The biopharmaceutical industry is undergoing a striking transition. In developed markets, one-size-fits-all medicine is being replaced with higher-efficacy treatments for targeted populations. In emerging markets, a burgeoning middle class and larger public investments in healthcare infrastructure are resulting in rapid growth of the pharmaceutical sector. In some developed and emering markets, reimbursement lists favor domestically produced pharmaceuticals, making local manufacturing a requisite for market entry. Smaller target markets for each molecule; volatility in regulatory and political environment in emerging markets; and stronger payer influence in developed markets are resulting in more frequent changes in commercial decisions. All of these trends are stepping up pressure for speed, flexibility and reliability in the pharmaceutical supply chain.
To deal with rapidly changing market conditions and patient micro-markets, biopharmaceutical companies need highly flexible supply chains. Indeed, companies with flexible supply chains are beginning to exhibit a significant advantage over less flexible competitors, especially in high-margin product categories. Irrespective of any macroeconomic trends, speed to market will continue to be a key competitive advantage for the biopharmaceutical industry. Many studies have shown that a faster product launch, even by just a few months, can bring additional revenue of hundreds of millions of dollars. Speed-to-market depends not only on the clinical development process, but also on the ability to quickly transition the clinical supply chain into a commercial supply chain. In the past, supply chain flexibility and supply chain speed were often competing goals with complex tradeoffs (“cost = efficiency” was largely an afterthought). Speed-to-market implied designing a supply chain network with manufacturing centers of excellence for a particular class of compounds, where clinical supply platforms could be quickly commercialized. In the future, companies need to transcend the tradeoff between speed and flexibility and look for innovative ways to simultaneously achieve greater speed and more flexibility.
The good news is that new manufacturing technologies are now making this increasingly feasible. Modular, on-demand manufacturing technology, which has been in the making for many years, is now close to being used at a commercial scale. Pfizer, along with its partners, is implementing “portable, continuous, miniature and modular manufacturing” (PCMMM), which allows rapid deployment and faster transition from clinical to commercial manufacturing, as the same equipment can be used for both. These “pharma manufacturing pods” are designed for rapid changeovers and flexible batch sizes. The pods can be quickly deployed in warehouses and existing structures, creating immense flexibility in the supply chain network. Drug products can be manufactured on-demand in each country, alleviating the need for solving complex cost and lead time trade-offs in regional or global planning. This idea holds the promise of considerably transforming the pharmaceutical supply chain. Over time, shared multi-company ‘pod farms’ may emerge to leverage the benefits of co-location of small-size manufacturing facilities.
While manufacturing technology is progressing to allow faster speed-to-market and greater flexibility, companies must also learn to make supply chain decisions quickly and flexibly. A fast and flexible pharma supply chain also requires strategic leaders who know when to look outside the industry for best practices. Companies in other industries have successfully embedded speed and flexibility in their supply chains to achieve competitive advantage. For example, in the fashion industry, Zara has created a supply chain that can bring new styles to market more quickly, while at the same time using a network that can adapt to the changing cost economics and long-term demand shifts. Speed-to-market and flexibility are not just management fads; they are an opportunity for the pharma industry to fulfill its social contract of bringing innovative and higher efficacy treatments to the market quickly, while maintaining high service levels and affordable costs. In my view, the companies that imbibe speed and flexibility – in manufacturing technology, supply chain network design, and decision-making processes – will emerge as the long-term winners in our industry.
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