Keeping Europe’s Medicines Stocked

Published on: 
Pharmaceutical Technology, Pharmaceutical Technology, March 2023, Volume 47, Issue 3

Technological advances will help ease pressure on pharma supply chains, allowing for greater visibility and less uncertainty.

The global pharmaceutical supply chain has been under unprecedented stress for a number of years, with events such as the COVID-19 pandemic and the war in Ukraine causing major disruptions, further heightened by surging winter sickness. Within Europe, region-wide measures have been put in place to try to mitigate issues arising from medicines shortages. For example, the European Commission has been stockpiling drugs and demanding that manufacturers guarantee supplies (1).

To find out more about the supply chain challenges impacting Europe, how companies can overcome associated difficulties, what potential trends might happen in the near future, and ways to future-proof supply chains, Pharmaceutical Technology Europe® spoke with Richard Ettl, CEO of SkyCell—a Swiss-based logistical solutions provider.

Current situation

PTE: Could you provide a brief overview of the current state of European pharmaceutical supply chains, highlighting any major issues causing difficulties for companies in the region?

Ettl (SkyCell): In Europe, countries such as Germany, France, and Italy are running short of even simple pharmaceutical products like antibiotics, painkillers, and antipyretics. This supply issue is something that developed countries have not experienced in the last few decades. As pharmaceutical products are usually produced at various different sites and locations to ensure a consistent supply, even if production at one site is interrupted, there is usually little to no effect to the consumer.

The root cause of current stock issues comes down to lean supply chains in good times getting into trouble very quickly when there are multiple sustained disruptions globally. The core disruption we are currently seeing is due to challenges in the production and logistics of products along the pharma value chain.

Prolonged lockdowns in countries like China and India that are largely responsible for the raw material supply of pharma products is now having a whiplash effect. Intermediary stocks meant that it took a while for severe disruption to appear, but as critical supplies have now fallen dangerously low in stock, a delayed effect from the COVID-19 pandemic is starting to be felt around the world.

Avoiding uncertainty

PTE: How can industry adapt to the evolution of the European pharma supply chain?

Ettl (SkyCell): Generally speaking, countries are becoming more accepting of superior margins and associated costs in the pharma industry to continue to fund the R&D of new drugs, and also of the costs required to ensure the continuous supply of pharma products. The recent stockouts are attracting the attention of regulators to investigate shortcomings in the system. Previously, there has been an overreliance on ‘fast and cheap’ when it comes to pharma production. Now, best-in-class pharma companies are focusing on reliability and resilience in the supply chain—if they can’t make a product or deliver a product on time, a patient is not served, and no sale is made.

However, pharma supply chains continue to grow even more complex as products are harder to make and require more stringent protection and transportation methods. And, at the same time, supply chains are becoming more unreliable.

Global businesses are entering what some are calling the ‘VUCA’ world—volatility, uncertainty, complexity, and ambiguity—a concept derived from the military and now being applied across many industries including pharma. Pharma companies are adjusting well after COVID-19, but the new normal is not yet what it was prior to the pandemic. The pharma industry is still not enjoying the high logistics reliability, low shipping costs, and high predictability of demand and supply from previous years.

Advertisement

The answer to uncertainty, however, is visibility and automation. Many problems in supply chains can be dealt with or even avoided with the right information—IoT [Internet of Things] provides visibility along the supply chain, in close to real time. Yet, information is only half the equation, action is what makes the difference. Some have reacted by building or contracting supply chain control towers, but the highest value can be gained by automating through software. People can scale to a certain degree but scaling by a factor of 100 is not possible with people in a short period of time and does not deliver on economies of scale. It is in these areas where companies should be placing greater attention.

Looking ahead

PTE: Are there any potential trends that will be impactful on the European pharma supply chain over the next five to 10 years?

Ettl (SkyCell): Looking ahead, new technologies or the evolution of technology will make the lives of supply chain teams easier, faster, and more cost efficient. Machine learning will help businesses that have automated their supply chains and can execute changes faster.

Sustainability will also become a key issue as most pharma companies are not focused on their CO2 footprint from scope 3 emissions. It is estimated that more than 80% of pharma companies’ CO2 footprint is in scope 3, which includes the delivery of its products to patients (2). If this is not being considered, then we are missing a huge amount of emissions that can make supply chains more sustainable and reduce the CO2 footprint of the pharma industry.

Today, 70% of pharmaceutical products are shipped internationally in one-way shipping solutions. These are incinerated or sent to landfill in the vast majority of cases. This has not gone unnoticed by governments and investors.

The early movers here are the European Union, and island countries in APAC [Asia-Pacific] such as Japan. Governments are working on landfill fees that will go to hundreds of euros which will make one-way solutions more expensive than reusable systems. This will drive up the quality of reusable solutions and fewer products will be lost along the supply chain.

Pharma companies are also issuing ‘green bonds’ where investors can expect the contribution of capital to improve the company’s sustainability. The cost to ‘go green’ is usually massively overestimated—or in simple words, lower than everyone thinks. The World Economic Forum has worked with the Boston Consulting Group and McKinsey to find what the costs are to go green for the consumer (3,4). They found that there would only be a 1–4% price increase for the average product. For pharma companies, our estimate around €0.6 or 3% increase on a €20 vaccine vial, or 0.01% of a cancer drug costing €12,000 per treatment.

Future proofing

PTE: What preparations should be made or put in place to ensure future readiness for any potential crises that may occur in the coming years?

Ettl (SkyCell): The next level is to combine visibility, automation, and simulation. At SkyCell, for example, this combination is called S+O [simulated and operational] data, when operational data—IoT, logistics milestones are overlaid with simulated data—where something is and should be. More importantly it is about what the risks will be, options and solutions going forward at that moment in time as real life is usually different from the planned version.

Imagine you are driving to see family in a different city and a tunnel is blocked by an accident, the earlier you have the information, the better the alternative plans that will be. On top of that, imagine a system that alerts you the evening before that there will be a lot of traffic and also adds a one-hour safety margin—this is simulation data.

By combining S+O data, supply chains can cope with disruption. Put simply, without effectively managing the supply chain, products would not reach patients.

References

1. Bounds, A. and Varvitsioti, E. EU Draws Up Plans to Stockpile Scarce Medicines. Financial Times, 12 Jan. 2023.
2. My Green Lab and Urgentem. The Carbon Impact of Biotech and Pharma: A Roadmap to 1.5 °C. Mygreenlab.org, October 2021.
3. World Economic Forum and Boston Consulting Group. Winning in Green Markets: Scaling Products for a Net Zero World. Weforum.org, Whitepaper, 12 Jan. 2023.
4. Broom, D. What’s the price of a green economy? An Extra $3.5 Trillion a Year. Weforum.org, 28 Jan. 2022.

About the author

Felicity Thomas is the European/senior editor for Pharmaceutical Technology Group.

Article details

Pharmaceutical Technology Europe
Vol. 35, No. 3
March 2023
Pages: 25–26

Citation

When referring to this article, please cite it as Thomas, F. Keeping Europe’s Medicines Stocked. Pharmaceutical Technology Europe 2023 35 (3) 25–26.