Advances in Cold Chain Management and Supply Chain Expectations Chris J. Anderson, Director, Quality Operations, Cardinal Health, Inc.

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1 Advances in Cold Chain Management and Supply Chain Expectations Chris J. Anderson, Director, Quality Operations, Cardinal Health, Inc.

2 Agenda Phase change material tote program: goal, discoveries, challenges, standards Business and market challenges and response Future innovation and challenges Cold chain video link

3 Phase change material tote program Initial goal & discovery Customer experience: standardization versus tribal knowledge Material cost: standardization versus over 40 cold chain vendors Thermal testing discovery Over $2 million in customer damage returns due to warm product received by customers

4 Phase change material tote program Challenges Off-the-shelf qualified options: costs & seasonal pack-out challenges Customer beta feedback Thermal challenges with tote shape, sizes & water-based gel-packs

5 Phase change material tote program Water-based Gel-pack 2-8 C Qualification Large Tote PRODUCTT Small Tote PRODUCT Water-based Gel-pack 2-8 C Qualification PRODUCT PRODUCT PRODUCT PRODUCT PRODUCT The number of gel-packs (typically frozen) was generally determined by vendor feedback, experience and customer noise PRODUCT Unable to qualify small tote with water-based gel-packs Various packout configurations based upon season / temperature utilizing combinations of frozen, refrigerated and ambient gelpacks The design/shape of our insulated totes, usable/reasonable payload, and seasonal packout changes made it impractical if not impossible to qualify at 2-8 C

6 Phase change material tote program Challenges Design tests ruled out water-based coolant Customer beta: keep the totes Phase change material = costs and change management

7 Phase change material tote program Industry and regulatory standards FDA 483 & CDC vaccines The pharmaceutical company Novartis is recalling 500,000 doses of its flu vaccine after two shipments bound for use in a childhood immunization program in New York were found frozen. Freezing can inactivate influenza vaccine, making it ineffective but not dangerous Washington Post, October 21, 2006 FDA 21 CFR Part 203: Prescription Drug Marketing Act State law USP 1079: Good Storage and Distribution Practices for Drug Products Competitors See Appendix A: regulatory summary

8 Phase change material tote program Industry and regulatory standards Health care publications (2006-present) CDC s Vaccine Management (2007) Cold chain conferences with FDA presenters ( ) Parenteral Drug Association (PDA) Technical Report 39: Guidance for Temperature-Controlled Medicinal Products (rev 2007) and 46: Last Mile Guidance for Good Distribution Practices for the Distribution of Pharmaceuticals to the end-user (2009) FDA s focused WD audits & FDA 483s ( ) See Appendix A: regulatory summary

9 Phase change material tote program Solution Moved to custom designed phase change material panels qualified as a universal 2-8 C (36-46 F) solution regardless of season or payload ( ) The phase change panels change physical state, liquefy or solidify (freeze) at specific temperatures different from water and recharge as ambient temperatures fluctuate, making them ideal for maintaining a 2-8ºC environment

10 Phase change material tote program Advantages The phase change material used in the cold chain tote program is Safe and non-toxic, Bio-friendly and biodegradable, Made of 100% renewable resources (plant-based oils and fatty acids), Approved by the USDA as a bio-preferred product Large Tote Phase Change Panel 2-8 C Qualification Small Tote Phase Change Panel 2-8 C Qualification PRODUCT PRODUCT PRODUCT PRODUCT PRODUCT PRODUCT 1. Maintain use of totes 2. Same packout configuration regardless of season 3. Standardized operations and customer experience 4. Compliance with minor loss in shipping payload

11 Phase change material tote program Results Standardization and operational efficiencies of approximately $18 billion in annual delivery of refrigerated pharmaceuticals to over 20+ distribution centers. Improved customer experience through the use of a qualified solution and education on what to expect as well as how to properly prepare a return if necessary. Customers report feeling more comfortable about product integrity as well as how to do their part to maintain the integrity of the product.

12 Phase change material tote program Results Cardinal has experienced an 85% average reduction of product losses (first year) due to complaints about improper temperature control of refrigerated pharmaceuticals losses. This accounts for an excess of $2 million annualized. The panels are capable of thousands of melting and freezing cycles without performance degradation.

13 Phase change material tote program Successes The phase change panels have remained in use a reported cycles and a number of the sites have not purchased a replenishment in over two years. 81% (13 of 16 reported) of the sites report an average return panel rate from customers of 96% (median of 98% with a standard deviation of 0.04). Three sites report an average of 77% returns. These sites have ongoing lean six sigma projects to improve the returns. All reported sites combined reported an average return rate of 93% (median 97% with a standard deviation of 0.09).

14 Phase change material tote program Recognition: 2012 HDMA Distribution Management Award by the Healthcare Distribution Management Association (HDMA) Selected by the Council of Supply Chain Management Professionals (CSCMP) 2012 Supply Chain Innovation Award (2 nd Place). Cardinal Health has made eight cold chain project presentations at industry conferences (by invitation) to include the Parenteral Drug Association (PDA), the International Quality & Productivity Center (IQPC), the Healthcare Distribution Management Association (HDMA).

15 Business and market challenges & response Customer education End of transportation cycle temperature testing Problems with surface temperature testing of paperboard cartons after removal from totes Use of infrared (IR) temperature gun Cold Chain Packaging: Limitations of spot temperature testing Preparing a refrigerated product for return video Refrigerated packaging overview video

16 Business and market challenges & response CDC publications Vaccine Management: Recommendation for Storage and Handling of Selected Biologics (Nov. 2007) Vaccine Storage & Handling Toolkit (Nov. 2012) Cold Chain and vaccine handling Internal White Paper External Publication

17 Business and market challenges & response Validation / accreditation versus qualification Cold Chain Packaging: refrigerated tote qualification

18 Business and market challenges & response Customer returns (denied credit due to improper packaging) Beat the Heat / Lean Six Six Sigma Project Pilot distribution centers (2) 9.85% denied returns $1 million customer losses Project expanded to other sites after pilot Looked for BDP at sites with good numbers

19 Business and market challenges & response 6σ DMAIC (define, measure, analyze, improve & control) process Tools: voice of the customer, SIPOC (suppliers, inputs, process, outputs, customers, requirements) map, Pareto map, process mapping, statistical sampling, cause and effect analysis, MSA (measurement systems analysis), FMEA (failure mode effects analysis)

20 Business and market challenges & response Failure causes (Critical X Discovery): Not using provided tools» Merchandise Return Authorization (MRA) form» Panels labels with instructions» Website intro video and instructions Lack of education» Importance of proper panel placement» Lack of understanding phase change material Turnover, number of employee involved and training» No accountability» No access to MRA or tools

21 Business and market challenges & response Solutions: Added visual indicators to tote lids and panels Created new short video aimed at why we use phase change material, how it works, how to pack and why it s important Re-education and testing of sales reps (mandatory) and operations to equip them to help and educate customers with cold chain returns Feet on the street re-education and follow-up

22 Business and market challenges & response Graphic Panel Labels Graphic Tote Lid Labels

23 Business and market challenges & response Short cold chain packing video

24 Business and market challenges & response Results The pilot had a 46% improvement = $460,449 customer savings Expanded to 85% of sites $200,000 investment (labels and video) Denied Cold Chain Returns down 44.1% (4.5 to 2.25%) Annual customer savings = $1,212,000 Annual Cardinal Health savings = $269,100 Miscellaneous courtesy credits Labor Customer and Cardinal Benefit = $1,481,000

25 Business and market challenges & response Totes are not the end all Overseas bulk and parcel Bulk Special markets Overnight domestic air

26 Business and market challenges & response Overnight air (returnable) 1. Challenge: overnight air to clinics and doctors offices & rollout occurred at the same time that Cardinal Health was rolling out the cold tote program to pharmacies 2. Other options: Off-the-shelf water-based coolers 3. Solution: complete custom designed system with three box sizes utilizing the frozen and refrigerated phase change pillows 4. Advantages: Qualified for overnight air shipment delivery, product integrity, patient safety Able to reclaim >50% of the materials with enclosed pick up slips

27 Business and market challenges & response Bulk (ground and air) 1. Challenge: integrate controlled room temperature product with refrigerated product for replenishment shipment to the forward distribution centers 2. Other options: looked at bulkheads, high reduction in available space, cube utilization is diminished, increased trans expenses, decreased backhaul space due to return 3. Solution: custom designed cold chain pallet shippers 4. Advantages: Shipped in a 20 C trailer with CRT product - 72 hour qualification at 2-8 C Ship ambient - 24 hour qualification at 2-8 C 29.7 ft 3 payload (40½x34¼x37 ) 57.3 ft 3 cube (43x48x48 ) 4 rigid blow-molded HDPE bottles w/18 lbs each of gel refrigerant Forklift slots and stackable Durable with long life-cycle Ergonomic design (front loading) to maximize productivity

28 Business and market challenges & response Kinray NYC 1. Challenge: small delivery vans, limited room, customer and operations wanted to stay with current outer box size, limited payload to ad coolant, energy leakage with EPS panels versus molded EPS coolers 1. Other options: qualified tote system (overkill) 2. Solution: custom designed to fit existing coolers utilizing small frozen 4 C phase change pillows 3. Advantages: Qualified, product integrity, patient safety Minimal impact to customer experience Easy return process for customers Viable solution for small coolers and short delivery times

29 Business and market challenges & response Puerto Rico 1. Challenge: small delivery vans, limited room, customers wanted a throw away cooler, challenge qualifying small coolers while maintaining payload, limited landfill space and green initiative on the island 2. Other options: qualified tote system (overkill) 3. Solution: move to insulated totes with frozen 4 C phase change panels 4. Advantages: Qualified, product integrity, patient safety Reduce waste with a reusable / durable solution Easy return process for customers Viable solution for short delivery times Easy transition to Cardinal Health standard green and orange phase change panels for longer deliveries to other islands

30 Future innovation & challenges Improve customers experience with new technologies Single 4 C Phase change panels (condition / solidify at 4 C in refrigerator or refrigerator) Better insulating material (PUR, VIP) Reduce conditioning and return packaging errors Investment challenges Change management and human nature

31 Future innovation & challenges Continued education and communication

32 Future innovation & challenges Questions? For more information, go to or search for Cardinal Cold Chain

33 Appendix A: regulatory summary

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