5 Unique Logistics Challenges for Specialty Pharmaceuticals

By Arnold Maltz

Many of our clients are innovator companies developing novel treatments that are often complex and extremely high value. As a result, they face similar supply chain challenges in preparing for commercialization. Often, these specialty products are also orphan and rare disease treatments, as well as extremely low volume. The supply chains for these emerging biopharma companies have different dynamics and present unique challenges from traditional low-value, high-volume pharmaceutical supply chains.

Several factors add to the complexity of planning and managing these specialty and rare disease therapies:

• The inventory value for such “premium” products shifts traditional cost/service curves and safety stock strategies. It also increases the importance of excellent planning.
• They are generally lifesaving or critical care treatments for unmet medical needs, which dramatically increases the “cost” of a stock-out beyond simply the financial implications.
• The treatments themselves are so innovative that the materials and processes required can be highly specialized and often single sourced. Frequently, they are fragile molecules or biologic compounds requiring strict environmental controls throughout the supply chain.
• The expiry/shelf life can be very short, which raises the risk of expired high value materials.
• The lifesaving and quality-of-life impact of these treatments increases patient risk if supply fails.

How to Address the Challenges of Specialty Pharmaceuticals

Having previously worked at both a global life sciences company and Converge Consulting, which supports many emerging biotech companies, I’d like to share my perspective on five unique challenges facing this segment of the biopharmaceutical market, along with some recommendations:

Challenges of Specialty Pharmaceuticals

High-level of virtualization. Many emerging life sciences companies operate fully virtual supply chains where manufacturing anything in-house beyond lab scale prototypes is impractical. With major production and logistics activities externalized, these networks involve much more movement and complexity than other industries. They also demand very proactive management.

Our Recommendations

• Understand the logistics and supply implications of your virtual supply network(s), including lead times, packaging, border crossings and product integrity.
• Include transportation costs and risks in determining internal and external operations.
• Utilize a structured supplier relationship management program with formalized KPIs to maximize benefits from your external partners.

Challenges of Specialty Pharmaceuticals

Unique cost-quality tradeoffs. For many such lifesaving and critical care therapies, “costs” reach much further than the typical financial impacts. The impact of logistics and supply chain performance on patient health and safety often outweighs the financial cost.

Our Recommendations

• Consider the intangible costs to patient health and safety in cost-quality decision making. Ensure risks are aggressively managed.
• Invest in reliable supply and transportation services and partnerships. They are essential to maintaining a high-quality patient experience.
• Avoid compromising service levels and reliability on the basis of cost.

Challenges of Specialty Pharmaceuticals

‍Limited availability of key resources and capabilities. Due to the highly specialized logistical requirements for these products, alternative sources for testing, shipping, and delivery are scarce. Often, we see our clients settle for inconvenient partnerships from an operational standpoint, creating fragmented and idiosyncratic supply chains and impacting performance expectations. It is common to see supply chains differ significantly by product, region, or country.

Our Recommendations

• Build your capabilities to manage a complex network of logistics providers, 3PLs, and other supply chain partners.
• Continually evaluate risks in your supply chain, particularly due to sole-sourcing; Ensure risk management strategies evolve with your operations and lifecycle.
• Begin early to establish and maintain a strong Global Trade Compliance program across your network.

Challenges of Specialty Pharmaceuticals

‍Organizational culture often neglects operations early in the product lifecycle. Emerging companies tend to overlook operational considerations in favor of research, product development, and commercial planning. It is challenging to advocate for logistics considerations early in the product and process development cycles. “No seat at the table” leads to complexity in supply networks and logistics requirements.

Our Recommendations

• Raise awareness early about the importance of operations and logistics considerations in setting product and process specifications.
• Educate and train the organization in the benefits and potential costs, penalties and broader risks associated with logistics complexity.
• Develop strategies to leverage available tools and mechanisms (FTZs, TIBs, Duty Drawbacks) appropriately as the program progresses.

Challenges of Specialty Pharmaceuticals

Quality is ubiquitous. While ISO is the quality standard in other more established industries, logistics for biopharmaceuticals is included in GMP requirements. The stakes in terms of patient health and safety are high. GMP compliance necessitates substantial overhead dedicated to establishing, maintaining, and enhancing operating procedures.

Our Recommendations

• Collaborate closely with Quality Assurance and Quality Control leaders to ensure quality is integrated into the operations design, planning, and execution.
• Plan for the resources and effort needed to reevaluate policies and procedures periodically to ensure alignment and compliance of your quality management system with changes to your logistics and supply network.

Concluding Thoughts

Understanding the unique logistical challenges facing specialty biopharmaceutical products is an essential step toward addressing them and building an agile, efficient, and compliant supply chain. Since external partners often play a significant role, establishing a structured relationship based on KPIs can maximize their benefit. Additionally, to ensure a consistently positive patient experience and outcome, investing in high quality and reliable transportation partners, aligned with your Quality and risk management strategies, is crucial for these lifesaving/life-changing treatments.

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