Pharma logistics: Tender but intensive care
The world’s healthcare requirements are changing and healthcare regulators are setting new global standards for every stakeholder in the supply chain to ensure the integrity of pharmaceutical goods in transit. From complying with Good Distribution Practices (GDP) to adherence of temperature control processes carriers, airports and handlers are treating pharma products like patients, no more as packages.
For the global pharmaceutical industry, transporting medicines and vaccines to where they are needed is a delicate process. Many drugs, particularly life-saving vaccines, need to be used quickly and transported in a strict temperature-controlled environment. In fact, over $250-billion worth of temperature-sensitive medicine is sold each year. According to a recent report by the global advisory and consultancy firm Seabury Group, only 0.5 million tonnes of pharmaceutical products are transported by air every year as against 3.5 million tonnes by sea. But the value of this air freight is around $213 billion as against the $56 billion value of sea freight. And according to the report, this is increasing by six percent year on year. Aviation is often the only choice to deliver these supplies where they are needed. The World Health Organisation (WHO) estimates that over 20 million children are under-vaccinated and remain at risk of being infected by vaccine-preventable diseases, but by 2015, some 4-5 million child deaths a year will be prevented by immunisation programmes. As new vaccines (for example, against dengue and malaria) become available and underutilised vaccines (for example, those against cholera, human papillomavirus, rabies, rotavirus, rubella and typhoid) are administered more widely, supply and logistics systems – already burdened – will face an even greater need for innovations. Cargo airlines and logistics companies continue to invest heavily in temperature-controlled air-freight depots at airports so these life-saving vaccines and medicines can be transported swiftly to the point of greatest need. Therefore, the pharmaceuticals industry is facing an era of transformation, from the supply chain to the distribution channel. The complexity and sensitivity of this commodity’s supply chain demand that there is a stringent regulatory environment and regulatory norms are implemented with precision and accuracy. These demands also compel businesses to rethink their supply chains and IT strategies and develop more collaborative models that enable them to be more agile, flexible and compliant. Recently, the IATA welcomed the decision of Brussels Airport to become the first European hub for pharmaceutical freight using IATA’s global certification programme for shipping cold-chain pharmaceuticals. The IATA Center of Excellence for Independent Validators (CEIV Pharma) is a standardized global certification programme that trains and conducts onsite assessments to provide the expertise needed adequately to transport cold-chain pharmaceutical products across the world. Since the programme goes beyond the Good Distribution Practices (GDP) covering air transport requirements, it is particularly attractive to forward-looking stakeholders who value the extra confidence this certification brings to their pharmaceutical clients. The pharmaceutical industry has relied heavily on the airline industry for its speed and efficiency in transporting high-value, time- and temperature-sensitive cargo. However, until this year, there were no global certification standards that could be internationally recognized and implemented. The global pharmaceutical industry would spend $8.36 billion on cold chain logistics by the end of 2014 and is expected to expand to more than $10 billion by 2018. “Brussels Airport is aiming to strengthen its position as a leading gateway for the handling and transportation of pharmaceutical freight in Europe,” said Steven Polmans, head of cargo, Brussels Airport. “We hope that our leadership in being recognized as a CEIV Pharma certified community will persuade other airports to do the same. It is important that cold-chain pharmaceutical products can be transported in a standardised, sanitary and secure way throughout the world,” added Polmans. An environment of increasing risks, complex regulations and continuing cost pressures is impeding healthcare executives from moving quickly to seize untapped industry opportunities. This is the finding of the 7th annual UPS “Pain in the (Supply) Chain” survey. Globally, healthcare executives are planning for strategic partnerships and technology investment to mitigate risks and capitalise on growth opportunities. “The most significant factors contributing to uncertainty in the healthcare supply chain are more stringent regulations and increased product protection challenges,” said the survey report. For the third consecutive year, regulatory compliance is the top supply chain pain point. “Companies that embrace new technologies and transformative supply chain strategies to mitigate risks will be more likely to capitalize on new growth opportunities in the healthcare marketplace of tomorrow,” said John Menna, VP, global healthcare strategy, UPS. “It’s a very exciting time to be a part of the healthcare industry, which is both changing and growing quickly. Global trends like changing demographics, increased access to healthcare and rising regulatory complexity are all impacting the healthcare industry,” added Melanie Alavi, director, global healthcare strategy, UPS. “We have made available multiple warehouses with direct tarmac access, and their occupants have successfully gone on to achieve GDP certification. Through the pharma logistics steering group which we founded, and following a number of round tables and the staging of a pharma logistics conference in India in partnership with STAT Times, we have created awareness among individual stakeholders at Schiphol of the need to work within the GDP guidelines, and obtained their commitment to do so. We persuaded a carrier to introduce new freighter services providing much-needed dedicated capacity into Europe via Schiphol, and we have also worked hard to foster the growth of pharma trade between India and the Americas, using Schiphol as a transhipment hub,” said Bart Pouwels of Amsterdam Airport Schiphol Cargo. Talking about the volume of pharma products handled in a year by American Airlines Cargo (AA Cargo) and the growth seen Tom Grubb, manager, Cold Chain Strategy at AA Cargo said since its implementation in 2009, the ExpediteTC programme of AA Cargo has grown dramatically in terms of both Active and Passive volumes. “As is the case with the global market overall, our cold chain volumes are an estimated 80 percent Passive, 20 percent Active which has been relatively consistent since programme implementation. Our business in this vertical doubled year on year for the first four years and growth continues at an extremely healthy pace. ExpediteTC is expected to outpace growth of all other of American’s cargo products,” said Grubb. With regulations in place shippers too are demanding high standards when it comes to their goods transportation. “Shippers require airlines to have tested and efficient processes in place to handle their shipments, they expect you to have a quality department as well as specially trained and highly qualified staff, you must be able to offer temperature-controlled facilities at origin and destination, you are to maintain a recording data archive, they want short transit times and expect you to monitor and track the temperature of their shipments. Broadly speaking, they expect you to be able to ensure and demonstrate at all times ( as per SOP ) to maintain the indicated temperature range as per booking once the goods are handed over to you,” said Stavros Evangelakakis, who is the Cargolux product manager specialized in pharmaceutical and healthcare products. Technology solutions provider Envirotainer has been scaling up their product innovation and network around the world to cater to the growing demand for cold chain containers from carriers. They have 48 global leasing contracts at present. Out of which 31 are airlines; and 17 are freight forwarders and integrators. “Our total fleet size is 4,200+ containers – almost 10 times the number of any of our competitors, last time I checked with my sources,” said Camille Madelon, strategy and business development director, Envirotainer. And according to Madelon, the growth in demand now is seen around 10 percent. We observe that pharmaceutical companies have increasingly complex global supply chains. API and key production steps can be done in countries such as India and China. Other steps of production and packaging are done in the west, mainly US and Europe. And what more, the patients that require these drugs are all over the world, US, Europe but also increasingly BRICS countries where the burden of disease is increasing. “We see more complex trade lanes being built and also together with that, more need for security. Security has become number one topic for APAC supply chain managers,” said Madelon. Mark Whitehead, Chief Executive Officer, HACTL is expecting around 10 percent annual growth in pharma traffic by enabling Hactl's customers to be more pharma-competitive. “However, our projected growth is mostly reliant on the marketing activities of our airline customers and overall market conditions,” clarified Whitehead. As for the demand from shippers, Navot Hirschhorn, logistics and temperature controlled product manager at Cal Cargo said their clients demand a temperature controlled corridor from point of origin to point of destination including not only the flight, but pickup from producer through ground transportation, handling, storage and delivery. “We cover every critical point in the supply chain including tarmac, loading and unloading,” he added. Going through some of the recent capacity and capability enhancements by different stakeholders to comply with global best practices when it comes to pharma transportation it is very evident that the height of priority and interest this particular commodity has for air cargo. Emirates SkyCargo has launched an internally developed and cost effective LD3 container that keeps temperature sensitive cargo cool when transported on the ground and in the air. Called the “White Container”, it’s the latest addition to Emirates SkyCargo’s Cool Chain portfolio, and has been designed specifically as an intermediate temperature control solution which is ideal for generic healthcare products and food perishables. “After two years of intensive research and development by our team, we are introducing a new cool chain offering to the air freight market. The White Container is an affordable option and does not replace Emirates SkyCargo’s high-end Cool Chain Premium solution. Instead it offers an intermediate solution that is cost effective for commodities, such as generic healthcare products and food perishables. It’s also environmentally friendly and meets all regulatory requirements,” said Moaza Al Falahi, Emirates vice president cargo product development and local affairs. Starting this month, United Cargo is pleased to introduce a new second option for customers shipping temperature-sensitive cargo via their Passive TempControl service. EZ Passive is designed to provide what many of our customers have asked for: the ability to book and ship Passive TempControl immediately without waiting for a customised set of processes to be approved. AA Cargo has constructed a 25,000-sq ft pharmaceuticals hub in Philadelphia. It is designed to cater for a full range of temperature-sensitive products being shipped in and out of the strategically important north-east ‘pharma corridor’ and includes a 6,000-sq ft area for Controlled Room Temperature (CRT) passive shipments managed at +15°C and +25°C, along with sections for maintaining +2°C to +8°C and -10°C to -20°C consignments. For Liege Airport which carries the tagline “The Flexport” when it comes to pharma they live by their claim offering flexible and right solutions on one single platform. Accurate and fast handling of very valuable and sensible shipments is in Liege Airports’ DNA. Pharma shippers nowadays are in direct dialogue with airports and airlines about their flows and about their service level expectations. Luxair Cargo, strategically located at Luxembour airport has created new dedicated infrastructure for pharma handling. Luxair Cargo’s new certification will enhance the Luxembourg logistics platform and its dedicated pharmaceutical centre. AirBridgeCargo Airlines (ABC) opened a new Basel freighter service targeting pharma business. The transportation options for Basel’s thriving healthcare industry will be extended with the launch of a Boeing 747 freighter service by ABC. IAG Cargo and Exelsius, the international Cold Chain Management Consultancy, have recently announced their partnership to provide the Healthcare and Life Science industry with a unique and certificated training workshop in GDP. In a joint statement, Alan Dorling, global head, pharmaceuticals & life sciences, IAG Cargo and Tony Wright, CEO, Exelsius said: “IAG Cargo, through its Constant Climate service, is one of the world’s leading airline carriers of pharmaceutical and life science products and has invested heavily in facilities, processes and systems to meet GDP requirements.” In India, Menzies Aviation Bobba, operating the cargo terminal at Kempegowda International Airport, Bengaluru, has opened an exclusive Pharma Cold Zone recently for the handling of pharma products. Bangalore is emerging as an important pharmaceutical hub in south India. Looking at the potential in pharma export from India there are several investment by global carriers in terms of infrastructure enhancements and capacity addition. In fact some of the global carriers like IAG Cargo and United Cargo have recently added additional capacity to Indian destinations like Hyderabad, Delhi, Mumbai and Chennai. United Cargo expanded its service for temperature-sensitive shipments by adding two cities in India -- Delhi and Mumbai -- to its worldwide TempControl network. TempControl service is now available for both import and export shipments in Delhi, and is available for import shipments only into Mumbai. “IAG Cargo has significant interest in India because of the huge potential we see there in pharma export. And we are very serious of our investments in building up capabilities and additional capacities. Additional capacities to Chennai and Hyderabad is an example of our commitment to Indian operations,” said Steve Gunning, CEO, IAG Cargo. India will join the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with the total value reaching USD 50 billion by then, according to a report by PricewaterhouseCoopers The country's population is growing rapidly, as is its economy - creating a large middle-class that can to afford western medicines, consultancy firm PwC's report said. “It is a well known story about the opportunity in healthcare and life science that exists in the country (India) the volume of generic drugs that moves out and the number of international companies who are going on investing here either through M&A or putting new plants or opening new centres here,” said Samar Nath, CEO, DHL Global Forwarding. “DHL recently introduced a new standard for air freight of pharma products called Thermonet. The company will open close to 60 centres around the world which would allow clients visibility of their shipments in transit up to 17 touch points. Five of these centres are already operation in India. “Those who have the right network, trained personnel and the required infrastructure to service the demands of pharma shippers only can be the leaders in this segment,” added Nath. What is demonstrated in this changing environment of pharma logistics is companies that embrace new technologies and transformative supply chain strategies to mitigate risks will be more likely to capitalize on new growth opportunities in the healthcare marketplace of future.