chain & distribution alone. Where in R&D and primary manufacturing costs only 25%. Therefore, the current supply chain and distribution cost is extremely high compared to other costs. And it is likely to go up further northwards due to the following factors
• FREIGHT COST
Post covid outbreak, freight costs across all modes of transport have gone up skyrocketing by 3-4-folds when compared to 2019 levels. And there is no reliability or consistency in prices as well as service providers like Airlines, Shipping lines, truckers do not give long term rate contracts anymore, and literally, freight rates keep changing on weekly basis. On one side the fuel costs are going up and on the other side, there is heavy equipment or inventory shortage which keeps destabilizing the supply chain plans and service providers are struggling to maintain the momentum.
Sea freight movements are extremely chaotic now and stressful due to various global issues like container shortage, backlogs in various ports, 2nd covid wave outbreak in key Asian ports, rerouting of shipping vessels, blank sailing, and avoidance of calling certain seaports is hitting the shipping movements terribly
The Airfreight movement is okay as most of the Airlines are surviving only on cargo revenue today as tourism post covid outbreak went for a toss. However, airfreight costs have gone up skyrocketing. For e.g., what used to cost INR 150 per kilo as airfreight cost to the USA per kilo in 2018-2019 has gone up to INR 450 per kilo now
Trucking costs have gone by 30-40% due to the increase in fuel cost. Combined with the shortage of drivers due to the covid outbreak has sent the trucking industry to an extreme difficult situation.
Overall, cost across all modes has gone up, and the situation is likely to continue for another 4-6 months period.
• TECHNOLOGY INVESTMENTS
Pharmaceutical companies must ensure precise on-time delivery, compliance, and stability. They must ensure the cargo will turn up on time in the right condition.
Managing perishable products, degradation of the medicines as they move along the supply chain, maintaining temperature control has a heavy cost attached to it.
Many pharma companies are moving to adopt newer technologies to the fullest potential and trying to integrate various processes. Transparency and visibility are going to be a key driving factor in the ensuing years for productivity and growth. The non-visibility of inventory causes serious threats of counterfeits, loss of sale, challenges to trace products, and cannot predict the demand scenario.
Pharma companies are forced to invest in new technologies to stay afloat in their business. Managing cold storage facilities is very resource-intensive and not budgetfriendly, some of the products must be stored at a very low temperature to ensure that the potency and formulation remain intact. This would need pharmaceutical supply chains equipped with specialized reefer containers for movement and the use of cold storage facilities for storage adds additional cost.
The task of bringing medicines to market is a race against time. Since the onset of the pandemic, the cold storage demand from pharma companies has increased, also flexible cold storage facilities are required now to meet the vaccine demands without any excess or wastage of vaccines. Unlike drugs, all vaccines need to be transported at cold temperatures between 2 and 8 degrees Celsius and many vaccines lose potency when exposed to higher temperatures.
Therefore, technology investment now is key to be successful and it also enables to be prepared for the future disruptions
COMPLIANCE & REGULATION - CHOOSING THE RIGHT SERVICE PROVIDER
It requires a strategic approach to tackle the logistics issues like prioritizing, monitoring, minimizing, and controlling logistics risks, and its imperative that pharma companies shift the logistics cost to “Supply Chain as a Service (ScaaS)”.
Due to increasing regulation and compliance requirements, the pharma industry is going through an enormous change and it needs a good service provider who can understand the pharma ecosystem. It requires a service provider who can respond to demand, provide multimodal options, cost-effective riskbased models, provide flexibility, visibility, and transparency.
The service provider with technical expertise, understanding of the regulation and compliance requirements is the need of the hour. Post pandemic, the traditional way of managing logistics is not going to be sufficient. Only an expert service provider can deliver the plans for the unexpected, reduces waste, cut costs, and can improve delivery times.
Good supply chain management can yield a 25-30% reduction in total supply chain costs. The traditional model is a highly fragmented model and is not going to help anymore as it will increase the cost further. Most global companies are now investing in an ecosystem internally to handle the complex requirements of pharmaceutical companies.
Pharma companies should have a holistic approach in identifying the service partner rather than comparing on a transactional basis.
An expert service provider who follows and deliver “Supply chain as a service” (ScaaS) offers companies end to end supply chain solutions & services from strategy to product delivery and in turn frees up the valuable company time to focus on customers and new product development and allows the company to focus on their core competence area.
Pharma companies that leverage the Supply chain as a service can quickly improve their commercial position by utilizing a lower and variable cost structure. Pharma companies can scale up their service that provides a competitive advantage in both the short and long term.
New software technologies, innovations, and digitization by the expert service providers help the pharma companies to meet their end-to-end operations, bridges the gap, and provides visibility and transparency with real-time information.
In the shorter run, choosing an expert service provider may cost more for the pharma companies but in the long run, it brings enormous value to the table and builds sustainability, and gives a competitive advantage for them.
