Supply Chain Intelligence, The Internet Of Things (IoT) and it’s impact on healthcare logistics

Over $15Billion in product losses occur every year in the Pharmaceutical industry due to temperature excursions alone.

This figure does not include the costs associated with replacing those goods, the labor costs (direct / indirect) associated with the root cause analysis process, or other causes of product loss such as shock, humidity, etc. All accounted for, it is estimated that over $35B is lost each year.

When Cold Chain IQ surveyed pharmaceutical executives, it found that at least 10 percent of respondents recorded temperature deviations in more than 15 percent of their temperature-sensitive shipments. Twenty percent didn’t know whether excursions had occurred. According to a report on Cold Chain by ChainLink Research, conservative industry estimates cite 80M climate-sensitive shipments occur annually. More aggressive estimates suggest up to 130M shipments.

There are very specific industry statistics that have been quantified with respect to the loss that consistently occur within the healthcare space:

  • 25% of vaccines reach their destination degraded because of incorrect shipping
  • 5% of pharmaceutical sales are marked as scrap
  • 30% of scrapped pharmaceutical can be attributed to logistics issues alone
  • 20% of temp-sensitive products are damaged during transport due to a broken cold chain
  • The average costs of root cause analysis for each excursion can range from $3K to up to $10K
  • An average pharmaceutical organization spends 6% of its revenue on logistics requirements

Sources: World Health Organization (WHO), Parenteral Drug Association (PDA), Worldpharmaceuticals.net and other industry estimates

The costs associated with these types of losses in the pharmaceutical supply chain focus around expensive product replacement costs and wasted shipping costs. In addition, there are large operational costs due to the human capital required to manage the quality and control process when damage occurs. Damage can also be caused by environmental factors beyond temperature—such as shock, pressure, humidity and tilt events.

These losses not only occur in volume product shipments, they also occur in clinical trials. To that end, the average cost for shipping excursions of a single clinical study to a clinical site can well exceed $ 150,000 and commits over 2,300 staff hours for excursion resolution for an average cold chain related study (source: Ray Goff, Wyeth Vaccines – white paper titled Cold Chain to Clinical Site: The Shipping Excursion). This does not include another 1,500 hours of lost opportunity labor.

All the while, key regulatory pressures continue to grow. Regulatory compliance for healthcare companies revolves around various standards that are produced by government bodies like the Good Distribution Practices (GDP) in the EU and related standards published in the U.S. by the FDA.  Recently the EU added the following update to the GDP:

“it is the responsibility of the supplying wholesale distributor to protect medicinal products against breakage, adulteration and theft and to ensure that temperature conditions are maintained within acceptable limits during transport.”

Experts interpret this to require the wholesale distributor/ manufacturer to measure the temperature to ensure it’s properly maintained (data logging, etc.). But this is just one of many various regulations the impact the industry – from either the manufacturer side or the logistics provider attempting to resolve these issues on their behalf.

To learn more about the issues Bio-Pharma is facing, how technology can be use to address these issues, and how data can drive corrective and preventative action programs, read the white paper here.