Effects on Pharmaceutical Supply

The uncertainty of Brexit leaves millions in the UK and EU open to significant disruption in the pharmaceutical supply chain, creating severe shortages and impacting the availability of vital medicines. Governments answer to the possible fallout effects of Brexit on pharmaceutical supply, remains unclear, and inadequate.

Challenge

A lack of trust and insufficient information sharing, along any supply chain, causes inefficiencies, unnecessary costs, and missed opportunities for members. The pharmaceutical supply chain, is no exception.

The looming hard Brexit might turn this economic issue into a life-threatening tragedy for patients in the UK and across the European Union.

Situation Analysis

In a perfect world, even after a hard Brexit, pharmaceutical supply will follow market demands, and the supply of medical goods will remain uninterrupted. Unfortunately, the likelihood of this happening is rather small.

A smooth flow of products along any supply network requires each member to trust their suppliers to both receive and deliver on time. Otherwise, members begin to stockpile medicines and medical supplies “just in case”, so products end up stuck in transit. This leads to fundamentally higher costs for all participants, and in many cases, product shortages for the customer/patient. This problem is exacerbated by preemptive calls for a drug export ban after a no-deal Brexit. The pharmaceutical industry is worth £60bn to the British economy, and exports 45m packets of medicine to Europe every month, with 37m coming the other way (1).

Significant efforts have already been made in the UK to prevent the disruption of medicine supply after a hard Brexit, by creating vast stockpiles of drugs. While this may make intuitive sense, on closer examination, it becomes clear that these efforts might turn out to be counterproductive because one key element is missing: information sharing.

Lack of trusted information about stock levels and plans within the supply chain leads to market participants having no other option but to “play it safe” and stockpile. Despite this overstocking, manufacturers feel pressured to keep producing more and more, because the drugs aren’t actually being delivered to the patients that require them, so demand at the end of the supply chain grows more urgent.

This sequence is repeated until every supply chain member, including the pharmacies, are overstocked. While this does mean that, finally, sufficient amounts of drugs are reaching the patients, this is also the point where manufacturers still producing full stream ahead, suddenly see the demand drop out from under them. Now the manufacturers are caught between a rock and hard place, because with an export ban in place, there is no market opportunity for them and they are left holding the bag or pill bottle, in this case, and they are forced to dispose of their overproduction. As a consequence, production levels slow to a trickle until manufacturers feel the demand increase. With every buyer being overstocked themselves demand will stay dead low for a long time, until it will suddenly explode. The mechanics of theses inefficiencies have been investigated for decades and are well understood. Scholars have coined the term “bullwhip effect” for it, because of the shape of the resulting demand curve.

Solutions: Establishing a Trusted Information Flow Circuit

This issue can only be solved by establishing a flow of trusted information along supply chain members, giving them the opportunity for reliable long-term planning. But this information exchange means giving up trade secrets, which is a tough pill to swallow. So measures must be taken to facilitate the sharing of information.

We propose the following:

• Incentivize the information sharing
• Allow members full control over the flow of information they make available
• Provide means for anonymous and automatic data aggregation with smart contracts

The PharmaTrace Network is being built to give companies along the pharmaceutical supply chain these capabilities and more. Although it is not yet production ready, it could be quickly deployed as a cloud-based solution to support these three measures.

In order for government to secure supply of vital pharmaceuticals to weather these scenarios, we recommend that a minimum of 10% of pharmacies in metropolitan areas, 50% in rural areas, all manufacturers of vital drugs, and industry wholesalers, be connected to the network. All sharing vital information within the common ecosystem. With a looming Brexit or other future causes of shortages, we must be prepared for supply chain disruption. It is not just a possibility but inevitable. We must work together to trace our path through.

Note: thanks to our contributors: Patrick Mccullough, Heisun Kim, Dr. Issame Outaleb

• https://news.sky.com/story/pharmacists-preparing-to-stockpile-medicines-and-medical-supplies-for-no-deal-brexit-11441089
• https://deputyprimeminister.gov.mt/en/cpsu/Pages/News/Brexit.aspx
• https://www.theguardian.com/global/2019/aug/26/we-need-to-be-told-which-medicines-are-at-risk-in-no-deal-brexit
• https://www.pharmaceutical-technology.com/news/no-deal-brexit-medicines/

The international Healthcare Mover 2019 study by ConCeplus, headed by Beatus Hofrichter, partner of the Healthcare Shapers, highlights a new dynamic in investment and innovation behavior among leading healthcare stakeholders. The benchmark analysis sheds the light on three key business drivers which agile firms master significantly well in shaping their competitive future positioning.

A qualitative, international benchmark study across 6’800 Life Science companies, ICT firms and Healthcare providers in Austria, Canada, Denmark, Finland, Ireland, Norway, Sweden, Switzerland, and the UK revealed, that innovative and agile companies advance stronger in digitalization than their peers. We observe that the dynamics of the digital transformation in these markets differ significantly. In the forefront are the Scandinavian countries and Canada. Their companies deploy a strong digital offering already.

A total of +1’250 companies were validated (or 18.3%) and rank as “Healthcare Movers” (or HCM) in shaping the digital transformation. HCM players understand the importance of focusing their strategic investments across three key drivers, i.e. Data acquisition strength of the clinical, device, medical, and public data domains, Next-level technology strength, and Business model agility.

The Top 100 Healthcare Movers

Furthermore, the Top 100 HCM cohort outperforms the average HCM peer companies significantly. They shape and deploy highly aspiring integrative healthcare business models in combination to the other two drivers well ahead of the core industry. HCM leaders can often be associated with therapeutic fields such as Cardiology, Neurology, Oncology incl. Urology and Gynecology, Radiology, and Nutrition/Dietitian which scores high in the HCM ranking.

Today, healthcare stakeholders compete globally and fiercely for market shares in this multi-trillion USD industry. Traditionally, critical competitive edges were sought through incremental product-centric innovations. In the past years, innovative leaders pursued novel offerings applying integrated digital solutions. According to Mr. Hofrichter, founder of ConCeplus and author of the HCM report, “… tomorrows’ competitiveness in healthcare is founded on agile convergence innovation through combining adjacent technologies, cross-disciplinary competencies, ICT capabilities, and patient-centric offerings in order to establish higher value outcomes.”

Real World Evidence drives value

Today, it is evident, that “… healthcare is rapidly shifting to use Real world evidence to enrich medical data sets…”, according to Dr. Bürgi-Krishnamurthy, co-author of the report. Leading HCM players score high in Data acquisition strength (averaging 3.3 out of the 4 key healthcare data domains). They aim to maximize this driver throughout their daily operation and within established value chains. Here, they pursuit a strong competitive advantage, while traditional firms remain to acquire such data within their inherited technology field(s). (see Fig. 1)

Another essential contributing factor to tomorrows HCM winners are the Next-level technology strength, and Business model agility. Global Top 100 HCMs can be seen as avant-garde. They set a challenging benchmark score of business model agility (0.71pts) and next level technologies (0.69pts). This cohort outperforms the average HCM companies significantly (see Fig. 2), while traditional players will be more exposed to a widening competitive gap.

Partner for leading healthcare value chains

The report highlights the “…ICT players as partners to Life Science firms will even be more crucial in the advancement of deploying holistic integrated platforms. They are seen as the best facilitators for data acquisition across all healthcare domains. Therefore, such firms continue to advance as key partners for leading healthcare value chains, …” commented Beatus Hofrichter, initiator of the HCM report and partner of the Healthcare Shapers

Find out more about the Healthcare Movers 2019 Report on www.conceplus.com