By Dirk Van Peteghem
It's time to act on untapped opportunities in the healthcare industry
By 2020, China is projected to spend $1 trillion on healthcare, driven by a growing middle class and aging population. This is just one of a long list of stats that illustrates the significant shifts that are happening in the healthcare industry today.
Global trends such as rising consumerism, increased healthcare consumption, increasing costs of care, greater regulatory complexity and a diminishing blockbuster pipeline also all spell change, challenge and opportunity in the industry.
The question isn’t whether there are tremendous global opportunities in healthcare. We know there are. The real question is whether companies are equipped to deliver on them.
Game “Chain-gers”
Healthcare companies are taking action in several areas to capitalize on the new landscape and meet evolving customer requirements and demands.
We’ve focused on four of these trends that are changing the game in the industry and the industry’s critical delivery vehicle: the healthcare supply chain.
Consolidation: Healthcare companies are having an exceptionally strong year in mergers and acquisitions, with year-to-date activity in the healthcare sector topping $380 billion, well over double the year-ago level.
Some sources estimate the deal value of mergers and acquisitions as the highest since 1980. The sheer volume of mergers and acquisitions is creating a new set of industry players.
Collaboration: Collaboration used to be something that a lot of companies talked about and few companies actually did.
We’ve seen a major shift from an era where companies shied away from collaboration as a competitive threat to a time when joint ventures, strategic partnerships and service agreements are regular occurrences.
Similarly, we’re also seeing more collaboration between manufacturers and academia in the R&D space.
Specialization: Companies are increasingly divesting non-core assets to focus on their core.
The new mentality is that if you aren’t number one, two, three or four in an area, it may be better to get out of that area in favor of putting your investments in areas where you can compete more effectively.
This has led to companies focusing on niche areas like specialized drug therapies. In fact, in 2013, 33% of FDA-approved drugs were for orphan diseases – diseases that affect fewer than 200,000 people in the United States.
Convergence: The lines that used to separate companies into distinct categories such as branded pharmaceutical company or generics manufacturer are getting blurrier.
We now see some branded pharmaceutical companies manufacturing generics. Generics companies are launching branded products.
This shift goes beyond just manufacturers: retailers are now becoming providers, distributors own pharmacies and the rise of Accountable Care Organizations (ACOs) is blurring the lines between payers and providers.
These trends place unprecedented strains on the healthcare supply chain which may restrict companies from fully capitalizing on new opportunities.
Company Be Nimble: Moving From Supply Chain to Logistics Network
Companies that will ultimately win in the new healthcare marketplace will view their supply chains as strategic areas for innovation and business growth.
Trends such as industry collaboration and convergence mean that supply chains must become inter-connected. The old linear model is out. Flexible logistics networks are in.
So how do you move from a supply chain mentality to a logistics network? Three words: agile, knowledgeable — and efficient.
Healthcare companies need to build agile logistics networks that give them the ability to quickly accommodate different types of products, leverage new distribution channels to reach new customers in new markets and prioritize risk management to ensure business continuity in a highly global marketplace.
The need to be agile does not exclude the need to be customizable. One supply chain model will not work for every product and every sub-segment of the industry.
Companies need a supply chain that will specifically enable their business strategy. Supply chain analysis and mapping will tell companies whether or not their current supply chain design will enable their future strategy and how to adapt.
Strategic partnerships are one way to build more knowledgeable supply chains.
Take regulatory compliance, for example. No one company can deal with the complexity of regulations around the world. To succeed, companies should build networks of regulatory expertise and technology.
Efficiency is also critical. The supply chain should be viewed as a key area to drive efficiencies across the organization.
Companies who are market leaders in efficiency are becoming more innovative in how they leverage partnerships and new distribution models to enter new and emerging markets and serve new customer bases. They are taking advantage of existing third-party assets such as multi-client distribution centers and external regulatory expertise.
There are business and financial risks of not being agile. Companies that build true logistics networks will gain the agility and efficiency to adjust their supply chain strategy with their evolving business needs and goals. This will open the door to new innovations and global opportunities.
New Research Explores Sources of Pain in the Chain
How close are we today to making the transformation to logistics networks?
Some new research shows the areas that healthcare companies are grappling with in their supply chains.
Every year we commission research from TNS to determine the top sources of “pains” in the global healthcare supply chain. The 2014 UPS Pain in the (Supply) Chain survey shows that the top three supply chain issues for healthcare executives globally are:
- regulatory compliance (60%)
- product security (46%), and
- managing supply chain costs (44%).
Regulatory compliance, which has long been the top supply chain issue, is only increasing in complexity as supply chains become more global. Top global challenges to regulatory compliance according to survey respondents, who are supply chain decision-makers from pharmaceutical, biotech and medical device companies, include:
- Murky, unstable and/or changing legislative outlook
- Delays caused by lack of clarity in regulations
- Keeping up with new regulations
- Higher costs of managing multiple countries’ regulations
- New market complexities
The costs of non-compliance also are on the rise. The number of FDA warning letters grew from 445 in 2008 to 6,760 in 2013. Companies must get ahead of regulatory complexity challenges to continue to drive global expansion.
These are the types of challenges that if left under-addressed, sap the supply chain of its ability to be nimble.
Don’t let your supply chain hold you back. When treated like a strategic function it could actually be your company’s most important growth engine.
Click here download the executive summary of 2014 UPS Pain in the (Supply) Chain findings.
Robin Hooker, Director of Healthcare Marketing at UPS, recently joined HealthCare Consumerism Radio to discuss how the shift toward patient-centric care is affecting all participants in the health care system. Today, patients are choosing more direct-to-home deliveries; walk-in clinics, such as CVS Minute Clinic and MedPost Urgent Care, are on the rise; the middle class and aging populations in emerging markets are growing. Learn more by listening above.
Dirk Van Peteghem is Vice President of Marketing for Healthcare Logistics at UPS, responsible for leading the global strategy and management of UPS’s portfolio of healthcare products.
This article originally appeared on longitudes.ups.com
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Published May 18, 2015 1pm EDT / 10am PDT / 6pm BST / 7pm CEST