Growth of Third Party Logistics

IMPACT ON THE PHARMACEUTICAL INDUSTRY

Mitchell Goldberg, MG Associates

mitchellgberg157@gmail.com

Mitchell Goldberg, MBA Sales, Marketing, and BD within

generic and branded pharma Industry Consultant Resident of Bucks County, PA

Agenda

Logistics Defined Overview: Mfg. Concerns Manufacturer Challenges 3PL Solutions Deeper Dive International 3PL Affecting Trade

Third Party Logistics: Defined

Traditionally…pick, pack, ship product; warehousing, accounting, risk mitigation

The use of an outside company to perform all or part of a firm’s materials’ management and product distribution functions

Utilizing a Third Party’s unique distribution and back office services so pharma stays focused on R&D and Manufacturing

Growth

‘Noise’ too loud to ignore Specialty prods are 40% of drug spend 2018- 7 of top 10 selling drugs will

need unique logistics distribution 3PLs/SPD’s offer solutions

Healthcare Mfg Concerns

Pressure to reduce costs New geographies and market channels Emerging markets = uncertainty Increasing scrutiny/regulation More specialty and life saving products Processes not aligned with business

Challenges for Brand Mfg

New reality Flexibility and complex distribution Too reactive Ex-U.S. and emerging markets strain

traditional distribution processes Distribution ties up cash

Solution: Logistical Changes

Turned over 2 DCs to a 3PL Reinvented the process Organized business around Healthcare Specialty distribution…unique solutions …ironically, biggest challenge faced?

Challenges for Big 3

Customers evolving Increasing need for creative solutions Mgmt becoming more sophisticated Treat as partners, not transactional Want strategic expertise from them

Solution: More robust SPD

Re-invented; created multiple platforms Better inventory positioning Better product security Transportation efficiencies Wholesaler invested in infrastructure Mutually beneficial relationships

Challenges for start up generic

Scientists…no commercial experience Lacked warehousing/distribution No back office experience Cash flow issues

Solution: Full service 3PL

Full suite of services Understood generic challenges Provided customer a feeling of trust Helped them commercialize Committed to company’s objectives

Deeper Dive: Two types Traditional…Distribution and services Playing strategic role/business partner W’salers; RxCrossroads; UPS; Masters SPDs meeting the demands of Specialty

product proliferation Besse; ASD; UPS Global; Curascript,

McK SP; Onocologic Supply, Cardinal

3PL’s Capabilities and Services

Quality IT Distribution Back office Transportation options

Initial Steps

RFI/RFQ Who are they? What are their capabilities Vendors in similar classes of trade Expect to perform Detailed questionnaire from them…

Client’s Checklist

Transportation mode selection Facility validation and licensing Audits and Certificates Employee training Monitor shipments

Service Agreement

Mutual agreement of definitions Obligations of each party Legal remedies if… Term and Termination Fees and Expenses

To 3PL or not…

Logistics = core competency Cost reductions not realized Control diminishes Logistics too important Service levels not realized

Specialty’s deliverables

Regulatory: Multiple licenses Cold Chain Management- Monitoring

controls; real time & historical data Fully validated and monitored sensors Control room temperature Refrigeration maintained Measureable metrics

Specialty’s challenges

Complexity of your product’s flow Each Specialty launch is unique;

demands different strategy Restrictive channels maintain integrity Rise of ‘Specialty Pharmacy’

Summary- Fundamental Needs of Life Sciences

Visibility Quality procedures Inventory control Temperature sensitivity capabilities Compliance with regulations Security Audit capabilities

Success factors

Openness, transparency, and good communication

Agility/Flexibility: Accommodate current and future business needs/challenges

Risk sharing

International Perspective

3PL’s are booming Reach Expertise Reliability Flexibility

Europeans lead the way

3PLs Revenues exceed US based comps History Empire Builders Export Expertise

Bigger is Better: Europe’s Way

Want to play in same sandbox Lack of 3PL’s in Emerging markets Expansion by acquisition

Affecting Trade (WIIFM)

Parallels ongoing changes unfolding in Trade & Supply Chain responsibilities

Become well versed in the capabilities and deliverables

Sell value of Trade/SC; become ‘expert’ Gain a seat at the table Be a strategic and tactical consultant

within your own companies

Affecting Trade

Coordinate contracting Work across multiple disciplines Build reputation/added responsibilities Become ‘go-to’ resource for analytics

Importance/role 3PLs Growing

Thank you Questions, comments MG Associates; mitchellgberg157@gmail.com; 267.679.3008