The 2020 Wholesale Distribution Trends in Life Sciences Report exemplifies the disruption and transformation reverberating throughout the life sciences industry. New models for treating patients and ensuring the safe and effective movement of medicine through the supply chain are causing wholesale distributors to reconsider their traditional value proposition. Looking forward to 2020, wholesale distributors must be prepared to realize new operations models and business fundamentals in order to transform the disruption in the industry into an opportunity for growth.
Personalized Medicines Impact on Wholesale Distribution
Personalized medicine is the next frontier in the prevention, treatment, and cure of many diseases. As these class of therapies continue to gain traction in the United States and abroad, the end-to-end supply chain needs to be radically altered from the traditional, validated model of commercialization where product and information is transferred from manufacturer to distributor to patient. Personalized medicine, such as cell and gene therapies respectively, have many different characteristics than traditional medicines, specifically shorter shelf lives, the need for refrigerated or freezer storage and distribution (2-8C, -20C, -80C), shorter cycle times from manufacturing to patient infusion, and individualized patient usage. With these unique characteristics, all partners in the supply chain must be equipped with flexible, adaptable capital assets and resources to deliver the correct medicines to patients when it’s required.
In 2019, personalized medicine’s market value was $13B but is expected to reach ~$74B by 2027, a CAGR of 24%. This growth is driven by the rise in chronic diseases, genetic disorders, and government investments (Cures Act-2016).
With the emergence of personalized medicines and its predictive growth, wholesale distribution will need to be proactive in shifting its current business strategy and model from its core services. The ability of distributors to aggregate standard pharmaceutical orders for a broad population and ship these to pharmacies will become less valuable when more orders are individualized. This means the economies of scale that wholesale distributors bring to the life sciences industries potentially can be lessened and increase the cost of medicines to payers and patients respectively.
With this potential scenario, other threats start to surface for these entities including:
- Excess warehouse capacity since personalized medicines are not held in inventory for long period of time (standard cycle time from apheresis procedure to infusion is < 20 days)
- Larger investments in technology and its ancillary components (i.e. hardware, resources, etc.) as the need to adhere to chain of custody and chain of identification requirements for personalized medicine will continue.
With every threat comes opportunities and wholesale distributors can start pivoting their business models to take advantage of them. A few of these opportunities include:
- As the liaison between manufacturers and their patients, wholesale distributers have established, foundational infrastructure and partnerships that integrate these entities, allowing them to potentially further invest in value-added services such as data management solutions or white glove services.
- Repurpose excess traditional warehouse capacity into capacity used for personalized medicines that require different handling and storage requirements
- Evaluate opportunities to serve as 3rd party logistics providers to manufacturers
- Assess potential to serve as third-party financiers (i.e. provide loans for capital intensive projects) to manufacturers.
- Continue to invest significantly in track and trace interoperability that will afford patients the opportunity to view in real-time the order and delivery process of their personalized medicines.