UPS Healthcare Supply Chain Vital Signs

Transcription

1 UPS Study Executive September 2017 START 2017 UPS Survey 2017 United Parcel Service of America, Inc. 1

2 An industry growing more complex: managing competition, compliance and costs Pharmacies are grappling with handling more complex, high-value medications in an increasingly competitive environment. Pharmacies > > An industry growing more complex About the survey Specialty pharma growth Spending on specialty drugs could quadruple by 2020, driving the need for complex and premium supply chain solutions and leading to increased competition for limited distribution specialty products. Source Pharmacy of the future Source Pharma 2020 High-touch patient care Pharmacies are using smart analytics and digital tools to help consumers manage illness, control costs and obtain drugs/ devices wherever they are located. Adherence With 75% of adults non-adherent in one or more ways, the economic impact is estimated to cost $100 billion annually. Cold chain protection Temperature excursions of costly biologics with strict stability ranges could compromise therapies and profits. Traceability mandates Regulations, like the drug supply chain security act (DSCSA), are requiring a single system of federal electronic, unit-level traceability of drugs and will require investments across the supply chain. Security issues The growth of high-profile and expensive drugs/brands have attracted sophisticated counterfeiting operations, necessitating solutions for controlled substances and increasing responsibility being placed on pharmacies and suppliers. Value-based reimbursement Reimbursement based on demonstrating effective patient outcomes places additional responsibilities on pharmacies to help ensure positive results by offering services such as medication management, personalized health education and adherence support. Direct and Indirect Remuneration (DIR) fees DIR contractual terms can be very complex and the post-sales fees have created revenue and cash flow uncertainty for pharmacy owners, making it difficult to determine profitability until months after the dispensing has occurred. This section of the UPS is focused on understanding the business priorities, supplier satisfaction and logistics challenges of pharmacies in the U.S., while providing valuable insights and implications for their clinical product suppliers, including pharma/biopharma suppliers and distributors. U.S. pharmacies are being challenged to treat unique patient needs in order to improve outcomes. In response, they are expanding patient care services for more complex specialty medications, such as advanced biologic drugs, across multiplying points of care. To address the resulting requirements for special handling and compliance with more stringent government regulations, leading pharmacies are exploring new supply chain strategies UPS Survey 2017 United Parcel Service of America, Inc. 1

3 An industry growing more complex > > About the survey Pharmacy respondents Organization type (n=100) Who we surveyed This executive summary is focused on U.S. pharmacies. Here s a snapshot of the survey respondents and their organizations: 69% Traditional retail pharmacy 17% Executives/ VPs/Directors 24% Physician group/clinic 83% Managers 7% Hospital-based 52% Chain 3% International 13% National 34% Single state/province Pharmacy type Market footprint 48% Independent 50% Regional About the survey Since 2008, UPS has surveyed the healthcare and life sciences industry about supply chain issues to better understand marketplace needs. This year we are introducing a global survey with a new perspective. The 2017 UPS provides the healthcare industry with insights into supply chain issues impacting pharmacies, hospitals and laboratories. We surveyed 750 participants from 19 countries across the United States, Europe, Asia-Pacific and Latin America representing executives and managers with purchasing, supply chain or materials management responsibilities across pharmacies, hospitals and medical labs. The survey, which provides a 360-degree view of the industry, including suppliers, distributors and providers, was conducted by PwC on behalf of UPS. This executive summary is focused on survey responses from 100 participants representing U.S.-based pharmacies UPS Survey 2017 United Parcel Service of America, Inc. 2

4 Top priorities for pharmacies Q: Over the next three years, how important will the following areas be to your operation s business results? (% rating very or extremely important) 87% 87% Controlling supply chain and logistics costs Improving pharmacy/ dispensing office operating efficiency U.S. pharmacy responses on prioritizing supply chain costs and operating efficiency were among the highest rated results throughout the global survey. However, firms that succeed with systems that support medication adherence will be better positioned to demonstrate better outcomes. 62% 68% 96% 87% 66% 58% 86% 87% > > Prioritizing efficiency and cost control Evaluating competitive strategies 77% Increased competition from other healthcare practices 68% Managing declining reimbursements for clinical services 72% Direct and indirect remuneration (DIR fees) Improving operating efficiency Controlling supply chain costs Europe Asia-Pacific Latin America United States Prioritizing efficiency and cost control Given the increasing complexity of pharmacy supply chains, it s logical that survey respondents ranked improving operating efficiency and controlling supply chain costs as their top business priorities over the next three years. Pharmacies are managing more highvalue inventory that often requires special handling and cold chain transport, necessitating the use of premium services which drives up costs. Plus, the growth of personalized medicine is requiring more diverse supply chains focusing on smaller product lots with specialized and limited distribution putting further pressure on costs. To achieve future business goals, pharmacies must find a way to deliver high-value specialty medications to patients profitably, whether to their home or a physician s office. At the same time, pharmacies must also plan for declining payments for clinical services, an area that 68% of respondents deemed important to business results. Increased competition from other healthcare practices was also rated highly, suggesting pharmacies should focus on the ability to differentiate UPS Survey 2017 United Parcel Service of America, Inc. 3

5 Competitive strategies Prioritizing efficiency and cost control > > Evaluating competitive strategies Q: How important do you consider each of the following in improving your competitiveness? (% rating very or extremely important) Expanded pharmacy practice to include specialty pharma products Strategic acquisition(s) to drive growth Investment in new technologies Optimized logistics and transportation 61% 75% 70% 66% Industry insight Specialty pharma is expected to continue to grow. Specialty pharmacy is expected to continue to grow. Drug Channels ( net/2017/04/our-exclusive outlook-for.html) reports that specialty drug revenue reached 28% of total pharmacy industry revenue in 2016, and is projected to climb to 42% of industry revenue of by Evaluating competitive strategies With the demand for specialty drugs projected to grow, 75% of survey respondents selected expanding into specialty pharma as an important strategy for increasing competitiveness. Pharmacies recognize that offering specialty products is a must and they are exploring ways to gain a competitive advantage. Fueling growth with strategic acquisitions was also highly rated as a competitive strategy. Growth via acquisition allows pharmacies to diversify payer relationships which can provide more leverage during negotiations and offer access to new markets. Two-thirds of pharmacies surveyed acknowledged the importance of investing in new technologies to compete more effectively. Examples include technology to improve adherence and measure patient outcomes UPS Survey 2017 United Parcel Service of America, Inc. 4

6 73% of pharmacies expect additional support from product suppliers Q: What type of additional support from your clinical suppliers is desired? (% rating support very or extremely valuable) 87% of pharmacies value their clinical product suppliers helping them maintain compliance to regulations and/or industry accreditations with 18% stating they would switch suppliers if the compliance support failed. > > Seeking additional support from clinical suppliers Exploring why pharmacies switch suppliers Taking advantage of key supplier opportunities 52% Customer service 24-hour telephone hotline Updates on pricing programs When I call (my supplier), many times there is no answer. 34% Training Storing and using temperature-sensitive products Training for all new products. 16% Product availability Equivalent drug recommendations Online support for the availability of products. Top 3 supplier services to help mitigate financial risk: Analytical tools to help measure medication effectiveness (67%) Sustainable storage and transport solutions for temperature-sensitive products (64%) Extended payable terms (52%) Seeking additional support from clinical suppliers As they face challenges associated with specialty drugs, requiring special handing and new technologies, U.S.-based pharmacies are looking for additional support from their suppliers. Respondents specifically mentioned training on using and storing temperaturesensitive products, as well as specialist assistance on all new product introductions. It s important for drug manufacturers to understand that pharmacies are seeking support from dedicated trainers or medical professionals with specialist product knowledge expertise versus sales representatives whose primary job responsibility is promoting new products and services. When faced with drug shortages, pharmacies look to suppliers for equivalent drug recommendations to avoid additional costs associated with higher-priced options. Pharmacies also look to suppliers for services to help mitigate financial risk, with 64% reporting they value sustainable storage and transport solutions for temperature-sensitive products. The bottom line is, pharmacies expect more support and there are opportunities for suppliers to differentiate themselves by helping pharmacies navigate complex supply chain challenges UPS Survey 2017 United Parcel Service of America, Inc. 5

7 Top pharmacy complaints Q: Aside from price, what are the most frequent complaints regarding your clinical suppliers? Why pharmacies switch suppliers Q: If your supplier were to fail on any of the following factors, which one or two are most likely to make you switch to another clinical product supplier? Seeking additional support from clinical suppliers Timely fulfillment and delivery Product integrity and quality Product availability 27% 25% 40% 34% Breadth of product portfolio 51% Product availability > > Exploring why pharmacies switch suppliers Taking advantage of key supplier opportunities Products not delivered at stipulated time and sometimes products came from different manufacturer. Deliver the right products. Products ordered sometimes run out of stock or alternate products came with higher value. 21% Access to payer (insurance or government) reimbursement programs Exploring why pharmacies switch suppliers Product availability is crucial to pharmacies with 51% of respondents saying they would switch if their current supplier failed to deliver on this factor. Aside from price, pharmacies cited product availability as one of the most frequent complaints regarding clinical suppliers. There have been a number of drug shortages which may be the impetus for this response. To control the rising cost of drugs, some suppliers are looking to limit inventory, an approach which appears to be at odds with the value pharmacies place on product availability. Pharmacies also cited breadth of portfolio as a reason to switch suppliers. As personalized medicine becomes more pervasive and the number of limited-distribution drugs increases, this will become even more important. Therefore, it s essential that suppliers and distributors maintain the breadth of their portfolio and leverage a well-orchestrated supply chain to differentiate themselves from their competitors UPS Survey 2017 United Parcel Service of America, Inc. 6

8 Prime opportunities for distributors and pharma suppliers Opportunity: High importance/high satisfaction Industry insight Hub service centers Hub service centers are increasingly important to patient centricity and gaining patient loyalty. They are typically independent third parties that provide services such as: Seeking additional support from clinical suppliers Exploring why pharmacies switch suppliers > > Taking advantage of key supplier opportunities Regulatory compliance and/or industry accreditation support Hub service patient support center Currently: High importance/low satisfaction Breadth of product portfolio Financial support for high-value specialty products Patient interaction to support adherence and outcomes Outcomes data to support valuebased reimbursement Hubs are most often used for complex chronic care needs today but are expected to expand to drugs in a lower price range Taking advantage of key supplier opportunities Improving hub service center patient support offers the greatest potential for suppliers hoping to increase customer satisfaction among pharmacies. It s a key satisfaction driver that is underperforming, thereby providing a competitive differentiation opportunity for suppliers. Hubs, which are projected to expand beyond chronic care to include lower-cost drugs, are gaining importance due to the increasing focus on patient outcomes. While support for regulatory compliance, when applicable to the service, appears to have less impact in driving satisfaction among pharmacies, 87% of survey respondents indicated that they value suppliers assistance in this area by developing equipment, products or kits that promote adherence. Therefore, it would be prudent for suppliers to maintain or increase efforts in this area UPS Survey 2017 United Parcel Service of America, Inc. 7

9 > > Managing supply chain costs Identifying successful strategies for direct distribution Challenges driving supply chain costs Q: What are the top supply chain challenges driving excess costs? Product spoilage, damage and lost product High-value specialty product inventory Transportation costs 37% Expired and returned products Adhering to new and changing regulations 30% 48% 56% 55% Cost-management methods 68% Negotiating directly with suppliers Q: To what degree are you using or considering these methods to manage cost? (% currently using) 61% Drop-shipping directly from suppliers (distributors/ suppliers) to your customers 87% Insuring high-value products 64% Reducing the use of specialty couriers for delivery 60% Adding technology and automation to the dispensing and fulfillment process Managing supply chain costs In order to control supply chain costs, which U.S. pharmacies cited as their top business priority, it s important to understand the factors driving them. Product damage and loss were identified as the primary challenges, followed closely by high-value, specialty product inventory, which is growing as more pharmacies expand into specialty pharma and begin offering more personalized care. The bottom line is change is needed as legacy supply chains designed for high-volume, small-molecule drugs are struggling to meet the requirements needed to efficiently dispense the diversity of new medications. To meet increasingly complex needs, pharmacies must develop productor therapy-specific supply chains. This added complexity and the requirements of high-value, time- and temperature-sensitive products are impacting transportation costs. Additionally, pharmacies are insuring high-value products to help mitigate risk. Respondents are also reducing the use of specialty couriers (64%) for deliveries, and drop shipping (61%) more products directly from suppliers to their customers to manage costs UPS Survey 2017 United Parcel Service of America, Inc. 8

10 Logistical strategies to drive final mile dispensing success Managing supply chain costs > > Identifying successful strategies for direct distribution Q: How successful/unsuccessful have the following supply chain strategies been when distributing prescriptions to patients homes and physicians offices? (% represent level of success) Leveraging optimal packaging to maintain product integrity Monitoring and intervening on at-risk shipments to reduce spoilage Maintaining detailed patient and physician profiles, containing delivery preference Ensuring proper chain of custody records throughout the supply chain Providing special delivery accommodations for patients with mobility issues Keeping the patient informed of the timing of delivery 59% 55% 53% 51% 58% 58% Industry insight The diversity of products and growing complexity of chronic therapy management aimed at smaller patient populations poses a logistical challenge for pharmacies. Suppliers can differentiate by considering the final mile challenges pharmacies face and develop upstream solutions to improve pharmacists ability to serve patients. Identifying successful strategies for direct distribution With multiple points of care, pharmacies are distributing more prescriptions directly to patients homes and physicians offices. These shipments may be high-value drugs or products that need special handling and documented delivery, making supply chain management more challenging. Survey respondents cited leveraging packaging solutions to maintain product integrity (59%) and monitoring/ intervention as needed to reduce spoilage (58%) as very or extremely successful strategies for distributing direct to patients. Ensuring proper chain of custody was another successful strategy selected by 55% of pharmacies. To support pharmacies, suppliers should consider designing product packaging that improves product integrity regardless of the dispensing channel. Suppliers should also align with logistics partners who provide 24/7 monitoring and risk mitigation services, to achieve the best patient and profitability outcomes UPS Survey 2017 United Parcel Service of America, Inc. 9

11 The following insights into the pharmacy industry are based on the survey results and include some potential impacts and opportunities for suppliers. Leverage successful logistics strategies Pharmacies cited packaging solutions and shipment monitoring/intervention as the two most successful supply chain strategies for delivering prescriptions directly to patients and physicians. Suppliers that provide secure packaging, enhanced visibility solutions and cold-chain expertise can strengthen relationships with pharmacies by helping them overcome challenges associated with dispensing more high-value drugs and products directly to patients. Collaborate on cost management Both pharmacies and suppliers can deploy key supply chain strategies to help manage costs, even as customer touch points increase. This includes adopting a series of unique supply chains, each tailored toward its own product, market and therapy group. Suppliers can help control costs by adding flexibility to product design and packaging. Product demand volatility in low-margin drugs can be managed by implementing pack-to-order strategies. Plus, greater flexibility helps minimize inventory write-offs and working capital needed for production. Provide special training & support Pharmacies are also seeking additional customer service and training support from their clinical suppliers. Temperature controls, product-specific packaging and shipping, and education on how to manage specialty packaging will be increasingly important and offer opportunities for suppliers to create value. Create additional value Ensure product availability Focus on patient outcomes To sustain customer relationships, suppliers should continue delivering services valued by pharmacies, including providing analytical tools to measure medication effectiveness, supporting necessary regulations and offering expanded payment terms to mitigate financial risk. Based on the study, any reduction in regulatory compliance support may not be well received by pharmacies. Data suggests that support programs in this area should be maintained or enhanced. Product availability issues are the main reason pharmacies will switch suppliers and account for a large number of complaints regarding suppliers. Not receiving the desired product or having a higher-value product substituted may negatively impact therapeutic outcomes for patients and cost management for pharmacies. While suppliers are looking to limit inventory due to the increasing cost of drugs, it s important they maintain the breadth of their portfolio for competitive differentiation. With the increase in limited-distribution drugs and personalized medicine, suppliers with the greatest breadth of portfolio will be the likely winners. As the focus on value-based care rises, the pressure to demonstrate outcomes across the healthcare value chain is increasing. Moving forward, suppliers will need to focus on therapeutic outcomes, innovative reimbursement strategies, alignment with key stakeholders and cost reduction initiatives. To meet these objectives, suppliers may need to expand capabilities beyond their core objectives. Pharmacies that are able to demonstrate support for improved outcomes will differentiate themselves. Learn more about the ways UPS can help healthcare companies UPS Survey 2017 United Parcel Service of America, Inc. All rights reserved. UPS, the UPS Brandmark and the color brown are trademarks 2017 of United Parcel Service of America, Inc. 10