NEW YORK, Feb. 21, 2011 /PRNewswire/ -- While recent attention has focused on issues such as the challenges associated with drug discovery and the regulatory review process, pharmaceutical companies have invested comparatively little effort in updating their manufacturing and distribution operations, many of which are inefficient, under-utilized and ill-equipped to cope with new medicines, cost pressures and health reform expectations, according to the latest report in the Pharma 2020 series, Supplying the Future: Which path will you take?, released today by PwC US.
Representing a significant amount of the cost base of most bio-pharmaceutical companies, the supply chain is the link between the laboratory and the marketplace and includes everything from sourcing raw materials to manufacturing and packaging to inventory warehousing, transportation and distribution. As demand grows for more customized products and services -- and as the nature of those products and services becomes more complex -- the next generation pharmaceutical supply chains will become an increasingly important source of differentiation for makers of medicines, and will be a more prominent part in the strategic thinking of industry leaders, according to PwC.
In the report, PwC outlines six trends that will fundamentally change the way pharmaceutical companies make and distribute their products.
"The current pharmaceutical supply chain worked well when the 'blockbuster' paradigm prevailed, but pharma's focus in a post-health reform world is shifting from products to patients, and their supply chain processes need to adopt the speed and agility of other, more consumer-oriented industries such as consumer electronics and mass retailing," said Wynn Bailey, head of supply chain strategies, PwC. "In a world where outcomes count for everything, health organizations need to acquire a much deeper understanding of patients and their healthcare needs. Information is the new currency, and the data behind the product may soon be as valuable as the product itself."
PwC predicts that the pharmaceutical supply chain will undergo three key changes over the next decade. It will become fragmented, with different models for different product types and patient segments; It will become a means of market differentiation and source of economic value; and It will become a two-way street, with information flowing upstream to drive the downstream flow of products and services, and the management of information transferred between the pharma company, the patient and healthcare provider will become as important as the movement of product.
"The most successful pharma companies will be those that recognize the underlying value locked in their supply chain and can leverage it as a value and brand differentiator rather than just a cost," said Steve Arlington, global advisory pharmaceutical and life sciences leader, PwC. "Companies that recognize information is the currency of the future, will be those that go the final mile and stand out by 2020."
In its report, PwC outlines four potential scenarios that pharmaceutical companies might explore as a way to restructure their supply chains. Depending on their product and channel portfolio, most companies will have to manage to more than one scenario simultaneously.
Companies that concentrate on specialist therapies might exit from manufacturing altogether and, instead, become a virtual manufacturer, outsourcing the entire supply from production of the earliest clinical batches to full-scale manufacturing, packaging and distribution through a network of integrated supply partners. Alternatively, they might position themselves as service innovators, building supply chains that are capable of manufacturing and distributing complex treatments as well as managing multiple suppliers of integrated, valued-added health management services.
Mass-market manufacturers, such as the makers of generic drugs, might position themselves as high-volume, low-cost providers, borrowing lessons in lean manufacturing, strategic pricing and inventory management from the consumer products industry. Another option for mass mass-market manufacturers is to turn their supply chains into profit centers that combine economic manufacturing and distribution of satellite services, such as direct-to-patient delivery, secondary packaging or distribution to hospitals and pharmacies, and then to franchise it as a stand-alone offering for both internal and external customers.
The report provides an in-depth explanation of these scenarios and is available for download at www.pwc.com/pharma2020supplychain. All of the reports in the Pharma 2020 series are available at www.pwc.com/pharma2020.
About PwC's Pharmaceutical and Life Sciences Industry Group
PricewaterhouseCoopers Pharmaceutical and Life Sciences Industry Group (www.pwc.com/pharma or www.pwc.com/medtech) provides assurance, tax and advisory services to proprietary, generic and specialty drug manufacturers, medical device and instrumentation suppliers, biotechnology companies, wholesalers, pharmacy benefit managers, contract research organizations, and industry associations. The firm is dedicated to delivering effective solutions to the complex strategic, operational, and financial challenges facing pharmaceutical, biotechnology and medical device companies. Follow PwC Health Industries at http://twitter.com/PwCHealth.
About the PwC Network
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network shadre their thinking, experience and solutions to develop fresh perspectives and practical advice. See www.pwc.com for more information.
© 2011 PwC. All rights reserved. "PwC" and "PwC US" refer to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
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