Katie G

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Gabby – thank you for sharing this thoughtful piece on the opportunity our current regulatory environment presents to US-based contract manufacturing organizations to enter the drug manufacturing space.

While I agree that the threat of Trump’s statements about pharmaceutical companies could ultimately push some production domestically, I struggle to believe that US companies will be able to respond in a way that makes domestic production cost-effective. Patheon is smart to consider ways that it could capture some of the potential demand given its pre-existing fixed-cost assets, but if I were management I would hesitate to expand capacity until I saw a more clear and definite change in regulation. The risk of investing in greater capacity that goes unmet is real, as is the risk that regulatory changes do not last beyond the current administration after which incentives could quickly shift back towards international production. In my opinion, the key success factor for any pharmaceutical manufacturer is finding ways to be the lowest cost provider of drugs — something that US-based manufacturers are unlikely to achieve any time soon.

Jojo – this is a very well thought out view on the risks our current regulatory environment poses to Constellation Brands and many similar US-based companies who depend on an international supply chain and global brands.

It is interesting to read about Constellation’s outwardly calm reaction. To me, this re-iterates the importance of the leadership’s stated concern (or non-concern) as a signal to the market — something we talk about often in our courses. That said I do think it is critical that Constellation invest time and resources in understanding how they will respond to changes in NAFTA and tariffs. It is plausible that the Trump Administration will follow through on its promises despite pressure on legislators.

To me, it does make sense that Constellation is simultaneously investing in expansions in Mexico given the low-cost advantages it offers as well as the need to keep a significant amount of production “local” for their Mexican brands. I would argue that this investment should be coupled with a marketing and distribution push to expand access to their Mexican brands in countries outside of the US, potentially in LatAm and Asia where there is economic growth and the market is less saturated than Europe.

Courtney – this is such an interesting and well-articulated piece on the challenges and opportunities to transform clinical trial recruitment through digital platforms like that of Acurian. I had no idea that this step in the drug development supply chain was so inefficient and costly and I can only assume that the costs incurred in recruitment often trickle down to the final price of the drug, impacting patient access.

I am in agreement that there needs to be a paradigm shift in the industry around pricing for Acurian’s solution to achieve its mission of improving the cost and time horizon of clinical trials. I worry that Acurian will need to invest significantly to make this shift happen which could be problematic from a business sustainability perspective and create space for competitors to enter. Ultimately, Acurian will need to differentiate itself on its proprietary digital capabilities – how can it capture the most patient data and use it in a way that generates more value for drug developers than its competitors can? I also wonder how digital platforms like this can be used to increase access to clinical trials for underserved patients – those in rural areas or emerging markets in particular. I look forward to seeing the evolution of this space in the coming years.

Katharine – your piece is fascinating and highlights the unique challenges found in supply chains when funded by the public sector. Unlike traditional markets, demand for a product does not necessarily entice supply. As you have pointed out, without adequate funding, supply chain cost efficiency becomes an absolutely crucial lever to try to maximize the number of life-saving products reaching populations who need them.

It is interesting to consider how UNICEF might mitigate the concerns that climate change creates for both supply and demand of RUTFs. I worry that some of the solutions they are already engaged in will be effective – for example, while focusing on local production could reduce costs and time to market, climate change could very well limit production capabilities in local markets. For example rising temperatures are already preventing the adequate growth of peanuts, a key RUTF ingredient, in Haiti and causing countries like the US to “dump” these ingredients in-country, exacerbating local production challenges by putting small farms in a precarious position. (https://www.npr.org/sections/thesalt/2016/05/05/476876371/u-s-to-ship-peanuts-to-feed-haitian-kids-aid-groups-say-this-is-wrong)

On December 1, 2017, Katie G commented on Amazon – In Prime position for the last mile :

I completely agree with your assessment of some of the challenges that Amazon will face in digitizing its supply chain for the last mile. In addition to the potential issues of privacy, unfavorable regulation, and imperfect algorithms, I wonder whether Amazon will truly be able to roll out this suite of digital products and services cost effectively at the last mile. I do not doubt Amazon’s ability to build or acquire the technologies, but rather fear that they will be unable to find cost-efficiencies as they continue to be at the frontier of new technologies which today are quite costly. Given that we are focused on the last mile where cost savings are key to success, Amazon will need to think not only innovatively, but also in a lean and streamlined way from a cost perspective which it has not necessarily done across its business to date.

Your question as to whether it is possible for Amazon to become a true market leader in logistics without raising regulatory red flags is a good one. I have no doubt that antitrust lawyers are already tracking Amazon’s every move. In fact, this summer the acquisition of Whole Foods seems to have triggered at least some anti-trust concerns* that are unlikely to go away as Amazon continues to buy up companies that offer threatening or complementary customer promises, including in the logistics realm.

*Graham, Jed. “The Amazon Monopoly Problem: Prime Time For Antitrust Action Vs. Internet Giants?” Investor’s Business Daily, 18 Sept. 2017, http://www.investors.com/news/technology/amazon-monopoly-problem-antitrust-action-vs-amazon-facebook-google/.In-text

On December 1, 2017, Katie G commented on H-E-B vs. Hurricane Harvey: A Case Study in Crisis Response :

Graham – this is a really unique perspective on the role of climate change on supply chains and the opportunity it presents for private actors to “do well by doing good” in the wake of climate-induced events.

Reading about H-E-B’s emergency supply chain planning and response got me thinking about what other types of organizations – private and non-private – could learn from them. For example, how can a non-profit hospital make rapid adjustments to their inventory deliveries to stock the supplies and medications in preparation for a major climate event, and could the resulting ability to treat patients more effectively result in cost-savings? It also begs the question of what other players could be doing to leverage their existing assets to support disaster response – could Enterprise or Avis for example lend out a fleet of rental SUVs to support the transport of people and supplies in and out of a partially flooded city?

I love your proposal that H-E-B could take its efforts a step further by partnering with suppliers to enhance the supply of climate-resilient foods. It recognizes that H-E-B’s powerful emergency response framework does not only benefit H-E-B financially, but it could also serve as a source of competitive advantage for its suppliers and other supply chain partners who can follow suit.