Pharmaceutical companies run two types of supply chains. There is the commercial supply chain where drugs that have been approved for use on patients are shipped to distributors, drug stores, and hospitals around the world. Then there is a clinical trials supply chain. Drug companies hold clinical trials to prove the safety and efficacy of their drugs. If national drug agencies approve the drug, that drug can then be sold in that nation.
Until talking to Antonio Tramontano, the senior director of digital strategy in R&D clinical supply at Novartis, I had not realized how critical this supply chain was to pharmaceutical companies. Mr. Tramontano gave me permission to cite him in this article, but he wanted to make it clear that all opinions expressed were his own.
The clinical trials supply chain would be much smaller. The smaller size should therefore make this supply chain much less costly, which would limit the savings that could be achieved through digital automation. Further, my impression is that the clinical trial supply chain would not be too concerned with costs. My supposition was that large inventories would be kept allowing for almost 100% service levels; this would make the jobs of supply chain planners almost simple. In short, I viewed this supply chain as much less important than the commercial supply chains that supply prescription and over the counter drugs.
Clinical Trial Supply Chains Must Be Reliable
Mr. Tramontano explained the economic realities to me. The cost of drug development is the full cost of bringing a new drug to market from drug discovery through clinical trials to approval. Typically, companies spend tens to hundreds of millions of U.S. dollars on drug development. But then tens of millions more must be spent on Phase 1 through 3 trials. The mean cost of developing a new drug has been the subject of debate, with recent studies estimating that the costs range from $314 million to $2.8 billion. The most recent study estimated that the median cost of getting a new drug to market was $985 million, and the average cost was $1.3 billion.
Although patents are good for 20 years after the invention of the drug, according to Mr. Tramontano it takes on average 6 or 7 years for a pharmaceutical company to do enough testing for approval from the U.S. Food and Drug Administration. The US is the most lucrative market for drugs and thus achieving approval in the US is a critical hurdle. This leaves 13 or 14 years of drug exclusivity. In practice, since competitors are vying to bring similar drugs to market, a pharma company may only have 3 or 4 years in which to drive the bulk of their revenues from a new drug.
If you deliver the wrong product to a clinical trial testing site, or you don’t deliver the drugs in a timely manner, that becomes a deviation. A deviation can trigger actions that lead to an extended trail period. “In this lengthy process,” Mr. Tramontano points out, “we have to always be precise and accurate.” If an efficiently run clinical supply chain leads to a drug hitting the market one year earlier than it otherwise would have, that can lead to hundreds of millions in additional revenues. In short, effective fulfillment dwarfs all other benefits for this supply chain.
But Mr. Tramontano points to another advantage. Increasingly, pharma companies are going to be selling personalized medicine. Personalized medicine involves using genetic biomarkers to make treatment decisions about patients. These could include decisions about who should get certain kinds of therapies or what dosages a patient should get. When commercial supply chains start to sell these types of drugs, they move to a direct fulfillment. This, Mr. Tramontano explained, “is the traditional model of a clinical supply chain.” With personalized medicine, the commercial chain will have to ship to individual patients with very short lead times and with 100% accuracy. In short, they will have a supply chain that mimics the clinical trial supply chain.
New Capabilities Drive Speed to Market
In 2017, the commercial supply chain team at Novartis implemented a supply chain planning (SCP) solution from Kinaxis called RapidResponse. They got good results from that implementation. But the clinical trial supply chain is a very different supply chain with different needs. Would Kinaxis also support the needs here?
Mr. Tramontano had been part of the commercial supply chain that had implemented Kinaxis. He understood the solution’s capabilities and believed it could be a good fit for what the clinical supply chain team wanted to accomplish. They spent a couple of months with their consulting partner Genpact and came to the conclusion it could be an effective solution and having a SCP from the same supplier would simplify their IT landscape and better allow for a single source of truth.
They kicked off the Kinaxis implementation in October of 2020. These are different SCP solutions, so the supply chain models, the digital twins, are different. The commercial model is more focused on bulk deliveries in the outbound supply chain. The clinical trial supply chain has a greater focus on visibility to inbound shipments from supply chain partners.
New clinical trials are not always about proving the efficacy of a brand-new drug. Often, trials for existing drugs are undertaken to prove that an existing drug can be an effective treatment for other medical problems that were not addressed in the initial clinical tests. Having visibility to the supply of existing drugs on the commercial side of the business is a boon to the clinical supply chain team for these kinds of trials.
Rapid Response has proven to be “an enabler for us,” Mr. Tramontano explained, “by having more real time data and being able to do for scenario planning, then we can adjust our supply to continuously changing demand.”
On the commercial side of the business, there is historical sales and shipping data. This makes demand forecasting viable. On the clinical trial side of the business, there is no historical data and if clinical was to try to forecast, they would be forecasting at the individual patient level; this is much more difficult than forecasting at a higher level of demand aggregation. The clinical trial supply chain team must therefore repeatedly adjust to a changing demand picture while ensuring that drugs are delivered before their expiration date. This makes the need for agility, which is enabled by real time data and scenario planning, a critical necessity.
Mr. Tramontano contrasted the agility that is possible with Kinaxis with what the case before the implementation had been. Before the implementation, the process was just too slow. If there was a problem, “before Kinaxis, a number of hours would be required to pull the right data from a variety of systems. Then I (would) need to model these in Excel. I would need to discuss the findings with someone. Then I make a decision. But perhaps in the meantime things have changed.”
It is still somewhat early in the journey, but Mr. Tramontano believes the company is on track to cut inbound lead times by 30%. This will improve the company’s ability to have zero stock outs and hit 100% service levels. Doing this allows them to run clinical trials that have no service deviations. And that, in turn, will improve the speed to market! And for this supply chain, speed to market is where the biggest savings from improved supply chain planning occur.