Pharmaceutical companies provide vital products to protect and enrich our lives, but manufacturing and supply chain issues can lead to unnecessary escalation of costs, quality issues and product shortages. If the lapse is serious enough, it can also lead to the distribution of expired, substandard, and counterfeit medicines that threaten the health and lives of patients.
Economically, the pharmaceutical industry is under tremendous pressure from a number of regulatory, economic, and technological challenges, including:
- Patent expirations and biosimilars: In its World Preview 2017 report, research firm Evaluate estimates that $194B in sales are under threat through 2022 due to patent expiration and the rise of biosimilars. In addition, biologics and biosimilars are much more complex to manufacture, and require careful handling, raising the bar and the costs of manufacturing and shipping them.
- The Drug Supply Chain Security Act (DSCSA) passed by President Obama in 2013: Although the FDA has postponed enforcement, it’s only a matter of time before penalties will kick in. In particular, the mandate for electronic package traceability involves significant challenges that will require a long runway for implementation, testing, adjustment, and training.
- Counterfeit and substandard drugs: A worldwide problem, the WHO reports that one in ten drugs in middle and low income countries are fake or substandard.
While the rapid advance of technology has created new challenges, it also provides new solutions. There is a significant opportunity for pharmaceutical companies to modernize, digitize, and secure their supply chains, gaining better visibility, accountability, traceability, and improving operations while enhancing compliance and security. Companies can now become demand-driven, synchronizing supply to demand to optimize patient service levels, lower inventory levels, and reduce costs and waste throughout the supply chain.
DIGITAL TRANSFORMATION AND INDUSTRY 4.0
In addition to medical advances that are driving innovative new treatments, there is a commensurate advance in technologies that can help companies manage operations from API manufacturing through to the delivery of patient packs at hospitals, clinics, and pharmacies. These technologies are converging to enable Industry 4.0.
While the first Industrial Revolution heralded the era of mechanization powered by steam, and the second lit the world with electricity, the third Industrial Revolution introduced the widespread availability of computers and information processing.
Now, we stand on the threshold of the fourth Industrial Revolution, which is an, integration of new technologies with a convergence of existing ones that will enable them to interact in new ways. Industry 4.0 creates an ecosystem where computers monitor and control physical systems. Essentially, it is about tighter integration between the physical world and the virtual world, supported by a cluster of technologies like artificial intelligence, blockchain, Internet of Things (IoT), and robotics.
That sounds great. So, what’s the problem?
Industry 4.0 relies on the premise of ubiquitous connectivity on a scale that is difficult to imagine. It requires a new way of thinking that isn’t just enterprise-centric with add-on external connections. It requires a “network-first” perspective, because manufacturing pharmaceuticals and then moving them to the patient and treatment centers, requires a global partnership of tens, hundreds, and maybe thousands or more partners, each of whom use a vast number of systems and devices across a range of facilities.
Such connections, if they are point-to-point connections or hub-to-spoke connections, are difficult if not impossible to establish and maintain due to the sheer number of them. In today’s fast-paced business environment, where new startups and partners popup and fade away, such a cumbersome process is unscalable. Among other problems, these types of connections multiply the data silos and exacerbate data integrity problems.
THE NETWORK SHIFT
For Industry 4.0 to realize its full potential, we need to question the prevailing myopic view and enterprise-centric thinking, and embrace the inherent interconnectedness of commerce. Instead of one-to-one thinking and connections, thinking in terms of many-to-many will reflect the reality of a highly connected ecosystem of people and things working in concert to deliver pharmaceuticals and care to the patient. It’s this conception that has driven the success of companies like Airbnb and Uber, who rely on multiparty networks with a real-time “single version of the truth” to connect supply (drivers) with demand (passengers). These types of multiparty networks are now emerging as the necessary infrastructure to support Industry 4.0.
At the same time, we need to recognize that the new hyper-connected, cyber-physical world must be mirrored with similarly connected and consistent strategies, operational plans, and tactical execution. The true value of Industry 4.0 will only emerge if companies align from top to bottom and across enterprise boundaries to act as unified teams that strategize, plan, and collaborate across an agile network focused on serving the patient. To do that and fully optimize the pharmaceutical network, they need to focus on four key areas.
1. Data is key. Connectivity is not an end in itself, it is a vital means for sharing data and enabling collaboration between parties. Unfortunately, many companies have plenty of data, but it is isolated in separate systems and in their trading partners’ data silos. When data is shared, usually via periodic batch transfers, it is stale and therefore is a poor basis for making decisions and optimizing the supply chain. Companies need a strong community-wide master data management (MDM) strategy that can automatically translate and cross reference data and reconcile differences between systems, while enabling the near real-time synching of partners to achieve a single, unified view. This means all trading partners and systems are synchronized to one authoritative source of the truth, and can operate as one without conflicts and disconnects.