Pharmaceutical Supply Chain and What To Know About It

5 min

Manufacturers, wholesale distributors, and pharmacy benefit managers are among the many stakeholders involved in the pharmaceutical supply chain (PBM).

MHRA approved warehousing UK has a lot riding on this complicated process. Incorrectly distributed drugs have an impact on the company’s reputation, customer satisfaction, and potential profit. According to a Kaiser Family Foundation report, an ineffective supply chain can disrupt patients’ healing processes and have negative consequences for public health.

Pharmaceutical supply chain challenges include supply chain visibility, drug counterfeiting, cold-chain shipping, and rising prescription drug prices, which can significantly increase patients’ out-of-pocket costs.

PharmaNewsIntelligence breaks down the fundamentals of the pharmaceutical supply chain in the following article to uncover strategies for overcoming the most common challenges and ensuring patients have consistent access to their medications.

What is the Function of the Pharmaceutical Supply Chain?

According to an Avalere report, the pharmaceutical supply chain has five basic steps to ensure that drug inventory is readily available for distribution to providers and patients.

These are the five steps:

1. Pharmaceuticals are made at manufacturing facilities.

2. Are distributed to wholesale distributors

READ MORE: FDA Issues Update on Coronavirus Supply Chain

3. Retail, mail-order, and other sorts of pharmacies stock it.

4. Subject to price negotiations and screening by pharmacy benefit management companies for quality and utilization management.

5. Pharmacy-dispensed medications are delivered to and taken by patients.

The basic structure of the pharmaceutical supply chain has various modifications, according to academics, owing to the continually changing stakeholders in the supply chain.

The pharmaceutical supply chain network’s key players ensure that it runs smoothly and efficiently. Manufacturers, wholesale distributors, pharmacies, and pharmacy benefit managers are among the players.

A pharmaceutical company should supply a quantity of its products that is about proportional to the demand from consumers/patients. The actual distribution of medications from facilities to drug wholesalers or directly to retail pharmacy chains, mail-order and specialty pharmacies, hospital chains, and some health plans is then managed by these producers.

According to experts, pharmaceutical makers have the biggest control over pharmaceutical prices because they evaluate expected demand, future competition, and estimated marketing costs to determine the wholesale acquisition cost (WAC).

Wholesale distributors, who buy pharmaceutical items from manufacturers and distribute them to a variety of clients, including pharmacies, are the next stop on the network.

Some wholesalers sell to a wide spectrum of customers, while others specialize in selling certain products, such as biologics, or selling to specific sorts of customers.

PBMs are the supply chain’s next big players. PBMs have become an important part of most consumer medicine purchases, despite not being a direct connection in the physical supply chain for pharmaceutical items.

PBMs collaborate with third-party payers to manage consumer drug purchases by determining which drugs will be covered and how much the pharmacy will be paid. Based on the rebates it negotiates with other supply chain stakeholders, this player also determines how much the consumer must pay out-of-pocket when the prescription is filled.

Pharmacies are the last stop before drugs reach patients, and they are arguably the most important because they serve as the information hub for PBMs, drug manufacturers, and wholesalers.

Pharmacies buy drugs from wholesalers or manufacturers directly. Following product purchase, pharmacists must keep a sufficient stock of drug items and provide consumers with information on the safe and effective use of prescription drugs.

Drug Costs and the Pharmaceutical Supply Chain

The pharmaceutical supply chain has a significant impact on medicine prices. Consumers will see greater out-of-pocket costs, while health plans will see higher prescription spending.

The complexity and quantity of actors participating in the drug supply chain, according to a report by the Pharmaceutical Research and Manufacturers of America (PhRMA), may be one of the main reasons prescription drug costs are making headlines.

According to the research, prescription medications are heavily reliant on various discussions involving wholesalers, pharmacies, pharmacy benefit managers, and insurers. The authors noticed that while rebates have increased in recent years, patients’ out-of-pocket payments have risen dramatically.

According to a Time article, the amount an individual pays for a brand-name prescription is determined by their insurance plan, the drugs it covers, the size of their deductible, and the contract their insurance company has made with the drug’s manufacturer.

According to the researchers, health plans with high deductibles or coinsurance have become more popular, which means more patients have greater out-of-pocket expenditures and may not be able to profit from negotiations because their co-payment is based on the list price rather than the negotiated cost.

The study looked at several examples of how a complex supply chain might raise prices for patients.

One of the scenarios is a patient who was prescribed an HIV treatment with a list price of $3,000 and was given the drug. Despite receiving a 20% rebate, the patient’s coinsurance is $612 because it is based on the list price.

The patient is thus required to pay an additional $100 beyond what they would have paid if the coinsurance had been calculated using the negotiated pricing.

According to a research by the National Community Pharmacists Association (NCPA), rising generic medicine prices have harmed practically everyone in the pharmaceutical supply chain.

Consumers will see higher co-pays and costs, while health plans will see increased prescription spending. Physicians are increasingly prescribing alternative medicinal therapy, while patients are sometimes refusing to take their drugs owing to rising costs.

Both providers and customers face risks and problems in the pharmaceutical supply chain. However, in a health-conscious society, pharmaceutical supply chain management is complicated by the fact that it involves life-saving medicines that are essential to patients.

The Most Serious Pharmaceutical Supply Chain Issues

Although the pharmaceutical supply chain has achieved success, it still confronts numerous hurdles.

According to a report from Imperial College academics, all organizations with an efficient supply chain follow a four-step process that includes demand management, inventory management and distribution, secondary production planning and scheduling, and primary manufacturing.

Lack of coordination, inventory management, missing demand information, human resource dependency, order management, temperature control, and shipment visibility were all mentioned by the global information analytics business.

The “Forrester effect,” for example, is a crucial business step that involves analyzing any supply chain disturbances. The Forrester effect, on the other hand, is visible at the primary manufacturing site, which poses a challenge because it is the least responsive part of the supply chain, according to researchers.

This makes it difficult for firms to respond effectively to issues like supply shortages, national supply bids, and epidemics.

Recently, researchers from Northeastern University and MIT’s Sloan School of Management identified solutions to address medicine shortages. One typical response, according to a study published in Complexity, is to store extra inventory to ensure that more items are accessible to treat patients in the case of a product recall.

Financial mitigation, operation mitigation, and operational contingencies are among the strategies mentioned by the researchers for mitigating the effects of disruptions.

“Mitigation methods are those in which a company takes action in advance of a disruption and bears the expense of that action regardless of whether or not the disruption occurs.” The literature on supply chain disruptions also looks at operational methods including inventory management, multiple sourcing, and production flexibility,” the researchers added.

Researchers at Imperial College Science, Technology, and Medicine revealed more specific challenges, such as unpredictability in the pipeline of new medications. Specifically, which medications will succeed in clinical trials and what dosages and treatments will be most effective.

This year, PWC produced a research stating that the pharmaceutical supply chain needs to undergo a “radical revamp” in order to fulfill the demands of a growing market.

Researchers say the makeover will involve more diversified product types and therapies with shorter lifecycles, new means of assessing, approving, and monitoring medications, a greater focus on outcomes, new healthcare delivery models, and other changes.

Overall, the pharmaceutical supply chain is critical in ensuring that patients receive the medications they require without experiencing any stress or delays. Despite the hurdles that the supply chain faces, organizations can take the essential steps to ensure a smooth transition from product manufacturing to patient delivery.

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