The supply chain
Globalisation will also have a profound impact on the pharmaceutical supply chain. As a growing amount of R&D migrates to Asia, the industry will have to manage resources that are much more widely dispersed.
Similarly, as the markets of the developing world get bigger, more affluent and better able to afford a wider range of medicines, and as greater mobility increases the potential for pandemics, it will have to build a supply chain that is much more globalised, scalable and secure.
Globalisation will almost certainly exacerbate the incidence of parallel trading and counterfeiting. About €4.2 billion ($5.7 billion) worth of medicines (at ex-factory prices) are already reimported every year in Europe alone. Counterfeiting is likewise on the rise; the FDA estimates that 10% of all medicines sold worldwide are counterfeit, and the problem is much worse in developing countries.
Over half the anti-malarial treatments sold in Africa are thought to be fakes. The geographical expansion of the supply chain will thus make it much more difficult to manage, as will several other changes already starting to take place.
The number of products companies make will increase, as they spread their bets and some of those bets start to pay off. The nature of the products they make will become more diverse, with the advent of combination therapies, diagnostics, biomarkers and treatments targeted at patients with specific disease subtypes.
And the technologies they use to manufacture some of these new therapies will become much more complex. Biologics are particularly hard to manufacture and transport, because they are more fragile than small molecules and more susceptible to impurities in the manufacturing process. But many of the new medicines reaching the market will also use novel delivery technologies like controlled-release implants and magnetically targeted carriers.
These technologies are far more complicated than the inhalants, transdermal patches and drug-coated stents that predominate today. So the manufacturing process will have to become much more flexible, with different manufacturing routes for different kinds of products. It will also have to become much more robust.
The FDA’s cGMPs for the 21st Century initiative calls for the design of effective and efficient manufacturing processes to assure product quality and performance; product specifications based on a mechanistic understanding of how different formulations and processes affect product performance; and continuous realtime assurance of quality.
Several US states have also passed product pedigree laws, and many others are contemplating such legislation. These laws will ultimately apply to every contractor in the worldwide supply chain, including active pharmaceutical ingredient manufacturers.
In short, Pharma will have to learn how to manufacture an increasingly diverse range of products in an increasingly challenging environment, drawing on resources that are much more geographically scattered –and it will have to do so just as manufacturing costs come under much greater pressure–.
The pharmaceutical supply chain is currently geared to the production of blockbusters for large populations. But, as these medicines come off patent, the economies of scale they generate will diminish. However, the industry is already suffering from overcapacity, with utilisation rates of less than 50% at some plants.
Many companies will therefore have to sell off their manufacturing assets or find new ways of exploiting them. So what will the manufacturing process of the future look like? We believe that, by 2020, some therapies will be “assembled to order” rather than “made to forecast”, using lean manufacturing techniques learned from the automotive sector.
New technologies will also play a much bigger role. Simulation and data analysis tools will accelerate the transfer from development to full-scale manufacturing. Process tomography and high-frequency camera systems will provide a better understanding of flow patterns. And integrated sensors will continuously monitor the performance and quality parameters of each manufacturing process on a real-time basis, thereby ensuring the quality of the medicines that are made and generating the data needed to optimise production.
However, since many pharmaceutical companies lack the skills required to manage turnkey operations and perform specialist manufacturing, they may decide to outsource most of their production to contract manufacturers.
That, in turn, will require much greater collaboration. Instead of treating such firms as “toll manufacturers”, they will need to treat them as strategic partners for the duration of the product lifecycle. They will also need to work closely with their customers, vendors and logistics service providers, to create supply chains that can be rapidly reconfigured as market conditions alter.
The distribution process will undergo equally major changes. The industry has traditionally relied on wholesalers to distribute its products, but the proliferation of inexpensive overnight courier services has made it feasible to ship medicines directly to pharmacies, thereby enabling many companies to reduce their inventory, control product “leakage” more effectively and lower their delivery costs.
The channels Pharma uses to reach the market are also beginning to fragment, as a growing number of companies fund the provision of support services tailored to the needs of patients taking specific therapies. In the US, for example, some firms now offer drug dispensing packages that include patient education, monitoring and counselling, drug administration training, nutritional advice, cognitiveand- motor-skill tracking and the like.
By 2020, most pharmaceutical companies will use this model not just for distributing speciality medicines but also for distributing an increasingly wide range of treatments for common diseases, and thereby creating a more intimate relationship with patients.
The role of the conventional “middle man” will thus decline, although some wholesalers may decide to expand their remit by providing support services. However, the supply chain will be responsible for commissioning those services and ensuring that they are delivered to standards that meet the manufacturer’s specifications –a transition that will ultimately enable it to become a means of revenue generation and competitive differentiation, rather than a cost-centre–.
The way in which medicines are dispensed will also evolve. Targeted treatments and other secondary-care medications will be dispatched directly to patients or their healthcare providers, while simple primary-care medications are dispensed electronically (see sidebar, Automated dispensing).
That, in turn, will reduce costs and release the retail pharmacists who previously dispensed such medicines to perform more value-adding activities such as patient counselling and monitoring. Moreover, all medicines will be tracked, using technologies like DNA labelling and “smart dust”.
Both technologies are still very immature, but they have potential applications in combating counterfeiting. DNA labelling could provide a way of fingerprinting proteins and identifying where they have been manufactured, if the problems with selecting a DNA fraction that does not affect a protein’s performance can be overcome. Smart dust –miniscule motes capable of finding and connecting with other motes, creating a network and communicating data across the network– could be used to track the position of all the products covered by any given network in real time, and transmit information about vibrations, temperature and light.
Sales and marketing
To accommodate a wider range of medicines and markets, the sales and marketing process will become more concentrated. Pharmaceutical companies will focus most of their efforts on the policy-makers and payers who increasingly determine which medicines are prescribed (see Figure 1). Moreover, some of these authorities will compare notes.
In September 2006, the European Commission launched the “Pharmaceutical Forum”, which aims, among other things, to share information on the relative effectiveness of comparable medicines and pricing and reimbursement. By 2020, a single pan- European agency could replace national bodies like NICE.
The stakes will get steadily higher, then, and the success with which pharmaceutical companies can make such “big ticket” sales will depend on their ability to differentiate their medicines from those of their rivals, demonstrate value for money and contribute to the overall improvement of human health. Many firms will therefore seek to enhance their offerings by funding the provision of services like compliance monitoring, home delivery and disease management.
These changes in the marketplace will gradually render the traditional model for selling medicines defunct. Pharmaceutical companies will replace their large sales teams with key account managers and specialist advisers capable of managing the tender process.
There will be far fewer sales people in markets that are currently saturated with sales staff, like the US –although growing demand will increase the need for key account managers and specialists in developing economies–. Some companies may even band together to sell “bundles” of medicines, including branded treatments, generics and OTC products, for specific patient segments.
So, for example, a bundle of medicines targeted at patients with CVD might include a statin, ACE inhibitor, diuretic, Omega 3 oil, anti-platelet drug and aspirin. The financial services industry already operates in this fashion, with “tied” financial advisers who can in certain circumstances market products from other providers.
But whether or not different pharmaceutical companies decide to join forces, the consolidation of the sales and marketing process should enable the industry to reduce its costs and redeploy the money it saves in further R&D or the provision of new value-adding services.
Patients will also play a bigger part in the sales and marketing equation, as they foot an increasing share of their own healthcare costs. The link between what they spend and the healthcare they receive will become progressively clearer, and some patients may be willing to pay more for health plans that offer them access to a wider range of therapies.
Figure 1.- Pharmaceutical companies will focus most of their marketing efforts on the policy-makers and payers who determine which medicines are prescribed.
Many pharmaceutical companies will therefore invest more effort in reaching patients, and the growing emphasis on promoting wellness rather than managing illness will provide them with new opportunities for doing so –opportunities that are seen as more palatable than direct-to-consumer advertising, which has generated some bad media coverage–.
Healthcare payers will increasingly reward patients with healthy habits and penalise those with unhealthy ones. Pharma can play a major role in helping patients by providing products and services that encourage healthy behaviour.
It can also offer support in the form of much better and more comprehensive product literature. With the de-skilling of many elements of primary care and the transfer of a growing number of medicines (some of them quite potent) to OTC status, patients will need clear, accurate and unbiased information about the treatments they take and how best to manage their conditions, if they have a chronic disease.