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Logistics – lifeline of pharmaceutical Industry

india pharmaceuticals industryToday, pharmaceutical, biotechnology and life sciences sectors have emerged as the new hot favorite with the service industry and logistics companies are rushing in to offer tailor-made solutions.

Logistics plays a vital role in the global economic cycle as it bridges the gap between the manufacturer and the retailer. It is the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to the point of consumption for conforming to customer requirements.

Logistics is a crucial part of the pharmaceutical industry as the activities are highly time sensitive. It is very critical for providing the right medicine to the right patient at the right time, place and dosage and most importantly at the right price. Since business is highly competitive today, success largely depends upon the efficiency of supply chain. Supply chain is very critical as it maintains the complex network relationship between the organizations (drug manufacturers), trading partners to source raw materials, delivery products, retailers and hospitals.

The Indian logistics and transport industry has huge potential growth prospects for local and foreign operators alike. Indian logistics industry is expected to reach a market size of over $125 billion in year 2010. According to Datamonitor, outsourced logistics is slated to grow at a compound annual growth rate (CAGR) of over 16% from 2007-10.

The lifeblood of the pharmaceutical industry is new product innovation and delivery. The Industry focuses on R&D efforts to develop the product and gain approval that the supply-chain management activities related to making the product available to providers and patients can seem an afterthought. Pharmaceutical products need temperature-controlled storage and distribution. The industry has given importance to logistics by focusing on supply chain and logistic level activities such as delivering the product to the end-customer at the right time, right place, in a secure mode and at a competitive operational cost.

The most important supply chain factors in pharmaceutical industry are inventory reduction and reduction of order cycle time. This is because, operational performance could be directly linked to logistics costs, while inventory reduction and the demand to decrease order cycle time are related to just-in-time deliveries and supply chain speed.

There has been a paradigm shift in the supply chain process of Indian pharmaceutical industry. Value added tax, consolidation of pharmaceutical companies and emergence of pharmaceutical retail chains are some the factors that are driving the changes in the distribution cycle.

A report by Ernst & Young entitled, Indian Pharmaceutical Distribution, reveals, “With the introduction of VAT in most of the states, the squeeze on domestic margins and increasing government pressure to contain retail drug prices, the reform in the Indian pharmaceutical supply chain is imminent”.

The market size of Indian pharmaceutical logistics was $ 199.5 million in 2006 and the industry has been growing at an average annual growth rate of four percent since 2002. In 2006, it registered a growth rate of 5.1% over the previous year. From the cost composition point of view, the major logistics costs in the pharmaceutical industry include packaging, distribution, etc. Hence, logistics comprises 45-55% percent of the costs in the pharmaceutical value chain. The logistics industry, led by UPS, FedEx, DHL and TNT Express, seems to be eyeing clinical research organizations with tailor-made solutions.

Major challenge is to integrate with international businesses. Another problem is transportation and infrastructure, in terms of roads, rail, ports, warehouses, and others are woefully inadequate to support the country’s manufacturing growth. With India emerging as retailer’s goldmine providing further impetus, logistics providers see a great opportunity to enter the market. Logistics providers address specific problem areas like

• securing the supply chain from counterfeit drugs,

• protection from contamination, etc are cool chain temperature monitors,

• specialized packaging, barcode scanners,

• data loggers for temperature control,

• temperature alarms (hooters) to monitor variations in the temperature,

• relative humidity indicators (RH) Temperature Mapping for the storage area before storing critical and temperature sensitive products (vaccines)

The time required to obtain regulatory approval has a direct impact on the shipment of medication. Regulatory authorities in many countries do not have the opportunity to increase their internal resources to cope with the growing demand for clinical trials. Government regulations are stringent and often create a problem due to its documentation process. There is a problem when it comes to export license and permit. Moreover, this varies from country to country. There are too many changes, too often, which create confusion.

In India, the Drug Regulatory authorities still do not have a process of accessing logistics norms. Due to the absence of logistics regulatory standards and stringent norms, many of the pharma manufacturers prefer sending drugs through conventional transporters and truckers. In addition, management of expired stock destruction returns management is another time consuming and other important tasks. This is where logistic providers offer value added services. Custom regulation is also complex and is strictly adhered to by customs staff.

In case of clinical trial logistics, there are other major concerns. Primarily, the people who handle these drugs are least aware of its effectiveness and impact that it could have if not ‘handled with care’. There is a large number of untrained staff who have little knowledge of the product. They may get confused with the packaging material. For example, using packaging for infectious samples with non-infectious specimens. There is lack of knowledge of the study sites. The transportation of medicines is subject to regulation, making the process more painful.

Healthcare logistics segment is highly specialized and extremely diverse with their own share of problems and challenges. The current logistics scenario in the healthcare segment to an extent is still primitive. The pharma retail segment is a very promising and upcoming segment. The opportunities from the logistics perspective are very high as most of the pharmacy retail players are approaching the third party logistics service providers to provide them with effective logistics solutions for the smooth functioning of the back-end operations.