Session: CEIV Pharma Update. Ronald Schaefer Palm Springs, CA; USA May 07, 2018

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1 Session: CEIV Pharma Update Ronald Schaefer Palm Springs, CA; USA May 07, 208

2 Introduction 2

3 Ronald SCHAEFER Assistant Director, Cargo / Ground Operations + CEIV Consulting, IATA SchaeferR@iata.org 3

4 IATA Competition Law Compliance Follow the prepared agenda. Do not discuss: Pricing, including fares, service charges, commissions, etc. Bids on contracts or allocation of customers Geographic/Product market allocations and marketing plans, including Expanding or withdrawing from markets Group boycotts Your commercial relations with agents, airlines or other third parties Any discussion aimed at influencing the independent business decisions of your competitors You will be asked to leave the meeting, and the meeting may be terminated, if the abovementioned discussions occur. Remember: All discussions count, even informal ones outside the meeting room! 4

5 Aim of the presentation Understand the risks and the potential gaps along the cool chain Learn how IATA s standards improve the handling of pharmaceutical cargo Introduce and provide an update of IATA s CEIV Pharma Program: Seek your input and constructive feedback on the solution IATA is implementing in the industry Introduce IATA s latest initiative CEIV Live Animals 5

6 Pharmaceutical business - A growing segment? Ronald Schaefer, Assistant Director, Cargo / Ground Operations + CEIV Consulting, IATA 6

7 Background: Pharmaceutical Market Development The global biopharma sales trend is projected to go upwards Global Biopharma Sales Trend ($ Billions) $,600 $,400 $,200 $,000 $800 $600 $400 $200 $0 $,042 $809 $233 Source: Pharmaceutical Commerce $,70 $887 $283 $,32 $973 $339 $,420 $,074 $ Cold Chain (+70% growth) Total (+4% growth) Non-Cold Chain (+32% growth) 7 The outlook for global biopharma sales is for continued expansion through 202 An expansive future for cold chain logistics is expected (at a 5 6 % growth rate), driven by the continuing transition to biologically based products; tightening requirements for life sciences shipments; growing internationalization of pharmaceutical trade; rising introduction of biosimilars; continued strong growth in insulin products and vaccines; and broader adoption in underdeveloped economies.

8 Background: Pharmaceutical Market Development Spending in biopharma logistics will continue to rise to meet demand Global Biopharma Logistics Spending ($ Billions) $00 $90 $80 $70 $60 $50 $40 $30 $20 $0 $0 $73.9 $2.0 Source: Pharmaceutical Commerce $79.9 $3.4 $4.9 $6.6 $6.9 $66.5 $7.4 $ Non-Cold Chain $86.3 Cold Chain $93. 8 By 202, world sales of cold-chain drugs and of biologics such as vaccines and insulin products will likely top $396 billion, in a global biopharma market exceeding $.47 trillion. It is estimated cold-chain logistics spending in 207 will be about $3.4 billion worldwide in a $79.9 billion overall pharma logistics market. The value of temperature controlled pharmaceuticals being shipped is projected to grow 0.7% in 207, suggesting that the industry is learning how to manage cold chain costs more effectively

9 Background: Pharmaceuticals Use Air Transport Pharmaceutical represent an important and lucrative sector for air cargo, contributing approximately US$.4 billion to total airline cargo revenue Pharmaceutical Trade By Air 207 Per Volume, Airline Cargo Revenue and Value (%) 0.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0%.0% 0.0% 9.4%.9% 2.6% Volume Airline Cargo Revenue Value Source: Seabury Global Trade Database 9 Q4 207

10 Background: Pharmaceuticals Use Air Transport Pharmaceutical transport by air has shown stronger growth than the air cargo market as a whole Long Term Air Trade Growth (% CAGR) 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0%.5%.0% 0.5% 0.0% 3.4% Raw Materials.5% 2.6% 2.7%.8% 3.4% 2.8% 4.7% 2.4% High Tech Machinery Perishables Fashion Chemicals Automotive Pharma Global Air Trade Source: Seabury Global Trade Database (May 207) 0 Q4 207

11 YoY Change Background: Pharmaceuticals Use Air Transport However, non-cool pharma has driven pharmaceutical growth in 207 with non-cool retail medicaments and vitamins generating ~45% of pharma growth in 207 YTD* Cool vs Non-cool Pharma Growth Per Commodity, JAN-AUG 207 (% YoY Change) Source: Seabury Global Trade Database (November 207) Total Air Trade Tonnage * YTD = Year To Date Q4 207

Background: Pharmaceutical Product Logistics Temperature control share of pharma Temperature management market, 203-207 In percentage of total business A big share of pharmaceutical shipments in the

12 Background: Pharmaceutical Product Logistics Temperature control share of pharma Temperature management market, In percentage of total business A big share of pharmaceutical shipments in the 5-25 C segment are shipped as general cargo. A significant part of pharmaceutical shipments requires temperature controlled transport. 75% of shipments require passive cooling solutions, and 20% require active temperature control. Active temperature control solutions demand a yield premium due to complex requirements. Passive solutions drive volume and are less costly to implement. Source: Seabury, BRU Cargo 2

13 Background: Pharmaceuticals Use Air Transport Pharmaceuticals shipped under CRT, COL or ACT command an average premium of 25-60% above the rate charged for the average air cargo shipment on the same country pair Pharma Rates by Handling Code Avg. Air Cargo Rate = Avg. Air Cargo Avg. PIL Avg. CRT Avg. COL Avg. ACT CRT = Controlled Room Temperature COL = Cool Goods ACT = Active Temperature Controlled Source: IATA Economics 3 Q4 207

14 Background: Pharmaceuticals Use Air Transport As a result, pharma air trade growth is based on high value pharma products (> $50/kg) compared to pharma ocean trade growth which relies on low value products (< $5/kg) Pharma Trade By Product Value: Air vs Ocean (Thousand Tonnes) AIR OCEAN, , , Source: Seabury Global Trade Database 4 Q4 207

15 Background: Pharmaceuticals Use Air Transport The United States is the biggest exporter and importer of pharmaceuticals by air Pharma Air Trade Destinations JAN-AUG 207 (Thousand Tonnes) USA 86 USA 73 India 54 China 23 Germany China Export Japan Germany 3 3 Import France 9 Brazil 2 UK 4 Netherlands 9 Belgium 2 India 8 Other 27 Other 24 Source: Seabury Global Trade Database (November 207) 5 Q4 207

16 Challenges for air cargo transportation (of pharmaceuticals) Ronald Schaefer, Assistant Director, Cargo / Ground Operations + CEIV Consulting, IATA 6

17 Background: Air freight has lost market share to ocean freight Over the past 6 years, ocean pharma trade has added significant volumes particularly in the mid-value pharma category Pharma Share: Air vs Ocean Global Trade of Pharma, 206 Air Weight Share, (MAR) 30% OCEAN 9% Air Share Losing Out to Ocean 70% AIR 9% Weight Value Source: Seabury Global Trade Database 7

Background: Critical Issues Raised by the Shippers The use of air-mode transportation is re-considered unless industry partners ensure quality services 25% 30% 20% Of vaccines reach their destination

18 Background: Critical Issues Raised by the Shippers The use of air-mode transportation is re-considered unless industry partners ensure quality services 25% 30% 20% Of vaccines reach their destination degraded because of incorrect shipping Of scrapped pharmaceuticals can be attributed to logistics issues alone Of temperature-sensitive products are damaged during transport due to a broken cold chain Due to a lack of compliance, standardization, accountability and transparency across the air transport supply chain a majority of all temperature excursions occur while the package is in the hands of airlines/airports Temperature deviation denature the product, render it worthless and be harmful to the health of the patient Products can be lost, scrapped, returned leading to significant costs 8 CNS Partnership Conference 208

19 Background: Critical Issues Raised by the Shippers Looses associated with temperature excursions in healthcare are around a staggering ~USD 35B Losses associated with temperature excursions In USD Billion Total: USD 34.B The average costs of root cause analysis for each excursion can range from $3K to up to $0K (avg. USD 6.5K per year) Wasted Logistic Costs Clinical Trial Costs 8.60 Trial Production Costs Direct Labor Costs Opportunity Labor Costs Replacement Costs Root Cause Analysis Source: World Health Organization, Parenteral Drug Association, worldpharmaceuticals.net, cargosense.com, other industrial analysis 9 CNS Partnership Conference 208

20 Air Cargo Industry Concerns and Challenges Temperature Excursions Where do they occur? Low Risk Medium Risk High Risk Source: Expeditors 20

21 More compliance on the horizon? Growing regulatory environment, higher business complexity and increased focus on accountability Pharmaceutical companies operate in one of the most dynamic environments. Changes in regulations by leading bodies such as US Food and Drug Administration (USFDA) and the European Medicines Agency (EMA) have increased the significance of regulatory compliance management for drug manufacturers. Pharma companies across the globe are compelled to alter their compliance practices to conform to changes in regulations and stringent anti-corruption laws. Historically pharmaceutical industry has been dealing with malpractices across the value chain ranging from improper branding to masking safety information and disregarding quality manufacturing standards. This has led to regulators keeping a strict watch on the pharma companies. Enforcement agencies the world over have become more active. Any violation of regulatory methods or noncompliance of standards could tarnish a company s reputation, risking its future. According to the 204 global survey on reputation risk conducted by Deloitte, reputation problems had a severe impact on revenue, loss of brand value and regulatory investigations. 2 3 February Newark; Expeditors Event

22 More compliance on the horizon? In the US and European markets, companies have become increasingly cautious about regulatory compliance Pharma shippers situation Impact on Air Cargo industry Leading pharma companies in these markets have reportedly implemented effective compliance management systems internally. Compliance is a priority for the air cargo sector. Air cargo sector performance not encouraging and increased regulation will continue to contribute to the compliance challenges facing the industry. Pharma companies are realigning their quality and compliance structure to conform to the constantly evolving regulatory guidelines. They will demand the same from their business partners. With the FDA and other regulators broadening the scope of compliance requirements, it helps if companies have a holistic approach and make regulatory compliance part of their corporate strategy. Companies ought to be proactive in setting up stringent internal controls as part of their commitment towards quality and compliance. Include effective training, proper timely communication, periodic reviews / follow-up, and support from the top management. Challenge Will Regulators focus on aligning country-specific regulatory frameworks to global standards enabling harmonization of standards and help companies drive efficiencies? 22 3 February Newark; Expeditors Event

23 Center of Excellence for Independent Validators (CEIV) in Pharmaceutical Logistics Ronald Schaefer, Assistant Director, Cargo / Ground Operations + CEIV Consulting, IATA 23

24 CEIV Pharma To ensure the integrity of the product throughout the supply chain OBJECTIVES Prevent sanitary issues caused by temperature excursions during transportation. Improve handling of pharmaceutical products and compliance with existing regulations + standards. Ensure product integrity Elevate level staff competency through efficient and robust training program. Create a global and consistent certification that industry can rely on. 24

25 CEIV Pharma Targets Who does CEIV Pharma target? The supply chain Trucking Companies Freight Forwarders Distributors Ground Handlers Airlines Airports 25

26 CEIV Pharma The Standard Ronald Schaefer, Assistant Director, Cargo / Ground Operations + CEIV Consulting, IATA 26

CEIV Pharma Standard CEIV Pharma standard focuses on global coverage and

regulations and standards e.g. EU GDP. covers GDP requirements.

27 CEIV Pharma Standard CEIV Pharma standard focuses on global coverage and universality IATA GUIDELINES GOOD DISTRIBUTION PRACTICES LOCAL + REGIONAL GUIDELINES + + E.g. Singapore GDP & GDPMDS or FAGG in Belgium = = CEIV Pharma: encompasses various regulations and standards e.g. EU GDP. covers GDP requirements. aims at covering international standards and country-specific requirements. aims at reducing the number of audits or simplifying them. aims to align air cargo stakeholders needs. 27

28 CEIV Pharma Standard Review, compare against best practice, offer recommendations for change, identify and mitigate risks, develop implementation plan Criteria applied Quality management Personnel Training Documentation Infrastructure + equipment Operations Complaints, returns and counterfeit Supplier management Self-inspections Transportation Specific provisions for brokers Issues tackled Content of manuals and guidelines Procedures for Audits Procedures for describing packaging systems Acceptance checklist quality and operating agreements Packaging requirements Documentation & labeling Acceptance & control Facilities and equipment Staff training requirements Training adequacy and currency 28

29 CEIV Pharma Certification Ronald Schaefer, Assistant Director, Cargo / Ground Operations + CEIV Consulting, IATA 29

Certification Approach and Methodology IATA will certify companies in several steps Preparation 3 Assessment 4 Validation Assemble team Prepare project logistics Send data and information request

Establish findings and offer recommendations for change Develop implementation plan and secure resources Draft gap analysis report On-site visit by an Independent Validator to ensure full compliance

30 Certification Approach and Methodology IATA will certify companies in several steps Preparation 3 Assessment 4 Validation Assemble team Prepare project logistics Send data and information request Send interview request sheet for first visit On-site assessment by Independent validator Assessment versus minimum IATA Temperature Controlled Audit Checklist Comparison against best practice Establish findings and offer recommendations for change Develop implementation plan and secure resources Draft gap analysis report On-site visit by an Independent Validator to ensure full compliance with the IATA CEIV Pharma checklist and also review the progress made against recommendations during the assessment phase Drafting of report 2 6 Training required for certification 5 Certification Additional Training 30

Training required for certification Successful completion of

for certification Temperature Controlled Cargo Operations

Cargo Successful completion of: 2 key personal on the audit

31 Training required for certification Successful completion of the courses is essential for certification Training required for certification Temperature Controlled Cargo Operations Audit, Quality and Risk Management for Temperature Controlled Cargo Successful completion of: 2 key personal on the audit training (5 days); and 2 competent personal on the handling training (3 days). 3

Certification Timeline (general approach) Preparation 4-6 weeks Assessment 2-26 weeks Validation 2 days on-site Timeframe depends on results of assessment.

32 Certification Timeline (general approach) Preparation 4-6 weeks Assessment 2-26 weeks Validation 2 days on-site Timeframe depends on results of assessment. -2 days onsite Training required for certification Additional Training 4-2 weeks Ideally completed before assessment. Needs to be completed before validation. 2 months after certification 32

33 Recertification Recertification will take place every three years includes assessment and one refresher training plus a validation if necessary "CEIV Pharma Certified" Re-assessment 3 years - 2 days X Close gaps Validation - 2 days One Refresher Training e.g. update on new regulations, development on new standards, development of new containers, etc. 33

34 CEIV Pharma Approach Ronald Schaefer, Assistant Director, Cargo / Ground Operations + CEIV Consulting, IATA 34

35 CEIV Pharma Certification Approach There are different approaches to obtain certification Individual Community Coalition One company decides to get "CEIV Pharma Certified One or several stations A group of companies at one airport decide to get "CEIV Pharma Certified" Form a pharma gateway Supply chain approach A group of companies decide to get "CEIV Pharma Certified" at several airports to form several pharma gateways Supply chain approach 35

36 Project Governance Everyone in the value chain can participate in the certification process Project structure - Who is involved and who can participate? Pharma shippers Example (BRU Cargo) Forwarders with pharma focus Handlers Truckers Facilitators Airlines Regulators TTTF 36

37 CEIV Pharma Main findings + effects Ronald Schaefer, Assistant Director, Cargo / Ground Operations + CEIV Consulting, IATA 37

38 Common Challenges Identified by Independent Validators Misunderstanding of CEIV Scope Lack of Robust Risk Assessment Minimal CAPA / Root Cause Analysis Inadequate Temperature Mapping / Monitoring Deficient Supplier Management Scope supersedes Wholesaler Distribution Authorization (EU GDP) Encompasses more than warehousing activities, for example: Lane Validation Supplier Management for FF towards Airlines as well as Airlines towards GHA at hubs / outstations CEIV covers Road/Air transport and the different processes that involve Acceptance Temporary Storage Warehousing activities Tarmac transportation Aircraft Loading Aircraft Offloading Missing Not structured Not detailed enough Not clearly identified Lack of methodology Requirement now reinforced with ISO 900:205 All deviation from the norm must be investigated More details need to be provided e.g. Not enough to say lack of staff training Often caused by a lack of methodology Level of involvement by Management can vary greatly thereby impacting the quality of CAPA s and/or Root Cause Analysis Documentation not complete, conclusion missing No link with the location and installation of the final monitoring system Often little or no training from the supplier Backup / data recovery system is missing No SLA properly describing system maintenance Often overlooked (e.g. RFS) Internal vs. external supplier confusion Inadequate clarification of requirements through SLA or Quality Agreement Inadequate performance monitoring based on preidentified Key Performance Indicators Inadequate supplier selection criteria Inadequate Supplier Audit, with frequency and type of audits identified in a Risk Assessment March Toronto; Cool Chain Canada

39 Impact of CEIV Pharma Outcome of one program Example E V O L U T I O N O F B R U P H A R M A V O L U M E S T O T A L E X P O R T E X P O R T F L O W N E X P O R T R F S 206 VS % 38% 07% 207 VS % 24% 22% Source: BRU data analysis I M P R O V E D Q U A L I T Y P E R F O R M A N C E P H A R M A A C C E P T A N C E N O N - C O N F O R M I T I E S - 45% I N V E S T M E N T S I N P H A R M A I N F R A S T R U C T U R E F I R S T & S E C O N D L I N E % Source: BRU Pharma Quality Dashboard Source: handler & forwarder dedicated m² pharma warehouses 39

40 CEIV Pharma Status update of program Ronald Schaefer, Assistant Director, Cargo / Ground Operations + CEIV Consulting, IATA 40

CEIV Pharma Development From Pilot to Launch Joint development of Community Concept with BRU Launch of Community Concept at BRU Discussion with SATS about

0 Development of CEIV Pharma Standard.0 Development of CEIV Pharma Standard. and.2 + Guidelines Development of CEIV Pharma Standard.

41 CEIV Pharma Development From Pilot to Launch Joint development of Community Concept with BRU Launch of Community Concept at BRU Discussion with SATS about a Pilot SATS Pilot Official launch of CEIV Pharma program Recertification of CEIV Pharma program Development of CEIV Pharma Standard.0 Development of CEIV Pharma Standard.0 Development of CEIV Pharma Standard. and.2 + Guidelines Development of CEIV Pharma Standard.3 + updated Guidelines Unreliable cargo industry loosing pharma industry: IATA sleeping All companies of the first community will undergo recertification 09/3 /3 0/4 03/4 05/4 07/4 09/4 /4 0/5 03/5 /7 4

42 CEIV Pharma Checklist CEIV Pharma checklist and guidelines will be included in IATA s Temperature Control Regulations as Annex CEIV Pharma Audit Checklist CEIV Pharma Audit Guidelines 42

43 Visibility for CEIV Pharma validated entities Validated entities are visible on IATA s website 43

44 CEIV Pharma (Certified Entities) Certified Pharmaceutical Trade Lanes Development Locations 0 27 Certification Completed Certification in Progress (estimate) Certification under discussion * * Estimate 44 Q2 208

45 CEIV Pharma (Certification in Progress) Pharmaceutical Trade Lanes Development Locations Certification Completed Certification in Progress (estimate) +99 Certification in Discussion * * Estimate 45 Q2 208

CEIV Pharma (Certified) North American Community Chicago Cincinnati Los Angeles Miami Philadelphia Puerto Rico Locations 35 Certification Completed (2 x LATAM (Airline + MIA Station)

46 CEIV Pharma (Certified) North American Community Chicago Cincinnati Los Angeles Miami Philadelphia Puerto Rico Locations 35 Certification Completed (2 x LATAM (Airline + MIA Station) Certification in Progress Atlanta (2X) Boston Chicago Columbus Dallas Indianapolis Kansas City Lester Los Angeles Miami New York Puerto Rico Saint Louis San Diego San Francisco Tampa 46 Q2 208

47 CEIV Pharma (in progress) North American Community Locations 35 Certification Completed Certification in Progress 47 Q2 208

48 Transforming Challenges into Success The importance of partnerships 48

49 Next Steps Refining Pharma Requirements 49

50 Excellence is not a destination; it is a continuous journey that never ends Brian Tracy 50

staff competency through training Provide Visibility and Transparency of

51 CEIV Opportunities Prevent operational issues and enhance infrastructure Improve handling in compliance with existing regulations & standards Elevate the level of staff competency through training Provide Visibility and Transparency of Certified Entities Recognize Specialized Entities Communication and Information sharing 5

52 CEIV Opportunities Industry Leverage of Quality & Excellence Live Animals Pharma Security

53 CEIV Live Animals Industry feedback is driving improvements Call for more enforcements and compliance with the Live Animals Regulations as well as quality services! Reduce Animal Stress, Injury & Death Improve Compliance with Standards & Regulations Raise the professionalism in the industry 53

CEIV Live Animals IATA Live Animals Regulations (LAR) IATA s LAR is the worldwide standard for transporting live animals by commercial airlines.

54 CEIV Live Animals IATA Live Animals Regulations (LAR) IATA s LAR is the worldwide standard for transporting live animals by commercial airlines. All persons who transport, accept, handle or load animals must be familiar with the specific requirements for the individual species to ensure that animals always travel in safe, healthy and humane conditions. IATA LAR have been adopted by a number of countries as their national regulations; International Organization or Governmental Agencies such as the OIE, CITES or USFWS all reference the IATA LAR as the guidelines that must be followed for the carriage of live animals by air; The European Union has adopted the IATA LAR as the minimum standard for transporting animals by air that member states need to comply with. 54

55 CEIV Live Animals: The Standard IATA combined its own LAR with other local and regional guidelines IATA GUIDELINES LOCAL + REGIONAL GUIDELINES + 55

56 CEIV Live Animals IATA strategy Strategy Promote a uniform approach for the transport of live animals. Protect the health and welfare of animals globally Improve animals health and welfare appropriate risk management. Enhance capability of modern live animals transportation. Strategy Reinforce trust through transparency and communication. The strategy includes many steps to improve standards and ensure that they serve their target: the animals welfare and Health 56

Training Validation CEIV Live Animals: Project Approach and Methodology IATA will certify companies in several steps 2 Preparation 3 Assessment 4 Validation Assemble team; Prepare project logistics;

On-site assessment by Independent Validator Assessment versus minimum IATA Live Animal Audit Checklist; Comparison against best practice; Establish findings and offer recommendations for change;

57 Training Validation CEIV Live Animals: Project Approach and Methodology IATA will certify companies in several steps 2 Preparation 3 Assessment 4 Validation Assemble team; Prepare project logistics; Send data and information request; Send interview request sheet for first visit. 4 weeks before assessment. On-site assessment by Independent Validator Assessment versus minimum IATA Live Animal Audit Checklist; Comparison against best practice; Establish findings and offer recommendations for change; On-site visit by an Independent Validator to review progress made against recommendations during the assessment phase. Drafting of report. Min 6-8 weeks after the assessment. 5 Certification Develop report, implementation plan and secure resources. 6 Training required for certification Additional Training Prepare logistics for in-house or register for class room session; Conduct training and pass exam. Before assessment. Train remaining staff. 57

58 Questions and Answers Ronald Schaefer, Assistant Director, Cargo / Ground Operations + CEIV Consulting, IATA 58

59 THANK YOU For further information, contact: Ronald SCHAEFER Assistant Director, Cargo / Ground Operations + CEIV Consulting, IATA Miami, FL SchaeferR@iata.org Tel: Mob:

Chicago, The Gwen Hotel, 21 September HPCLC; Chicago, IL, USA; 21 September 2016

Chicago, The Gwen Hotel, 21 September HPCLC; Chicago, IL, USA; 21 September 2016 Chicago, The Gwen Hotel, 2 September 206 2 September 206 Background: The impact of mode shift on pharmaceutical logistics The pharmaceutical industry has relied heavily on the airline industry for its