Page 21 - Linkline Yearbook 2018
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Pharma - Pure Supply Chain Gold Lies Ahead
Brendan Ryan takes us through the challenges and opportunities that exist in supply chain in the midst of the ongoing upheaval in the pharma industry.
Current market valuations put the pharma industry at over $1 trillion ($1,0004bn) with many of the bigger pharma companies with extensive manufacturing operations in Ireland. While the branded drugs sector remains strong, many expensive “Blockbuster” branded drugs have gone off patent. This ‘Patent Cliff’ has curtailed industry growth and the value of branded dollars in the market as more affordable Generic and Biosimilar drugs replace branded drugs that were priced initially to recover very expensive R&D start-up costs.
Generics have grown steadily to a value of $350bn and Biosimilars have grown to a value of $100bn. The Generics and Biosimilars markets are heavily promoted by governments with growing populations and “urbanisation” issues within the less affluent regions of the world to create more cost effective and reliable supply networks. South East Asia including China has emerged at the largest growth cluster. These strategies and market events are shaping the pharmaceutical industry, they eat away at patented drug share, shrink the brand dollars of leading drugs and reduce the overall market value.
Companies that fail to recognise the impact of these strategies and the need to adopt new business models will be left behind. It’s not a case of missing the train – it’s a case of time to build a robot! Regulatory requirements will continue to be enforced by the World Health Organisation (WHO), the US Federal Drug Administration (FDA) and international medicine boards and such standards cannot be used as an excuse to restrict industry specific innovation and growth. New “Pharmerging” markets have emerged, “Channel Push” is being replaced by “Customer Pull”, the “Smart Factory” with Automation and Big Data Analytics replacing
large batch multi-site manufacturing networks. Contract manufacturing continues to grow and will provide more cost-effective capacity but also knowledge and competence in development, commercialisation, production, lifecycle management and packaging. 3PLs are moving up the value chain, they are restructuring networks and they are bringing forward innovative solutions particularly around cold chain distribution and serialisation.
“Pharmerging” Markets and New Manufacturing Networks
The US, European and Japanese markets remain as the strong traditional global leading markets but their respective compound annual growth rate (CAGR) are between 2% - 4%. The key growth cluster, “Pharmerging” market in the world is South East Asia because of urbanisation, growing populations and the emergence of new and chronic diseases due to lifestyle changes. China is poised to be the world’s largest market by 2030 with a CAGR of 15%, while Vietnam, Indonesia and India show equally demanding CAGR growth patterns in the region of 10% - 13%. Interestingly over 60% of India’s pharma output comes from generic manufacturers
- Sun Pharma, Dr Reddy, Lupin and Ranbaxy are the companies leading this growth in India. These companies have ambitions to prosper in the lucrative North American market but quality issues and failure to meet FDA regulations is an ongoing issue.
Another “Pharmerging” market is South Africa. It’s wealthy middle class support branded drugs and contribute to its staggering compound annual growth rate (CAGR) of 22%. The South African government is encouraging local production of generic drugs to provide employment, to reduce costs and to support the HIV / Aids epidemic. The African region overall remains problematic from a supply and a drug counterfeiting perspective and in many cases top pharma multinationals have opted to supply the region from Regional DCs in Dubai as such mirroring the Singapore model for South East Asia. Other countries on the radar of the larger multinationals include the BRIC countries (Brazil, Russia, India and China) and the MINT countries (Mexico, Indonesia, Nigeria and Turkey)- the common theme being large populations with growing disposable incomes.
On Demand Customer Centric Delivery
Big Data analytics is helping the healthcare industry to predict demand more accurately and to optimise supply chains. Bayer AG uses predictive analytics to know when and where to ramp up production of its hay fever blockbuster drug “Claritin.” Roche have rolled out a self-administering device to allow patients to monitor blood levels at home. Results are passed online to doctors to allow them to
  The CharTered InsTITuTe of LogIsTICs & TransporT 21

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