Pharmaceutical manufacturing seems to generate huge returns, even in these days of western governmental austerity. Manufacturers are under huge pressure to decrease prices yet their shareholders still want the stellar returns they have experienced over the last few years. ‘Emerging’ economies are developing an affluent middle class who have money to spend on life-improving pharmaceuticals. From these factors, you see two trends: manufacturing is moving away from high cost developed nations; finished products are being shipped to more international locations.
Freight forwarding, shipping, transportation, logistics – no matter what name you give it, it is still a high capital business with low returns: a lot of pain for a little gain! Logistics companies are looking for high margin traffic which is stable throughout the year.
In 2014, the overall market for pharmaceutical logistics was $72 billion and is predicted to rise to $94 billion by 2020 – a growth of 30 per cent. In 2000, around 245,000 TEU of pharmaceuticals were moved, in 2015 this became 567,000, a growth of 130 per cent.
Combine these elements and it is obvious that you should be chasing pharma companies to achieve high growth. If only it were as easy to do as it is to say!
Pharmaceuticals are governed by Good Distribution Practice (GDP) which is a set of ‘guidelines’ detailing how products must be transported. They are called guidelines but are strictly enforced through audit processes by national regulatory agencies, eg Medicines & Healthcare products Regulatory Agency (MHRA) in the UK. The guidelines place a significant barrier to entry for logistics service providers but the rewards are well worth the effort.
There is little point in adopting GDP processes without a Quality Management System (QMS) in place. It has been said that a QMS is the roof to a house built on the foundations of regulatory compliance. As a logistics provider, it is likely that you already have a QMS through ISO certification or a similar scheme. Whilst this may not satisfy GDP of itself, it means you are off to a good start.
Key to the transportation of pharmaceuticals is your personnel and their level of training. Enshrined in GDP is the concept of a Responsible Person (RP) who will ensure that you can demonstrate GDP compliance. You can train a current employee, employ directly your own RP or contract this service in. Training a current employee is likely to take the longest and this person would still have no experience in pharmaceutical logistics. Both employing a RP and contracting-in have different advantages so careful consideration should be given to this choice.
Training is a critical area of GDP and would include warehouse, driving and office personnel as well as some management. Logistics providers often separate their pharma department from the main operation since this clearly defines the cohort requiring training as well as giving them a tangible ‘product’ they can sell to potential customers.
GDP guidelines cover premises and equipment. The requirements might appear onerous at first but closer inspection reveals that they are similar to the needs of other governmental bodies such as HMRC and HSE. On this basis, it is likely that little work is needed to meet the standard. However, pharma companies may need temperature-controlled storage and/or distribution which is very expensive to build and operate. Initially, it is likely that you will seek to partner with domestic companies who can offer such infrastructure which can then be allied to your international forwarding capabilities to form a GDP-compliant service offering.
Key sections of GDP cover the outsourcing of activities – you may more commonly know this as sub-contracting. This can be done but there must be a contract in place between you and your sub-contractors. There must also be a GDP-compliant Quality Agreement (QA); this is a very technical area and you should engage your RP or a specialised pharmaceutical logistics consultant to achieve compliance. The alternative is to use the QA provided by the pharma manufacturer but this has two problems: their QA is likely to contain clauses which you would not want to agree to; not having your own QA is considered a deficiency by most pharma companies and demonstrates a potential lack of capability to move their product.
The physical transportation of pharma products has a chapter in the guidelines but these are straightforward to comply with. Main areas surround temperature control (where required) and general good practice such as cleanliness of vehicles and warehouses, systems to ensure the right products go to the right delivery location and systems to promote good handling. Additionally, security is covered but the level required would be met by any company which is part of a ‘known consignor’ regime or has AEO status.
Finally, medicines can be recalled for many reasons so a good quality tracking system is needed. Since this is becoming a normal, commercial requirement across industry verticals, it is likely that logistics companies already have one which would be sufficient for GDP.
Of course, an article like this can only scratch the surface of this complex subject but the transportation of pharmaceuticals can bring tremendous rewards so it is an area you should consider further.
About the author
Mark has over 25 years of logistics experience garnered at a variety of logistics service providers and product manufacturers; he is currently the Managing Director of Modalis which is a dynamic logistics consultancy specialising in pharmaceutical and temperature-controlled logistics.
His projects at Modalis have included helping a major pharmaceutical manufacturer to achieve GDP compliance, moving an electronics manufacturer to a new freight provider to save 40% on freight costs, migrating 2 distribution centres for a telecommunications company and successfully assisting various companies with their RFP/RFQ.
Prior to Modalis he was Global Freight and Compliance Manager at Actavis, one of the top, global, pharmaceutical manufacturers. He was responsible for all aspects of international logistics and was the subject matter expert for transportation, warehousing, Incoterms, Customs’ compliance, Good Distribution Practice and new product launches.
Amongst his many achievements were consolidation of the supply chain from over 200 transport providers down to just 2, the introduction of GDP compliance & temperature control to all shipments at no additional cost to the business and a 100% on time, in full, first to market success for all of Actavis’ new product launches.
Additionally, Mark is chair of the Oceanfreight Working Group which seeks to bring pharma manufacturers, shipping lines, port operators and freight forwarders together in order that they can understand each other’s needs and move more pharmaceuticals by oceanfreight.