The steady stream of openings of dedicated, temperature-controlled warehouses and intermediate storage areas for biopharma products ticked up noticeably in the past year. More and more freight forwarders, air carriers, trucking firms and 3PLs (third-party logistics providers) now have branded life sciences services. Technologies for packaging life sciences products and clinical trial materials (CTMs) are advancing, as are digitally based networks and devices for tracking shipments through supply chains.
According to estimates by the Economist Intelligence Unit, WHO, IMS Health and others, global healthcare spending is ripping along at a 3–4% annual rate currently, and is approaching $10 trillion globally. That’s 2–3 times the rate of population growth. Within that, global pharmaceutical spending is projected to rise by 4–5% through 2020. And within that, according to Pharmaceutical Commerce’s 2016 Biopharma Cold Chain Sourcebook, spending on refrigerated (2–8°C) drugs is growing about 7% annually, or 41% during the 2014–2020 period (Fig. 1).
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Looking at the entirety of pharmaceutical logistics, the Sourcebook projects that cold chain currently represents 19% ($12.6 billion) of a $78.8-billion industry, rising to 22% ($16.7 billion) of a $93.8-billion industry by 2020 (Fig. 3).
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A second, related driver to this growth is that more and more of the pharma industry is biotechnology-based. While there are refrigerated small-molecule pharmaceuticals, and while not all biotech products require refrigeration, the great majority of biotech products do, and they command the highest value in the healthcare market. Of necessity, biotechnology manufacturers (as well as vaccines, insulin and blood products, and others) need to spend liberally on technologies and services that ensure the quality and efficacy of the products they ship around the world. Spurring this on is the latest R&D on cellular therapies, including stem cells, regenerative medicine and varieties of genetic therapies. On a commercial basis, these are still relatively small markets, but the logistics of managing their distribution will add complexity and cost to healthcare.
A third driver is, to some degree, self-imposed. Through collaboration between leading industry organizations, and national and international government regulators, the restrictions on how pharmaceuticals, medical devices and other healthcare products are transported are becoming significantly tighter. A key factor here is the imposition of Good Distribution Practices (GDPs), which are beginning to address not just refrigerated products, but also so-called controlled room-temperature (CRT) ones. The days of tossing any pharma product into a cardboard box and dropping it off at the local parcel delivery company are fading. While the industry globally has not, as yet, adopted insulation and cooling systems for CRT products across the board, the use of techniques like thermal blanketing and regulated warehouse room temperatures is become widespread.
<strong><em>2016 Forecasts</em></strong>
The Sourcebook, as in the previous editions, is premised primarily on two things: a methodical review of the labels of most common pharmaceutical and biotech products to calculate how much of the overall pharma supply chain is dedicated to cold chain practices; and an analysis of as much data as can be collected on the costs of pharmaceutical logistics in the US and globally. A third element is an evaluation of the pharmaceutical “pipeline”—the pace at which drugs under development will come on the market, and how the market will grow for those and for existing commercial products. The forecast timeframe is five years (2016–2020).
Since the 1980s, when the commercial biotechnology industry introduced its first products, the global market for such products has expanded enormously. As of 2016, it exceeds $250 billion in value, and the special logistics for maintaining the quality of temperature-sensitive products as they are shipped from manufacturers to hospitals, clinics, pharmacies and patients around the world account for more than 15% of all biopharma logistics spending.
Our updated forecast for cold-chain logistics spending in 2016 is that it will be more than $12 billion worldwide, in a $79 billion overall pharma logistics market, of which $9 billion will be transportation and $3 billion will be specialized tertiary packaging and instrumentation, such as insulated boxes, blankets, phase-change materials, active-temperature-control shipping containers, and various temperature sensors and recorders (Fig. 4). By 2020, cold-chain biopharma logistics spending will expand to more than $16 billion.
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The bulk of this spending is on refrigerated (2–8°C) products; the amount of frozen products or clinical trial materials is trivial by comparison. There is a trend toward more spending on devices and system for controlled room-temperature (CRT) shipping, but to date, most of this involves more careful monitoring of shipping conditions and not necessarily extensive use of insulation or other environmental controls.
The Sourcebook also evaluates the clinical trials market, but with somewhat less granular detail. There are both pallet and parcel shipments of clinical trial materials, but no good way to characterize their respective volumes. A factor that is somewhat outside the scope of the Sourcebook is return logistics that occurs during clinical trials—the delivery of, for example, blood or tissue samples from a trial. Our analysis is based primarily on the trend in trial startups, along with estimates based on how much of a trial’s budget is dedicated to logistics issues (Fig. 5).
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Clinical trial logistics is an adjacent and very substantial market for temperature-assured transportation and packaging. It involves shipment of products to be used in trials to study sites that may be dispersed around the globe, and return of unused medicines, as well as shipment of medical samples to centralized analytical laboratories.
This year we are updating our estimate for the market size to about $3.2 billion in 2016, due to growth in number and enrollment of trials even as pharma R&D spending was little changed. Based on estimates of trial volume, location, and industry R&D spending overall, our forecast now is for a continued expansion of clinical trials logistics at a rate of about 2% per year, to about $3.4 billion by 2020.
<strong><em>IoT cold chain</em></strong>
Incremental improvement is also the watchword for vendors of temperature monitors and other devices that monitor a shipment, or that verify that a shipment has been delivered without excessive temperature excursions. The combination of these devices with internet-based communications portals, creates, in fact, what is commonly regarded as an “Internet of Things” (IoT) application, although, strangely, equipment vendors have not jumped on that theme to promote their products and services.
Sensitech, one of the leaders in this field, has recently extended its popular TempTale 4 line of dataloggers with the TempTale 4 GEO, which has embedded communications electronics to enable a shipment to be tracked in real time. The company also offers a web portal, ColdStream, that enables the tracking to be communicated to clients, and to record shipment conditions.
Elpro, another datalogger vendor, has a similar program, called LiberoManager, as does Berlinger, with its Smartview offering. The service is also offered by the freight forwarders themselves, such as FedEx’s SenseAware program, DHL’s Thermonet, Kuehne + Nagel’s Cargo IQ and others.
<strong><em>Ocean shipping</em></strong>
According to industry insiders, there has been a trend toward employing ocean freight for life sciences shipments. Shipping costs for ocean are vastly less expensive than air cargo; the problem has been the uncertainty of delivery times with an ocean conveyance, and the ability to safely manage what could be a multimillion-dollar shipment held within a single ocean container (which has a much larger capacity than the unit-load devices used by air cargo).
Logistics service providers and container vendors are responding to these market needs. DHL has expanded its previously announced Thermonet service (which provides near real-time tracking of air cargo shipments) to Thermonet Ocean; other service providers offer comparable service. Container manufacturers like Klinge Corp. and ZIM now equip containers with self-contained power and refrigeration systems. The ocean carriers themselves—who are experiencing a painful contraction in shipping volumes overall, and therefore are looking to build business wherever they can—are offering more specialized, dedicated services to monitor and maintain these specialized containers during ocean transits.
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