The healthcare industry has successfully brought effective vaccines to market despite massive disruption from COVID-19. But with global supply chains still stretched, what are the priorities for supply chain players (pharmaceutical manufacturers, medical technology companies, healthcare providers and PE investors[1]) as we move towards a ‘new normal’?

Success in the face of disruption

In the UK, the NHS was forced to shut down or significantly reduce many areas of non-COVID care. Fewer patients sought treatment during lockdowns, resulting in a significant drop in elective procedures, urgent cancer referrals, first cancer treatments and outpatient appointments.[2]

Meanwhile, the pharmaceutical industry cancelled or postponed most research and development (R&D) projects,[3] and rapidly repurposed production facilities to support vaccine manufacturing.[4] Distribution became much harder due to reduced air and ocean freight schedules, while different lockdowns disrupted trade flows.

Yet vaccines have been successfully developed and deployed. From the start of the outbreak at the end of 2019, it took only a month for scientists to isolate the virus, sequence its genome, and publish the information online. Within a few more months, measures to slow and stop chains of infection were identified. In less than a year, several vaccines were in mass production.[5]

With companies planning for a new post-COVID normal, attention is turning to the immediate financial, logistical and operational challenges ahead. Companies that do not act to mitigate supply chain risks now risk falling behind as the global economy recovers from the pandemic.

The critical supply chain priorities for healthcare stakeholders

The post-COVID patient will seek more accessible access to care, minimising in-person appointments where possible, while taking advantage of new technologies to benefit from highly personalised service. Supply chains will need to change to support a ‘new normal’ for healthcare that is much more patient-centric. We see three key opportunities: remote patient monitoring, direct-to-patient distribution, and supply chains that maximise resilience. (These are by no means exhaustive and are intended to promote further debate and discussion.)

1. Remote Patient Monitoring

The telehealth market grew at a phenomenal rate in 2020 (around 60% in the United States⁵) as COVID-19 disrupted healthcare. Telehealth is projected to grow at a CAGR of around 40% through 2025.[6]

Remote patient monitoring (RPM) is a fast-growing telehealth sub-sector involving the collection, transmission, evaluation, and communication of patient health data from a range of electronic devices, including wearable sensors, implanted equipment, and handheld instruments.

RPM technologies have already been applied to collect vital signs of COVID-19 patients at Mount Sinai Health System in New York City and University Hospitals in Cleveland, Ohio. In Minnesota, the Mayo Clinic is setting up remote monitoring for patients with non-COVID conditions such as congestive heart failure.[7]

There is a compelling case for RPM post-COVID-19. Success for pharmaceutical firms, MedTech companies, and other service providers will depend on managing increased complexity along supply chains in terms of technologies, data, processes, and systems. For example, patient-level demand signals could be obtained from many devices, requiring upgrades to processes and IT systems. The value generated must be shared equitably with participating parties, including reimbursement and contracts. Change management to support adoption will play a critical role and should be included in cross-organisation transformation plans.

Investors must correctly judge the operational advantages and commercial potential of these innovations. In terms of operations, an understanding of the data, systems, and IT tools will be vital, along with a view on capabilities and scalability. On the commercial side, patient needs, market size, growth, and competitive landscape need to be intimately understood.

2. Direct-to-Patient Distribution

Although home deliveries are not yet part of the healthcare mainstream, COVID-19 has accelerated  providers’ and patients’ appetites for direct-to-patient (DtP) models.

Whether in trials or for recurring prescriptions, DtP models promise considerable benefits for patients. Not only are they much more convenient, they also reduce waste and improve adherence to dose recommendations and regimes, as only what is needed is shipped.

Pharmaceutical manufacturers benefit from better visibility of demand, plus deeper insights on patient requirements. Manufacturers can capture margins previously charged by wholesalers, and prices can be set based on channel. In addition, parallel imports can be controlled since ownership remains with pharmaceutical companies. (DtP models are particularly relevant for biologics and cell and gene therapies where the cost of distribution is small relative to the cost of the treatment.)

Regulation must also be reviewed to understand what is legal in terms of home deliveries. Proactive engagement with health ministries is helpful: at present, there may be more willing to challenge traditional approaches due to the COVID-19 crisis.

For investors, there are several innovative companies offering specialised home delivery services, such as Healthcare at Home, PantherX, Viela Pharmaceuticals, and Polarspeed, and related businesses such as cold chain shippers (Evo, Polar Thermal), and temperature monitoring systems (Berlinger, TempTracer). It will be essential to determine the total customer base needed for economical service delivery. While DtP can deliver margin improvements by avoiding wholesalers, the costs of service delivery need to be carefully assessed relative to the value of medicines being delivered, plus any nursing support.

3. Supply Chain Resilience

An increased level of patient engagement must be supported by resilient, high-performing supply chains. Otherwise, stock-outs or late deliveries would make these solutions at best meaningless and at worst damaging to patient health.

Manufacturers should consider alternative sourcing where possible. Some supply chain activities (raw materials and product manufacturing) are already shifting from China to India due to the US / China trade war. We envisage COVID-19 will accelerate this trend for resilience and alternative supply reasons.

Reliable assessment of Contract Manufacturing Organisations (CMOs), including quality, cost and delivery performance, and ability to scale, will be critical. Ramping up new CMOs will need robust technical transfer management to mitigate supply risks.

In terms of planning, manufacturers should look to supplement Sales and Operational Planning with data from RPM technologies and DtP logistics providers. Planning meetings and decision-making processes ought to be upgraded to consider the new channels. Existing ERP software such as Kinaxis or SAP may need to be expanded and made fit for the future.

Pharmaceutical manufacturers have been dealing with broader product ranges and smaller volumes for many years. This trend will continue, for instance, with personalised medicines having ‘vein-to-vein’ supply chains[8] and much greater complexity (e.g., very short shelf-lives, different temperature regimes, high demand volatility). For these products, supply chain orchestration is critical, encompassing patient engagement, care management, health outcomes, funds, and data management. Companies such as Trackcell and Vinetti provide Personalised Therapy Management platforms covering these areas.

We also expect postponement models to become more prevalent. In a postponement model, products are held in semi-finished states and finalised (often labelling and packaging) on customer demand. Lean production methods, including rapid quality checks, typically support the final stages of postponement. Several logistics providers can perform postponement, or manufacturers can do themselves. The choice depends on complexity, capabilities, and risk appetite.

Finally, while in-market distribution will largely be governed by DtP providers, intercompany distribution may have scope for rationalisation of logistics service providers, particularly if they can provide postponement and in-market services.

Conclusions

Resilient, high-performance supply chains could help the healthcare industry respond to COVID-19’s many disruptions and support the transition to a new healthcare normal. Change has been very rapid and will only accelerate as pent-up demand for patient-centric services is released. The organisations planning ahead now and considering alternative models of care will be more likely to succeed over the long term.

A&M: Leadership. Action. Results.

A&M has worked with some of the largest European and global organisations to transform operations and accelerate growth through decisive action. A&M’s Health and Life Sciences team brings decades of experience and fact-based, action-oriented leadership to create value and drive rapid results for healthcare businesses. To learn more, reach out to our key contacts Raymond Berglund and Lee Feander.