THIS TIME, IT'S PERSONAL
Tailoring the choice of therapy and the delivery of treatment more precisely could lead to better outcomes for patients and lower costs for providers. To do that, the life sciences sector will have to rethink its business models and supply chains.
In 1899, German dye-maker Bayer started the manufacture of synthetic acetylsalicylic acid. Sold under the brandname Aspirin, the company’s tablets, complete with embossed logo, ushered in a new model of standardized medicines, produced and distributed on an industrial scale. It was a model that built the global pharmaceutical industry into a giant. Worldwide prescription drug sales reached $777 billion in 2016, for example.
More than a century later, is this model beginning to crumble? Overall, the pharma business seems healthy enough. Prescription drug makers are expected to enjoy continued annual growth of 5 percent or more over the next three years, and sales are forecast to pass the trillion-dollar mark by 2020. The industry is facing pressure from multiple directions, however, forcing companies to rethink some of their most well-established processes.
The symptoms are well understood. Demand for healthcare products and services is rising faster than society’s ability to pay for them. Ageing populations and the rapid rise in noncommunicable, lifestyle-related diseases are stretching the health services of developed countries. In emerging regions, billions of people now expect – and deserve – access to better healthcare. The very success of the global healthcare business is compounding the pressure. As new products and treatments become available, people naturally want the best available, regardless of the price.
Getting healthcare costs under control has become a pressing political issue in many countries. But while the price of healthcare products may be grabbing headlines, it’s only one element of a bigger picture. Increasingly, the industry is recognizing that changes in other areas can have a decisive effect on both costs and outcomes for patients.
We're All Individuals
One significant driver of this changing mindset is the growing understanding of the very different ways that different patients respond to treatment. An individual’s genetic makeup, lifestyle and the characteristics of their condition can have a fundamental effect on the efficacy of a drug or treatment approach.
Doctors have always known this, but in the past, they had little choice but to take a trial-and-error approach. If the most common treatment didn’t work for one patient, they would try another. That meant more money spent on drugs, higher risks for patients and more time spent in treatment.
Now some players are applying the power of big data and artificial intelligence techniques to accelerate the identification of the best treatment approaches for individuals. IBM has partnered with the Memorial Sloan Kettering Cancer Center to build a decision support system for oncologists using its Watson artificial intelligence system, for example.
The system reviews patients’ digital medical records and genetic information about their tumor, and uses what it finds to suggest potential treatment plans for that individual, based on data from thousands of studies from hundreds of medical journals and textbooks. Watson has been designed to analyze both structured and unstructured data, including natural language, important because an individual’s medical records are likely to contain large quantities of both.
The use of digital technologies to improve the speed and effectiveness of treatment holds huge potential in healthcare, but capturing that potential will require plenty of challenges to be overcome. Not all of them are technical. Providers, and society at large, will have to make some careful decisions about how data is used and shared, balancing the need for individual privacy with the opportunity for broader good.
In such a highly regulated, risk-averse industry, steps toward digitalization have so far been tentative. When researchers at the McKinsey Global Institute analyzed the degree to which industries in the U.S. have adopted digital tools and business processes, for example, they ranked healthcare fourth from bottom, ahead of only hospitality, construction and agriculture.
It’s no surprise the life sciences sector is increasingly looking for help from digital natives. The healthcare arm of Netherlands-based technology company Philips, for example, has entered a joint venture with Salesforce.com, a pioneer of cloud-based software in the customer relationship management sector. The two companies are developing platforms that combine data from multiple sources – from medical imaging equipment to hand-held and wearable devices – to help patients and doctors manage chronic conditions.
Using technology to improve communication between patients and healthcare professionals has been shown to be very cost-effective. “Telehealth” delivery models help patients to comply with treatment plans and let doctors intervene more quickly if the patient’s condition changes. That means less unnecessary prescription of expensive drugs, and fewer costly complications.
Better off at Home
Another way healthcare is becoming more personalized is in the location of treatment. In the U.S., inpatient stays account for around 7 percent of all healthcare services, but 30 percent of costs. The average inpatient stay in a U.S. hospital costs around $10,000. Hospital visits are stressful and inconvenient, especially for patients whose condition may require multiple trips over an extended period. Going to the hospital is risky, too. In 2011, for example, 6.4 percent of patients staying in a hospital in England acquired an infection while they were there. Treating those infections can mean extended stays, and more costs for providers.
To chip away at these high costs, there is increasing interest in the delivery of treatment to patients in their local communities or at home. Studies of chemotherapy treatments offered in hospitals, local doctors’ offices or the patients’ home have shown no significant difference in clinical outcome, for example. Treatment in the community can be cheaper, too. One U.S. study found that the cost of chemotherapy was between 20 and 80 percent lower if it was delivered in a local doctor’s office rather than at a hospital.
Then there’s e-commerce. The internet has transformed the way people around the world buy and receive many categories of products. The life sciences industry has been relatively slow to make that shift, mainly due to tight regulatory constraints in many markets.
That’s likely to change, however. Consumers, especially those managing long-term conditions, want the convenience and simplicity of receiving their medication via home delivery. Drug companies, meanwhile, see direct-to-consumer sales as a way to boost margins in price-sensitive categories by cutting out supply chain intermediaries, while also fighting back against counterfeiters and gray-market providers.
Emerging markets could see the most dramatic changes to drug distribution through e-commerce, as they have millions of customers that are not currently well served by hospitals or pharmacies. Consultancy Deloitte, for example, suggests that China’s pharmaceutical e-commerce market could grow from 10 billion RMB ($1.45 billion) to 150 billion ($21.8 billion) as the government eases distribution controls.
Supply Chain at the Forefront
For pharmaceutical companies and medical device-makers, this emerging world of personalized treatments, delivered direct to patients, will have profound implications for the supply chain. To understand something of the challenges involved, they can look at other industries that have made similar shifts. The automotive industry’s transformation from mass production of uniform product to just-in-time and just-in-sequence production of vehicles tailored to individual customer needs, for example. Or the retail sector’s development of omnichannel supply capabilities, with flexible distribution infrastructure capable of handling truckload deliveries to stores, alongside packaging of individual items for direct deliver to e-commerce customers.
Supporting the delivery of complex services such as cancer treatments or kidney dialysis in community settings will have a lot in common with the field service supply chains used by technology companies supporting critical assets. They will require the delivery of equipment and materials to the patient’s home to be tightly synchronized with the arrival of the medical professional who will oversee the treatment.
Other characteristics make healthcare supply chains even more demanding, however. Some of the products involved are delicate and short-lived. They must be shipped and stored under tight temperature control. Security and traceability are critical concerns.
Some healthcare products have supply chain demands rarely seen elsewhere. Autologous cell therapies, for example, use tissue extracted from the patient, processed by a pharmaceutical company and then reinfused. That requires a carefully choreographed, circular supply chain between patient and manufacturing site. Similarly, the growing use of 3-D printing in medical devices such as implants used in reconstructive surgery requires the ability to manufacture and deliver fully customized products with very short lead times, while still meeting demanding safety and quality standards.
To meet its coming supply challenges, the industry will have to innovate. Like all innovation, that’s going to involve some borrowing of ideas and approaches from elsewhere. But it is also going to require those ideas to be adapted and recombined to create entirely new solutions.
“The next 10 years will see a transformation in the design and operation of many life sciences supply chains,” says Scott Allison, President, Life Sciences & Healthcare, DHL. “New technologies and new supply chain models will help companies provide a faster, more personal and more cost-effective service. The exciting thing for the industry is that many of the capabilities they need are there already. Now it’s going to be about making the business case.”
– Jonathan Ward for Delivered. The Global Logistics Magazine