Navigating the Complex Landscape of the Life Sciences Supply Chain: A Comprehensive White Paper

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Authors: Alexander Haas, Lucas Brach, Marius Eschenbacher (SAP - Business Transformation Services)

This research paper provides a comprehensive exploration of the complex Life Sciences supply chain.

1 Introduction

Like the intricate pathways of life that scientists decode, the Life Sciences supply chain is a complex and fascinating network that forms the backbone of our healthcare system. This paper aims to offer a thorough understanding of the interplay between Life Sciences and supply chains. Our journey commences with a basic introduction to the core principles of both supply chains and Life Sciences, paving the way for a more detailed examination of this compelling subject matter.

The Life Sciences sector encompasses a broad range of entities that focus on the innovation, production, and distribution of a variety of products aimed at enhancing the quality of life for living organisms. This includes pharmaceuticals, biotechnology, medical devices and other related fields.

As mentioned, pharmaceuticals are a crucial segment of the Life Sciences industry, which encompasses the development and distribution of therapeutic drugs aimed at treating and managing or preventing illnesses. Enterprises may manufacture either generic or branded medications.[4]

Contract research organizations (CROs) or contract manufacturing organizations (CMOs), also known as Contract Development and Manufacturing Organizations (CDMOs), are vital to the Life Sciences industry. They provide support to pharmaceutical, biotech, and medical device companies in researching, testing, refining, manufacturing, and marketing drugs, drug products, and medical devices. The CRO market was valued at $35.1 billion in 2018 and is projected to reach $50.7 billion by 2025. Leading CROs like Covance, Parexel, and IQVIA are expanding their capabilities and global reach, making the CRO marketplace increasingly competitive.[5]

Now, after delving into the realm of Life Sciences, it's time to shift our focus to the supply chain - the vital network that bridges the gap from raw materials to the delivery of pharmaceutical products.

A supply chain represents the entire journey of a product or service, from the moment a customer places an order to the point of delivery and payment. This journey encapsulates the planning, execution, and monitoring of all activities linked to the movement of materials and information, starting from the procurement of raw materials to the ultimate delivery of the product to the customer.

In essence, a supply chain is a multi-tiered network of connections between various companies. These connections extend both upstream and downstream, involving different stages of value creation, from raw material extraction, through various stages of refinement, all the way to the end consumer.

In today's globalized world, supply chains have evolved into highly complex systems. This complexity is driven by factors such as internationalization, increased throughput rates, and shifts in global consumption patterns.

The supply chain can be broken down into three main stages:

1. Procurement: This stage pertains to the sourcing and delivery of raw materials required for product manufacturing.


2. Production: This stage involves the transformation of raw materials into finished products.


3. Distribution: This stage encompasses all activities that ensure the product reaches its final destination, facilitated by a network of distributors, warehouses, physical stores, or online platforms (in the case of e-commerce businesses).

The term "value chain" is often used interchangeably with "supply chain," as it highlights the idea that products increase in value as they undergo various stages of processing and refinement.[6]

 

2 Structure of the Life Sciences Industry

2.1 Key sectors

The Life Sciences industry is separated in different key sectors, which are different regarding their structure.

 

2.1.1 Pharmaceuticals

The pharmaceutical industry is a sector that discovers, develops, produces, and markets drugs or pharmaceutical drugs for use as medications. It is one of the major pillars of the healthcare system, providing treatments for diseases, preventive vaccines, and medications that improve the quality of life for individuals with chronic diseases.

This industry is heavily regulated, with stringent guidelines and protocols to ensure the safety, efficacy, and quality of the drugs.[7] Furthermore, the pharmaceutical market is characterized by high research and development (R&D) costs, long development timelines, and various stages of clinical trials, all of which a potential drug must pass before it receives approval from regulatory bodies like the U.S. Food and Drug Administration (FDA) or the European Medicines Agency (EMA).[8]

The pharmaceutical industry operates in a market that is largely dependent on patents and exclusivity rights. This provides a temporary monopoly for new, innovative drugs, allowing companies to recoup R&D costs and make a profit. Once these patents expire, generic manufacturers enter the market, which typically leads to significantly lower prices for the drug.

The pharmaceutical industry is part of the broader Life Sciences industry because it applies biological science to develop medications that improve health outcomes.

The biggest players in the pharmaceutical industry are Pfizer, Roche, AbbVie, Novartis and Johnson & Johnson among others.[9]

In summary, the pharmaceutical industry is a critical component of the Life Sciences, driving innovations in medicine that lead to better patient outcomes.

 

2.1.2 Biotechnology

The biotechnology industry represents a multidisciplinary field that leverages biological processes to create commercially viable products. The industry is characterized by its application in various sectors, including medical and agricultural domains. The medical biotechnology sector is primarily concerned with the drug discovery pipeline, which involves identifying genes or proteins associated with specific diseases that can serve as drug targets or diagnostic markers. This process involves extensive research, chemical screening, optimization, toxicity checks, and clinical trials. The agricultural biotechnology sector employs similar techniques to enhance agricultural and food products. The advent of genetically modified crops has revolutionized this sector, with bioengineered crops like corn, soybeans, and cotton becoming increasingly prevalent.[10]

The biotechnology industry is often characterized by its interdisciplinary nature, with teams comprising chemists, molecular biologists, statisticians, engineers, and clinicians. The ability to work flexibly and communicate effectively is highly valued within this industry. Despite misconceptions, industry scientists can publish their work, provided intellectual property is protected. While the industry does offer better remuneration than academia, it can also be more volatile in terms of job security.[11]

The industry is also differentiated by the size of the companies, with large companies typically having more resources and hiring people with a wide range of skills. In contrast, smaller companies often seek specific skill sets to complement their teams and may require additional flexibility from their employees.⁵

 

2.1.3 Medical Devices (Medical Technology)

The medical device industry, often referred to as medtech, is a complex and multifaceted sector that plays a crucial role in the healthcare system and therefore is part of the Life Sciences industry. This industry is primarily composed of companies that develop, manufacture, and distribute a wide array of technologies, devices, equipment, diagnostic tests, and health information systems. These products and services are instrumental in transforming healthcare through earlier disease detection, less invasive procedures, and more effective treatments.[12]

The U.S. is the largest medical device market in the world, accounting for over 40% of the global medtech market.⁶ The industry is characterized by a high level of innovation, with companies consistently developing cutting-edge technologies that allow for significant advancements in medical care. This innovation is driven by over 6,500 medtech companies in the U.S., most of which are small- and medium-sized enterprises.¹²

The products developed by the medical device industry range from advanced technologies used by medical professionals, such as nanotechnology, state-of-the-art imaging, and genetic testing, to everyday items used by consumers, such as bandages, thermometers, and catheters.12

The industry is further divided into subsectors, including surgical and medical instruments, surgical appliances and supplies, dental equipment and supplies, and electronic instrument manufacturing. Each subsector contributes to the overall industry in unique ways, from the production of surgical gloves and artificial joints to the development of advanced imaging equipment and diagnostic tests.¹³

In conclusion, the medical device industry is a vital component of the healthcare system and the economy. It is characterized by a high level of innovation and a diverse range of products that improve patient care and contribute to economic growth.[13]

 

3 Stakeholders

3.1 OEM & generic producers

In the pharmaceutical industry, both Original Equipment Manufacturers (OEMs) and generic producers play significant roles in drug production and supply. OEMs are companies that hold patents for drugs and are responsible for their manufacturing. On the other hand, generic producers are companies that produce bioequivalent versions of drugs once the patent protection period of the OEM expires.¹⁴

Generic producers play a crucial role in promoting competition and improving accessibility to medications. When the patent of a drug held by an OEM expires, generic producers can enter the market and manufacture equivalent versions of the drug. These generic drugs contain the same active ingredients, have the same dosage form, strength, route of administration and intended use as the original branded drug.¹⁴

Generic producers benefit from the research and development efforts invested by OEMs. They can rely on the clinical trial data and scientific knowledge that have already been established for the original drug. This allows them to bypass the extensive and costly research and development phase, resulting in cost savings. Consequently, generic drugs are often more affordable than their brand-name counterparts, making healthcare more accessible and reducing healthcare costs for patients and healthcare systems.

Regulatory authorities have stringent requirements for generic drugs to ensure their safety, efficacy and quality. Generic producers must demonstrate bioequivalence to the original drug through rigorous testing and regulatory submissions.[14] This process involves comparing the generic drug's pharmacokinetic profile to that of the original drug to ensure similar absorption, distribution, metabolism and elimination characteristics.

 

3.2 Suppliers

The global supply chain for Life Sciences is a complex and multifaceted entity, with significant roles played by a number of countries and companies. However, a significant portion of the active pharmaceutical ingredients (APIs), which are crucial for drug manufacturing, comes from China. By 2020, China accounted for the bulk of exports of certain APIs and now plays an indispensable role especially in the supply chain for antibiotics and vitamins. During the COVID-19 pandemic, the global pharmaceutical supply chain experienced disruptions due to its dependence on a few suppliers in China, for many key APIs​. Even if the APIs are produced outside China, most of the time the production relies on raw materials from China.^[15] Despite the fact that China plays a key role in the API market, India is also one of the biggest suppliers, but they heavily depend on China regarding to raw materials.[16]

Especially Europe depend on the exports of China’s APIs, with a trade value of 9.5 billion USD.[17] During COVID these supply chains got interrupted heavily, therefore regulatory authorities will act to shrink the reliance on China’s APIs and raw materials. This topic and the consequences for the supply chain will be discussed in chapter 3.3.2.

 

3.3 Regulatory Authorities

3.3.1 The Drug Development Process (FDA)

In the following the drug development process, according to the FDA, will be explained. The European Medicines Agency (EMA) process is largely the same.

“When a drug comes to the market, almost 15 years have passed since the start of the R&D phase, usually also the patent application initiation. This shows the long and costly process a new drug is incurring over the R&D – clinical – drug registration phase, where the timely involvement of Regulatory Affairs experts can prevent unnecessary delays in the development and registration process and will contribute to a timely approval and start of commercialization of the medicinal product.”[18]

Regulatory Affairs (RA) plays a pivotal role in the pharmaceutical industry, spanning from drug development to commercialization. RA teams provide crucial expertise and guidance throughout the product lifecycle, ensuring compliance, safety and efficacy. They navigate the complex regulatory landscape, manage submissions for marketing authorization and handle post-approval changes. The involvement of RA from clinical trials to commercialization is essential for timely approvals and successful product launches. Involving regulatory experts at every stage is key to achieving the development and commercialization goals of pharmaceutical products.

The process of bringing a new drug to market is complex. Here is a brief overview of the process governed by the U.S. Food and Drug Administration.

1. Discovery and Development: Research for a new drug begins in the laboratory. Drugs are often discovered from natural sources such as plants, animals and microorganisms. They can also be developed in a laboratory using a variety of methods. [19]


2. Preclinical Research: Before testing a drug on people, researchers must conduct lab and animal tests to determine whether it is likely to be safe and work well in humans. There are two types of preclinical research: in vitro (test tube or cell culture) and in vivo (animal).[20]


3. Clinical Research: This research is done in three phases using human volunteers. Phase 1 focuses on safety, Phase 2 expands the study to a larger group of people to confirm effectiveness, monitor side effects and compare the drug to commonly used treatments.[21]


4. FDA Review: If the results of the clinical trials are positive, the company submits a New Drug Application (NDA) to the FDA, which includes all the data from the trials. The FDA then reviews the data and decides whether to approve the drug.[22]


5. FDA Post-Market Safety Monitoring: After a drug is approved and, on the market, the FDA continues to monitor its safety in the public and can take action to withdraw a drug or to add warnings if new, serious risks are discovered.[23]

 

3.3.2 Governmental Regulations

Despite the importance and complexity of RA, governmental regulations play an extremely important role as well. They influence the supply chains much more than the RA.

In the wake of the COVID-19 pandemic, governments and regulators worldwide have recognized the criticality of securing pharmaceutical supply chains to ensure patients' access to essential medications.

EY analyzed different policies and their impact on supply chains.[24] Tier 1 policies are policies which are likely and have a big impact on the supply chain. Tier 2 policies are less likely but would also have a big impact on the supply chain.

The following Tier 1 policies were analyzed:

1. Government incentivized supply chain diversification: Governments implement measures to encourage diversification of pharmaceutical supply chains, reducing dependence on a single source or region. This policy aims to enhance supply chain resilience and migrate risks associated with disruptions.


2. Export quotas: Governments impose limitations on the quantity of pharmaceutical products that can be exported. Export quotas ensure the availability of essential medications within domestic markets, potentially impacting global supply chains and trade dynamics.


3. R&D credits and incentives: Government offer financial incentives, tax credits and grant to encourage research and development (R&D) activities in the pharmaceutical industry. These measures aim to foster local development and manufacturing capabilities, promoting self-sufficiency and reducing reliance on imports.


4. Tariff shifts: Governments revise import tariffs on pharmaceutical products, either increasing or decreasing them. Tariff shifts can influence the competitiveness of domestic and international suppliers, affecting supply chain dynamics and pricing structures.


5. Government procurement: Governments actively participate in the procurement of pharmaceutical products to ensure the availability of essential medications for public healthcare systems. This policy can impact supply chain operations, including sourcing strategies and contract negotiations.


6. Restrictions on market access and investment: Governments impose regulations and restrictions on foreign companies’ market access and investment in the pharmaceutical sector. These policies aim to safeguard national interests, promote domestic industries and regulate market competition.

Tier 2 policies:

1. Direct funding of local projects: Governments decide to fund local projects to reduce their reliance on foreign supplies. This is a policy which is related to localization.


2. Government-mandated distributions and other value-added activities: Government-mandated distributions and value-added activities such as vaccine diplomacy play a crucial role in the Life Sciences industry and they can influence the function of the healthcare supply chain.

Pharmaceutical supply chains are subject to various tier 1 and tier 2 policies that significantly impact their operations and resilience. It is crucial for pharmaceutical companies to navigate these policies effectively, ensuring a robust supply chain that can adapt to evolving regulatory landscapes. By understanding and proactively responding to these policies, stakeholders can contribute to the stability, availability and accessibility of essential medications for patients worldwide.

 

3.3.3 Standards-setting organizations

Standards-setting organizations provide an essential guidance for government bodies. They can’t enforce regulations, but they define standards and guidelines which can be used to establish industry best practices. The most important organizations among others are explained in the following chapters.

 

3.3.3.1 Parenteral Drug Association (PDA)

The PDA is a global organization that provides scientific, technological, and regulatory information to the pharmaceutical and biopharmaceutical community. It develops technical reports, conducts audits, and offers training to ensure that Life Sciences companies adhere to the highest standards of quality and safety.[25]

 

3.3.3.2 International Air Transport Association (IATA)

The IATA, on the other hand, regulates the air transportation of biological materials, including pharmaceuticals. It ensures these materials are transported safely and efficiently, adhering to international standards. It provides guidelines for packaging, labeling, and handling, and conducts training programs for personnel involved in the transport of these materials. Especially the temperature of the products is important, that’s why the IATA defined Temperature Control Regulations.[26]

Overall, the IATA is important for logistics & distribution inside the Life Sciences Supply Chain.

 

3.3.3.3 Pharmacopeia

Pharmacopeia sets the standards for pharmaceuticals and other healthcare products. Pharmacopeias such as the United States Pharmacopeia (USP), the European Pharmacopoeia (EP), and the British Pharmacopoeia (BP) provide guidelines for the testing and quality control of drugs and therapeutics.

 

3.3.3.4 International Organization for Standardization (ISO)

Additional standards are provided by the ISO which is an independent, non-governmental international organization that develops standards to ensure the quality, safety and efficiency of products, services and systems.[27]

 

3.4 Sales Structure

In the field of Life Sciences, especially the pharmaceutical industry, the sales structure primarily relies on wholesalers as key stakeholders. Wholesalers play a crucial role in the distribution and supply chain of pharmaceutical products, medical devices and other healthcare-related items. They act as intermediaries between manufacturers or suppliers and various customers within the industry, including hospitals, pharmacies, clinics and other healthcare institutions.^[28]

Wholesalers are responsible for purchasing products in large quantities from manufacturers and then distributing them to retailers or directly to end customers. They ensure the efficient movement of goods, handle logistics and manage inventory to meet the demand of healthcare providers and ultimately patients.[29] Wholesalers often have established networks and infrastructure to handle storage, transportation and delivery of healthcare products, ensuring their availability across different regions.

One of the primary advantages of the wholesaler-based sales structure in the Life Sciences industry is the consolidation of product sourcing and distribution. Wholesalers streamline the procurement process by offering a wide range of products from multiple manufacturers, providing convenience and efficiency for healthcare providers in sourcing their required items from a single supplier.^[30] Moreover, wholesalers often negotiate pricing agreements and volume discounts with manufacturers, allowing for cost savings and competitive pricing for healthcare institutions.^[31]

But in the medical technology (medtech) sector, which is part of the Life Sciences industry, the sales structure is primarily based on sales reps. Despite that the purchasing method is changing towards more digital self-service.

The adoption of an omnichannel sales structure in the medtech industry is gaining relevance due to the growing preference of healthcare professionals for digital self-service over traditional purchasing methods.

Furthermore, healthcare professionals are increasingly seeking more efficient and streamlined procurement processes. Traditional methods of purchasing medtech products, such as visiting physical stores, relying on sales representatives, or going through lengthy procurement procedures, are often perceived as time-consuming and cumbersome. The omnichannel sales structure offers a solution by providing digital self-service options that enable healthcare professionals to access a wide range of products, compare features, check availability and place orders with ease.

The COVID-19 pandemic has further accelerated the need for digital self-service in the medtech industry. The restrictions on in-person interactions and the emphasis on remote work have highlighted the importance of having robust online channels for product research, purchasing and support.¹⁰

The implementation of an omnichannel sales structure in the medtech industry involves leveraging various digital channels, such as e-commerce platforms, mobile applications and online marketplaces to provide a seamless and consistent customer experience. These channels allow healthcare professionals to browse product catalogs, access detailed product information, compare options and make informed purchasing decisions at their own pace.

 

3.5 Focal Companies

“About 92 percent of prescription drugs in the United States are distributed through wholesalers, with three — AmerisourceBergen, Cardinal Health and McKesson Corporation — accounting for more than 90 percent of wholesale drug distribution in the United States.”⁴

Focal companies, acting as wholesalers within the Life Sciences supply chain, hold a pivotal position due to their ability to provide crucial data to both upstream and downstream stakeholders. As key intermediaries between manufacturers or suppliers and various entities within the industry, such as pharmacies and healthcare providers, these wholesalers possess valuable insights into market dynamics, product availability and customer demand.

Wholesalers are uniquely positioned in addition to their logistical relevance to gather and analyze data related to pharmaceuticals and medical supplies. They have access to comprehensive information regarding purchasing patterns, stock levels and product performance. By leveraging this data, wholesalers can offer valuable market intelligence to upstream stakeholders, enabling pharmacies and healthcare providers to make informed decisions regarding inventory management, product selection and patient care. This data is highly relevant for all stakeholders of the Life Sciences supply chain.

Furthermore, Wholesalers manage large inventories of products from different OEMs. This allows healthcare providers to access many different products from one single source. This simplifies the procurement process for healthcare providers and the OEMs gain lots of insights, which was already mentioned above.

It’s important to note that the roles and responsibilities of wholesalers and OEMs depend on various factors. Wholesalers are focal companies in the downstream supply chain of OEMs, because of the volume handling, central position and their market knowledge.

Overall, wholesalers act as focal companies in the Life Sciences supply chain due to their unique position as data providers and their distribution. While OEMs play a crucial role in the supply chain, they are not considered the focal companies because their primary focus is on manufacturing and production, rather than on coordination of the downstream activities.

 

4 Main Processes and specific requirements

The SCOR (Supply Chain Operations Reference) model is a process framework that provides a comprehensive and standardized approach for managing and optimizing supply chain operations.[33] It was developed by the Supply Chain Council (now part of APICS[34]) and is widely used across various industries, including the Life Sciences industry.

In the context of the Life Sciences industry, the SCOR model helps organizations streamline and improve their supply chain processes, from the procurement of raw materials to the delivery of finished products to customers. It provides a framework for understanding and optimizing the key processes involved in the Life Sciences supply chain.

The SCOR model consists of five major process categories:

1. Plan: This stage encompasses tasks associated with the planning of demand and supply, resource allocation and the scheduling of production. Within the Life Sciences sector, the intricate and time-sensitive nature of activities such as pharmaceutical development, manufacturing and distribution necessitates meticulous planning.


2. Source: Procurement-related tasks, including supplier selection, contract administration, and the management of supplier relationships, are integral to this stage. Securing a consistent source of superior quality raw materials, components, and equipment in the Life Sciences industry is vital to uphold product standards and meet regulatory guidelines.


3. Make: This stage involves tasks related to the production process. In the Life Sciences sector, this includes activities such as compounding, blending, filling, packaging, labeling and quality assurance. Compliance with stringent quality benchmarks and regulatory guidelines is paramount at this stage.


4. Deliver: The stage encompasses activities linked to order fulfillment, warehousing, transportation, and distribution. Ensuring a precise and timely product delivery to satisfy patient needs, regulatory timelines, and market demands, all while maintaining product integrity crucial in the Life Sciences industry.


5. Return: This stage deals with reverse logistics processes, including the return, recall and disposal of products. In the Life Sciences sector, the efficient and compliant management of product recalls and returns are of high importance for ensuring patient safety and meeting regulatory requirements.

Building upon our foundational comprehension of the SCOR model and its applicability in elucidating and enhancing supply chain processes within the Life Sciences sector, we proceed to conduct a more comprehensive exploration of each of the five stages. This will include a particular emphasis on the unique characteristics and considerations inherent to the Life Sciences industry.

 

4.1 Plan

As previously mentioned, this first stage in the SCOR model focusses on balancing the demand and supply to ensure optimal business performance and avoiding unnecessary cost. This stage can be further divided into different subtasks which will be covered in the following.

The planning process begins with demand planning, a phase that involves the projection of product and service demand. Given the inherent complexity and variability of this sector, this process can pose significant challenges, potentially necessitating the use of advanced forecasting methodologies and tools to accurately ascertain demand.[35]

Upon the completion of the demand forecast, the formulation of a production plan is undertaken. Within the purview of the Life Sciences sector, this plan is necessitated to cater to the distinct requirements intrinsic to product manufacturing, such as adherence to regulatory standards from the FDA which was mentioned previously.[36]

The next phase, inventory planning, involves determining the optimal inventory levels for raw materials, work-in-process and finished goods.

Subsequently, the planning process moves into the supply chain planning phase. This encompasses the planning of the entire supply chain, including supplier selection, transportation route determination and warehouse location planning. The Life Sciences sector presents unique challenges in this regard, as many products require specialized transportation, rapid delivery times and storage conditions which will be covered later.[37]

Finally, the plan is regularly reviewed and adjusted in the review and adjustment phase. This is particularly crucial in the Life Sciences sector, where conditions can change rapidly due to changing regulatory requirements or technological advancements. Consequently, coming up with a risk mitigation plan is crucial as well.[38]

4.2 Source

The process of supplier selection in this industry extends beyond the conventional parameters of cost, reliability and capacity. It necessitates a thorough evaluation of potential suppliers' adherence to stringent quality standards and regulatory requirements, particularly those supplying raw materials and components to produce pharmaceuticals, medical devices and other Life Sciences products.[39]^,[40]

Contract management in this context often requires the inclusion of specific clauses pertaining to quality assurance, regulatory compliance and risk management. Suppliers may be obligated to comply with Good Manufacturing Practices (GMP), maintain certain certifications, or submit to regular audits, ensuring the integrity of the products and processes.[41] GMP covers all aspects of production from the starting materials, premises and equipment to the training and personal hygiene of staff. Compliance also extends to environmental and occupational safety regulations.[42]

The management of supplier relationships is a critical aspect within the Life Sciences industry. It involves regular communication, collaboration on product development or process improvement initiatives and joint risk management efforts. Given the crucial role of suppliers in ensuring product quality and regulatory compliance, these relationships transcend transactional interactions and are more akin to strategic partnerships.[43]

Furthermore, the Life Sciences industry often grapples with ethical considerations in sourcing. These may include ensuring the ethical treatment of animals used in research or avoiding suppliers that exploit workers.[44]

Risk management strategies may include diversifying the supplier base, implementing robust quality control processes, formulating strict contracts and developing contingency plans for potential disruptions.

 

4.3 Make

The manufacturing processes in the Life Sciences sector, whether it involves the formulation of pharmaceuticals, the assembly of medical devices, or the cultivation of biological materials, are often complex. These processes demand meticulous planning and execution to ensure the quality, safety and efficacy of the products. This often necessitates the use of specialized equipment, skilled personnel and controlled environments.[45]

Quality control is a critical component of the "Make" phase in the Life Sciences sector. This involves stringent testing of the final product and quality checks at various stages of the manufacturing process. Activities to guarantee compliance include record-keeping, reporting, inspections, as well as the validation of manufacturing processes and equipment to ensure consistent product quality. All of these must adhere to industry-specific regulations such as Good Manufacturing Practices (GMP)[46] or Good Laboratory Practice (GLP). The latter is a set of principles intended to assure the quality and integrity of non-clinical laboratory studies that are intended to support research or marketing permits for products regulated by government agencies.[47]

But the regulatory framework in the Life Sciences industry is constantly evolving and becoming more competitive. It's crucial to maintain a focus on continuous improvement alongside regulatory compliance. Quality Assurance (QA) and Quality Control (QC) are both indispensable for compliant manufacturing in this industry. However, incorporating both within a robust, data-driven Quality Management System (QMS) allows for comprehensive quality management across the entire product value chain.[48] A popular standard for a Quality Management System used to design and manufacture of Medical Devices is provided by the ISO 13485 norm.

Lastly, the "Make" phase in the Life Sciences sector often involves ethical considerations. These may include the humane treatment of animals in research or the responsible disposal of waste. These considerations must be integrated into manufacturing processes and policies.[50]

Risk management is also integral to the "Make" phase and may include process controls, equipment maintenance, supplier diversification and contingency planning.[52]

 

4.4 Deliver

The process of order fulfillment and warehousing within the Life Sciences sector often necessitates specialized packaging, light levels, traceability and handling procedures. For instance, pharmaceuticals, biological materials and medical devices often demand temperature-controlled packaging and transportation. The distribution of products in the Life Sciences industry often involves multiple channels. These can include direct sales to healthcare providers, sales through distributors, or sales to patients through pharmacies or online platforms. Each distribution channel may have its own requirements and challenges.

In general, temperature-controlled logistics refers to the complex process of storage, preservation and transportation of cargo that is sensitive to specific temperature conditions.

Given the serious implications of improperly stored drugs, regulatory requirements in this sector have become stringent. Pharmaceutical companies need to demonstrate that their products have been transported through a temperature-controlled supply chain. Specific emphasis is placed on "cold-chain" products such as e.g. vaccines or special chemicals which require storage between 2ºC and 8ºC. These conditions must be maintained by all parties involved, including the manufacturer, shipper and wholesaler.[53]

The storage and transport conditions, including the acceptable temperature and humidity range, the margin of error for temperature fluctuations and the acceptable level of risk, are usually defined by the manufacturer. Additionally, the cold storage system should be selected considering several factors such as the temperature range and volume of the medicine, backup temperature controls, the layout of the storage unit and airflow, external temperature logging and data tracking, cargo placement and the volume of the medicinal product.

Temperature-controlled logistics involves a range of critical touchpoints and potential risks. These include preparing the product for transport, transportation to the shipper location, minimizing the amount of time the drugs spend at ambient temperatures, careful physical loading and ensuring proper handling during transit. Companies operating within this field must comply with the latest rules and standards from various international regulatory bodies, such as previously mentioned.[54]

The key types of temperature-controlled logistics involve the use of refrigerated vehicles, passive shipping containers and active shipping systems. Air freight is currently the most preferred mode of temperature-controlled transport, primarily due to its speed and capacity to bypass geographical challenges. However, rising costs have led to increased interest in sea freight as a viable alternative. Presently, 20% of pharmaceutical payloads are moved via ocean freight, but this is projected to increase to 75% over the next decade.

While sea freight provides a more controlled environment, less risk, easier monitoring and fewer temperature excursions, air freight remains crucial for responding to emergencies and transporting high-demand or high-value pharmaceutical products promptly. Despite the narrowing gap between air and sea transportation due to tightening regulatory rules and the increase of temperature-sensitive medicines in the market, both forms of transportation will continue to be important in the pharmaceutical logistics landscape.[55]

 

4.5 Return

The "Return" stage of the SCOR model, when contextualized within the Life Sciences industry, necessitates a specialized approach due to the rigorous regulatory landscape, the intricate nature of the products and the paramount importance of safeguarding patient health.

 

Managing product returns in this sector is a complex operation that goes beyond simple logistics. It demands careful orchestration and strict compliance with regulatory standards. Returned items, whether pharmaceuticals, medical devices, or other healthcare products, must be handled in a way that ensures their safety and integrity. This may require specific procedures for receipt, inspection and storage of returned products, as well as detailed record-keeping to ensure traceability.

Product recalls represent another crucial element of the "Return" stage in the Life Sciences sector. Given the potential impact on patient safety, recalls must be executed swiftly and efficiently. This involves identifying the scope of the recall, liaising with customers and regulatory authorities, retrieving the affected products and implementing corrective measures. The multifaceted nature of these operations often necessitates the use of advanced tracking systems and coordinated efforts across multiple departments and stakeholders.

Product disposal is another significant aspect of the "Return" stage. In the Life Sciences industry, many products are classified as hazardous waste and must be disposed of in line with specific regulations. This may involve specialized waste handling and disposal procedures, as well as reporting and record-keeping requirements.

 

In conclusion it is evident, that traceability is crucial in today’s Life Sciences supply chains and as of today manufacturers seem to handle downstream traceability (from manufacturer to actual customer) pretty good. However, compared to other industries, Life Sciences have less traceability to the origins of raw materials. Therefore, it is time for the Life Sciences to adopt upstream traceability to ensure that supply chains are resilient and can adapt to ever-changing needs.[56]

Technology has played a pivotal role in improving batch traceability in the Life Sciences supply chain. In particular, blockchain technology has helped to enhance transparency and visibility across the entire supply chain. By implementing blockchain, Life Sciences companies can resolve critical issues by enabling better traceability, without disclosing commercially sensitive data. Advantages of supply chain traceability using blockchain include brand protection, real-time data tracking, storing high-priority information in a tamper-proof and distributed ledger, eliminating intermediaries, automating manual processes and enhancing security.

Despite the remarkable advancements in utilizing blockchain technology to improve batch traceability in the Life Sciences supply chain, the regulatory aspects in this area are not yet fully clarified. Further investigations are needed to ascertain the specific regulatory requirements and provisions associated with batch traceability in the Life Sciences supply chain.[57]

 

5 Sustainability

Lastly, this section will dive deeper into the realm of sustainability concerns which are getting more important every day and have already been lightly touched in this paper before.

The United Nations Framework Convention on Climate Change (UNFCCC) has established an objective of eliminating carbon dioxide emissions by the year 2050, a goal that many organizations in the field of Life Sciences have embraced worldwide. Sustainability is understood as the concept of fostering growth that satisfies current necessities without jeopardizing the capacity of future generations to fulfill their own requirements. The interpretation of this into tangible objectives for the Life Sciences sector varies based on geographical location, industry concentration, and corporate motivations.

Numerous international pharmaceutical firms have developed their own engineering guidelines to ensure adherence to regulations on a global scale. In contrast, smaller entities and standalone companies are more inclined to meet only local legal and code requirements unless there's a robust commitment from the board or shareholders, or another motivating factor like a socially responsible investor, to opt for sustainable alternatives.

The shift towards sustainable solutions is viewed as advantageous for the pharmaceutical sector, despite the fact that many companies may experience short-term sacrifices for long-term benefits. Companies frequently need to allocate substantial resources initially to investigate, design, and put into action sustainable alternatives for processes and infrastructure. The outcomes can offer significant, enduring benefits for the company, such as enhancements in process and operations, improved environments, risk mitigation, and cost reductions due to increased efficiencies and more economical facility management.

Another important organization to know is the International Society for Pharmaceutical Engineering (ISPE) which is promoting general sustainability topics, the impact of Pharma 4.0 on sustainability, the importance of Quality by Design (QbD) in setting sustainability targets, the potential for risk reduction through sustainable practices as well as the challenges and opportunities presented by the concept of a circular economy.[58]

Improving in terms of sustainability does require firms to considerer numerous different factors. One, which was mentioned in the previous chapter is general energy consumption. To give an example, temperature-controlled logistics and especially the cold-chain logistics as previously described are a big energy consumer that contribute to environmental concerns, including greenhouse gas emissions. In fact, just the transportation of food is responsible for 11% of the world’s electricity consumption. Therefore, it’s no surprise that companies are seeking ways to reduce their energy usage, such as using more efficient cooling technologies or renewable energy sources.[59]

Another important aspect is waste management. Life Sciences products often have strict expiration dates, leading to high levels of waste if products are not used in time. Packaging waste is another significant issue, particularly for single-use products. In fact, 80% - 90% of medical related products use plastics and in general, single-use plastic accommodates to a portion of 50% of all plastic waste. Companies are working on ways to reduce waste, such as through better demand forecasting, more sustainable packaging, and take-back programs for used products.[60]

Ethical Procurement is as well a prominent term when it comes to sustainable procurement. To ensure that raw materials are sourced ethically is a crucial sustainability concern. This involves fair trade practices, labor rights, and avoiding suppliers that contribute to deforestation or other environmental harm.[61]

Next, many Life Sciences products require significant amounts of water in their production processes. Companies need to manage water usage carefully to avoid contributing to water scarcity in certain regions. The pharmaceutical industry accounts for 23% of global water usage, according to the Pharmaceutical Technology Europe Journal.[62] This dependency makes the industry particularly susceptible to water-related climate risks. A decrease in water availability due to climate change could lead to significant delays in the production of pharmaceuticals, potentially causing worldwide medicine shortages. Recent warnings from UK pharmacists, based on a poll of 1,562 respondents, reflect these concerns. Moreover, extreme weather events disrupt not only production but also distribution, leading to backlogs and other problems. [63]

Last, Stakeholders are increasingly demanding greater transparency about the sustainability practices of companies in the Life Sciences sector, which involves tracking and reporting on sustainability metrics throughout the supply chain. This can be a complex process but is needed to achieve clear carbon reporting. Therefore, the approach includes data collaboration and sharing their tier 1-3 emissions amongst business partners and leveraging technology to increase visibility and accountability across the supply chain.[64]

6 Summary

In this white paper an overview about the Life Sciences Supply Chain was provided. Firstly, key components and key stakeholders are defined and discussed, later the Life Science Supply Chain was analyzed by utilizing the SCOR model.

As outlined, the Life Sciences industry can be seen as one of the key industries with a significant share in the projected business growth worldwide. Therefore, the future focus from a business and from an IT perspective will increase on this industry.

 

Endnotes/ References

[1] Cf. Mikulic 2023.

[2] Cf. Vantage Market Research 2023.

[3] Cf. Precedence Research 2023.

[4] Cf. U.S. FOOD & DRUG Administration 2018a.

[5] Cf. Scilife 2023.

[6] Cf. Mecalux 2023.

[7] Cf. Dailey 2023.

[8] Cf. Congressional Budget Office 2021.

[9] Cf. Statista 2021.

[10] Cf. Martin et al. 2021.

[11] Cf. Scitable 2023.

[12] Cf. AdvaMed 2023.

[13] Cf. SelectUSA 2023.

[14] Cf. U.S. FOOD & DRUG Administration 2021.

[15] Cf. NIKKEI Asia 2022.

[16] Cf. Buddhavarapu 2022.

[17] Cf. Karen M. Sutter et al. 2020, p. 31 f.

[18] Laenen 2021.

[19] Cf. U.S. FOOD & DRUG Administration 2018b.

[20] Cf. U.S. FOOD & DRUG Administration 2018b.

[21] Cf. U.S. FOOD & DRUG Administration 2018b.

[22] Cf. U.S. FOOD & DRUG Administration 2018b.

[23] Cf. U.S. FOOD & DRUG Administration 2018b.

[24] Cf. EY 2022.

[25] Cf. Parenteral Drug Association 2023b.

[26] Cf. International Air Transport Association 2023a.

[27] Cf. ISO 2023.

[28] Cf. The Health Strategies Consultancy 2005.

[29] Cf. Jacoby 2019.

[30] Cf. Jacoby 2019.

[31] Cf. Seeley and Kesselheim 2019.

[32] Figure from Grimm 2022.

[33] Cf. Huan et al. 2004, p. 25ff.

[34] Cf. Association for Operations Management 2023.

[35] Cf. Daehne 2020.

[36] Cf. Downes 2021.

[37] Cf. Downes 2021.

[38] Cf. Downes 2021.

[39] Cf. Frolovs 2022.

[40] Cf. oboloo 2023.

[41] Cf. Dorwart 2023.

[42] Cf. EudraLex 2014.

[43] Cf. JAGGEAR 2021.

[44] Cf. World Health Organization 2022

[45] Cf. Aziz-Andersen 2022, p .218ff.

[46] Cf. Landkof 2021.

[47] Cf. European Medicines Agency 2004.

[48] Cf. Landkof 2021.

[49] Cf. ISO 2020.

[50] Cf. Paffen 2023.

[51] Cf. European Medicines Agency 2023.

[52] Cf. Landkof 2021.

[53] Cf. Hargraves 2021.

[54] Cf. The European Regulatory System for Medicines, Parenteral Drug Association 2023a, International Air Transport Association 2023b, British Pharmacopoeia 2023.

[55] Cf. Muspratt 2018.

[56] Cf. Sourcemap 2023.

[57] Cf. MSRvantage 2022.

[58] Cf. Bowen 2020.

[59] Cf. Gao 2019, p. 1ff.

[60] Cf. Strammer 2019.

[61] Cf. Myburgh 2022.

[62] Cf. Aldridge 2008.

[63] Cf. Cervest 2022.

[64] Cf. Correll 2023.

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