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1. The increase of biologics leads to a higher demand for cold chain logistics services
The market share of biologics, or biopharmaceuticals, is growing rapidly over the globe and is expected to account for up to 28% of the global pharmaceutical market by 2020. Whereas traditional drugs are generally stable and have a long shelf life, biologics – such as blood products, vaccines, and therapeutic compounds to treat various conditions – are more sensitive to varying temperatures and other types of exposure. The growing amount of biologics has led to an increased demand for cold chain logistics services for these sensitive products. Logistics providers that want to capture a share of the growing market must be ready to increase their cold chain capacity.
Logistics providers that want to capture a share of the growing market must be ready to increase their cold chain capacity.
2. Competition has intensified with more cold chain logistics solutions in the market
While the demand for cold chain logistics services is increasing, competition has also intensified. Logistics providers are introducing new, innovative services or are upgrading existing solutions for cold chain logistics. As a result, there are more choices as well as more competition in the market.
Pharmaceutical companies are also facing increased competition from generics and biosimilars (cheaper versions of biologics with expired patents) and profit margins are not as high as they once were. While quality is still the number one criteria regarding cold chain logistics services, there is an increased focus on cost control.
The combined effect of intensified competition among cold chain logistics providers and increased cost focus in the pharmaceutical industry implies that airlines and other cold chain logistics providers cannot sit back and expect the same loyalty as before. Instead, they must be proactive and continuously update their services.
3. Increased competition from cold chain ocean freight
To keep costs under control, pharmaceutical companies are turning their focus to ocean freight. Ocean freight takes longer, and is out of the question for intercontinental freight of products with a short shelf life or products that must be kept in very narrow temperature ranges. For drugs that are not too sensitive, however, ocean freight can be a viable option. In some regions, such as in East Asia, ocean freight is an option also for high-value items, as shipments between for example South Korea and Japan may only take a day if all goes well. Also elsewhere in the world there is a trend from air to ocean. To maintain, and preferably increase, their share of cold chain transportation, airlines must demonstrate the advantages of safe air freight shipments.
4. Stricter regulations for cold chain management
Another trend is that regulatory requirements regarding cold chain logistics have become stricter in many countries, most notably in the European Union with the EU Good Distribution Practice. So far, regulations for cold chain logistics are not as strict in emerging markets but changes are taking place. China, for example, implemented its Good Supply Practices for medical devices, GSP, a few years ago, which is a very comprehensive set of regulations regarding transportation. Regulatory compliance is thus high on the agenda in the pharmaceutical industry and cold chain logistics providers have to respond to the increasing regulatory requirements.
Regulatory compliance is thus high on the agenda in the pharmaceutical industry and cold chain logistics providers have to respond to the increasing regulatory requirements.
5. Pharmaceutical companies demand access to shipment data
A trend that is becoming critical for the airline industry and other logistics providers is the increased demands from pharmaceutical companies to have access to shipment data. With more sensitive drugs being shipped, monitoring becomes vital to control the quality of the products, not least to ensure the safety of patients but also to minimize the amount of damaged products. Lack of control and/or restricted access to shipment data might lead to the airline industry losing business.
6. Deglobalization, Industry 4.0, and biosimilars may change the trade routes
Several changes in the market are affecting current pharma trade routes, but the combined effect is difficult to predict. For many years, pharmaceutical companies have located manufacturing to developing countries to reduce labor costs and other production costs. There is still lot of collaboration in the industry, where for example raw material may be manufactured in China, shipped to India for further development, and the finished products will then be shipped to for example the US. However, there is also the opposite trend of deglobalization, where companies are relocating manufacturing back to the home market.
There are several drivers behind the deglobalization trend. Next generation manufacturing, or Industry 4.0, are terms that describe the new developments in manufacturing with a high degree of automation and process control. This radically reduces manpower requirements, which means that labor costs are not as decisive as before. Instead, market closeness becomes more important as well as access to well-functioning infrastructure. Local production also minimizes the political risks of global business. While Asian countries are affected negatively by the deglobalization trend, the Asia Pacific region has the largest number of biosimilar products in development. The region is already one of the most important producers of biosimilars in the world. How trade routes will be affected is, as noted before, hard to predict but one thing is clear: the demand for cold chain logistics will increase globally with the continued growth of biologics and biosimilars.
“Regulations have influenced revolution of biosimilars market”, BioSpectrum (Asia), 15 May 2018, Dr Charu Manaktala MD, Head of Asia Pacific Biosimilars Center of Excellence at IQVIA https://www.pressreader.com/india/biospectrum-asia/20180515/282179356744842/textview; Latest trends in demand for Pharmaceutical air cargo, Seabury Consulting, Nov 2017; Biosimilars gaining acceptability, BioSpectrum (Asia), 15 May 2018, Priyanka Bajpai, https://www.pressreader.com/india/biospectrum-asia/20180515/282192241646730; China Introduces New Medical Device GMP and GSP Rules, Ropes & Gray, January 8, 2015, https://www.ropesgray.com/en/newsroom/alerts/2015/January/China-Introduces-New-Medical-Device-GMP-and-GSP-Rules; Presentation: Next Generation Biologics Manufacturing: Delivering the Vision (Biogen), https://www.osisoft.com/Presentations/Next-Generation-Biologics-Manufacturing--Delivering-the-Vision/; Biosimilars gaining acceptability, BioSpectrum (Asia), 15 May 2018, Priyanka Bajpai, https://www.pressreader.com/india/biospectrum-asia/20180515/282192241646730