It’s been clear for some time that the life sciences supply chain business model is undergoing a fairly radical change, moving from a stock-based model, where companies would stockpile products for distribution, to an order- or customer-based model.
By Rick Ruiz, Partner, CSC Life Sciences
Perhaps of more importance is why is this happening and how is it manifesting. At a high level, personalized medicine is a huge driver in requiring companies to create a nimble and responsive supply chain. When this happens, physicians win, patients win, payers and insurers win, and the company supplying the product wins.
A very good example of a responsive supply chain can be found in the medical product arena. In the past, a medical device company would send an off-the-shelf product such as a replacement hip or knee to a surgeon for implant in a patient. A few years later, the patient would start to develop pain or problems with the device, and it was determined that the patient’s biologics or skeletal frame didn’t quite match the device. Then surgeon would go back in, modify the device and re-implant it.
A Customized Approach
But that’s not a very cost-efficient, productive or patient-friendly way to manage health. Now, technology has enabled a few short steps from using an image to implanting a device, in which an MRI is taken of the body part where the implant is required, that image is then sent to the producer of that device, who then customizes it using technology, such as 3D printing. The customized product is then sent back to the physician for implant.
None of this is possible, however, without completely remodelling the supply chain toward an order-based model. An agile, next-generation supply chain requires the coming together of all these key steps: personalized patient data, the ability of the manufacturer to support custom build, the delivery of that custom build to the right place at the right time, and – crucially – for data to flow up and down the supply chain efficiently.
A streamlined, interconnected supply chain benefits the entire value chain:
- The patient gains a better health outcome with a properly fitted device
- The physician is able to demonstrate positive outcomes – a crucial factor with the medical affordability act pushing toward value-based reimbursement
- The medical device company builds its rapport with customers and also reduces the costs associated with sending out additional accoutrements needed with generic devices, because the more you know about the patient and the operation, the fewer additional devices that will be required – leading to lower overheads
A more nimble supply chain is also able to respond to the demands of insurers. Increasingly, insurance companies are placing limits on paying for post-operative activities. So while in the past patients would have subsequent surgeries to make modifications to implanted devices, insurers are now looking for some customization of the implant prior to surgery to avoid this duplicative costs.
Regardless of whether we’re talking about a device or a medicinal product, it’s about the supply chain’s ability to be flexible, to assess and respond to new information, to customize the device or medicine and get it out in a timely manner, and to track it according to the relevant compliance and regulatory requirements.
In this new, more nimble environment, life sciences companies need to be more in tune with the end point rather than perpetuate the inventory model. That helps to drive down cost because rather than stockpiling product, companies are reacting to external demand and engineering to order.