by Natalia Kosk | Created: December 4, 2012

Pharmaceutical, medical device and biotechnology companies must act now to prepare for the changing landscape of life sciences

In many industries, transformation overhaul designed to restructure processes for improved long-term benefits and market gain is not uncommon. For the life sciences space, such changes will only continue as a number of factors—including increased patient safety, improved product accountability and changing federal mandates—govern healthcare. In fact, under the Patient Protection and Affordable Care Act (PPACA)—signed into law in 2010 with an aim to reduce overall healthcare cost—come 2014 citizens without healthcare coverage will have to pay a penalty (certain provisions, exemptions and clauses pending). As a result, a potential consumer shift in increased healthcare service adoption—in addition to the changing landscape of requested consumer care—would put added pressure on all supply chain elements of the life sciences space.

To prepare, service and technology providers in the pharmaceutical, medical device and biotechnology space must adapt to new business models and strategy adoption to combat with the changing scale of healthcare.

Changes are happening now

Regulatory compliance (65 percent), reform and legislation continue to reign at the top of the list (typically, above 50 percent) of general business concerns of the healthcare industry. In fact, in both 2011 and 2012, increasing regulations beat cost management as the top supply chain issue, according to a 2012 “Pain in the (Supply) Chain Survey” report from UPS.

Issues including increased competition, consolidation and access to funding such as for technological investments—while equally important—made up a lower percentage of concerns, according to the report.

“Many hospitals have a capital budget that is already pre-set,” explained Margie Rivera, Manager, Supply Chain and Contracting, Cardiovascular Institute, Florida Hospital Orlando. “Some hospitals don’t like to spend money on capital—only on machinery or equipment they need. They outweigh investing in RFID technology or having an ultrasound machine. The executive level teams in hospitals—which are usually the clinicians and not always business people—don’t always understand these things and don’t work well in being able to get the ROI. So it’s a challenge to prove to a hospital why you need to use such tools.”

Besides regulatory pressure, also relevant are the current supply chain changes in healthcare that are causing a need for new distribution channels and models.

Approximately 33 billion this year alone in patent-protected pharmaceuticals are transitioning to generic with an estimated 26 billion to follow suit next year, according to Scott Szwast, Director of Marketing, Healthcare, UPS, which “creates a lot of impetus now for these companies to suddenly improve and focus on the supply chain,” he explained.

“Up until fairly recently, there was not a lot of impetus for supply chain improvement because there was a lot of cash moving in the supply chain because of the cost of the pharmaceuticals. Right now, specialty drugs that are very tailored for specific and very narrowly-defined patient universe make up about 17 percent of the total drug market. By 2020, that’s going to be 40 percent.”

The globalization of the middle class is another factor impacting healthcare. Such a population shift, if it continues, will affect healthcare supply chains and the outsourced production model.

The increased adoption for more healthcare services on a larger base by consumers also goes hand in hand with improved product security and product protection (prevention of product damage or spoilage)—two areas that have become significantly important most currently than in previous years of the UPS “Pain in the (Supply) Chain Survey,” Szwast confirmed. And while most companies surveyed in the report confirmed that they are “cautiously optimistic” (38 percent) on the state of the healthcare industry today, the majority of U.S. companies (83 percent of those surveyed in the UPS report) plan to invest—over the next three to five years—in global market opportunities with technology adoption as the top strategy.

The link between

While resources such as the Health Information and Publications Network (HIPNet) are available to healthcare and garnering more industry discussion, global technology solutions and service providers in the life sciences space also help service providers address such issues as product traceability and streamlined inventory management.

“We’ve used technology to help link our customers up with their supply base,” explained Matt Walker, Executive Vice President, Supply Chain for TAKE Solutions, Princeton, N.J. “We try to be as full service as possible to companies—whether they are conducting clinical activity or are in the process of dealing with their commercialized product and moving that around efficiently. When it comes to healthcare providers, this issue of serialization requires our customers to be very complete and thorough in the tracking of their product all the way through to consumption of that serialized product by the end user.”

Carola Endicott, Senior Vice President of Operations and Services for Littleton, Mass.-based WaveMark Inc., echoed similar sentiments.

“The link that we provide between hospitals and their suppliers is the supply chain intelligence,” said Endicott. “In some ways we don’t really sell an RFID product. We use RFID to drive the efficiencies and automation. RFID is an enabler but what we really sell is savings and piece of mind. Our focus on building the supply chain capabilities of the software and enabling it to be incredibly flexible and able to obtain those cost goals of our customers—that is what is different about WaveMark’s technology.”

In the field

As mentioned, the changing shift in healthcare service care consequently creates this added need for traceability and inventory tracking. Florida Hospital is one such healthcare facility and service provider that understands the pains of tracking inventory to improve product management and improve its supply chain efficiency.

To do so, in 2008 it implemented WaveMark’s clinical inventory management solution (CIMS) to track more than 5,000 high-value items in the catheterization (Cath) lab and electrophysiology (EP) lab, helping to optimize inventory levels and effectively track product expirations and recalls.

Since then, WaveMark’s technology, which leverages RFID via its smart cabinets and Point of Service (POS) readers, also was deployed in the Ginsburg Tower, which houses the Florida Hospital Cardiovascular Institute that conducts nearly 15,000 advanced cardiac procedures annually.

WaveMark also expanded into the Cardiovascular Operating Room (CVOR), which includes a pediatric hybrid operating room (OR), interventional cardiology and electrophysiology. The expansion to the pediatrics OR marks the hospital’s most recent, as it was completed earlier this year.

“Without WaveMark, we would have to have two or three more employees and would probably not reorder efficiently,” said Rivera. “We have 12 cath labs operating at the same time. So every technician would be responsible for every item that was used on every patient and giving this information to our staff so they can reorder efficiently. And that’s not feasible—it doesn’t always happen that way.”

Even more significant for cardiology, having inventory to cover the extensive scope of the human anatomy also is crucial and adds to the demand of inventory management tracked by personnel.

“A patient can have 10 different vessels with different sizes,” Rivera continued. “So for every type of item, you have to have more than one size. And as we use one, we have to reorder. It becomes very difficult to manage.”

To alleviate this, the RFID cabinets provide real-time visibility into items about to expire, recall items or management of “just-in-time” items, (such as, items that healthcare service providers may stock up on in fear of running out based on past experiences). The WaveMark CIMS also enables the user to view all of the data in real time via Web-based reporting.

“What WaveMark does is, we take the manual process out of inventory and we automate it with these smart cabinets,” said Endicott. “So instead of calculating inventory based on an in- and out-series of transactions, the system reads the inventory in real time to provide a positive read of that inventory on a continuous basis.”

Initiate best practices before it is too late

From changes in drug and medical device manufacturing, to stricter regimes and practices in healthcare settings requiring new strategies to global expansion—there’s no doubt that major upheavals in the life sciences space will continue. Add the need for patient safety and improved product accountability to the mix and the result is an industry that continues to grow in excess of six percent per year.

As massive changes continue to occur over the next five to 10 years, the life sciences space will have to adapt and adopt new ways to deliver necessary innovation and proficient patient service to continue driving this industry forward.

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