Pfizer’s digital supply chain transformation: innovation or necessity?
Faced with increased price and regulatory pressures, the pharma industry is forced to look to other avenues for revenue growth, including digitilization of its historically unwieldy and heavily regulated supply chains. Is industry leader Pfizer doing enough in this pursuit?
The pharmaceutical industry is a global, growing industry with worldwide revenues exceeding one trillion dollars. Prices consumers pay for drugs also continue to grow at staggering rates, casting the industry’s efficiency woes under a spotlight. Amidst the growing awareness and discourse surrounding health care policies and reform, a large area of potential improvement in the pharmaceutical industry remains largely untapped: its supply chain. The pharmaceutical supply chain is one of the most complex supply chains in the world, given the global nature of the industry and size and scope of companies that dominate the space. It has also been historically unwieldy and resistant to transformation, including technological change. However, the past couple of years have presented both increased opportunity for and pressure to achieve digitization of its supply chains[i].
As cloud and big data technologies advance, it has become increasingly feasible to achieve end-to-end tracking and sophisticated analysis of the supply chain, from initial testing to patient usage. The attractiveness of leveraging these new technologies increase when considering three major trends straining the industry: the rise of generics, increasing volume of prescriptions, and rise of cold chain logistics[ii]. The percentage of generics in the market has been steadily rising and is predicted to make up 92 percent of total prescriptions by 2020. While traditionally depending on blockbuster patented drugs for most of their revenue, companies now must find other ways to make up this revenue. Alongside this rise in generics is a rise in the volume of prescriptions, likely due to effects of the aging population and the amplification of new drug products, making more accurate forecasting and inventory management increasingly paramount. The rise of biologics, which require storage in cold temperatures, are increasing inventory holding costs and further require better demand forecasting. These pressures, along with regulatory serialization mandates that essentially force drug companies to at least have primitive digitization of its supply chain (e.g. the US requires drug companies to serialize each sellable unit to track end-to-end movement of drugs along the supply chain for patient safety reasons), make investing in supply chain digitization exceedingly attractive and necessary[iii].
Pfizer, one of the largest pharmaceutical companies in the world, took note of this changing landscape and first moved its supply chain to cloud in 2012[iv]. In 2015, Pfizer introduced the Highly Orchestrated Supply Network, described in its 2016 Annual Review to achieve “complete visibility into the status of products at all times” and “immediately identify demand – from anywhere in the world – and quickly alert the best production facility to manufacture the product to meet that demand and ensure it is delivered on time” as its ultimate goal over the next five+ years[v]. Pfizer is also looking to move into the e-commerce space for prescription medications in the near future, a task previously limited by the prevalence of paper prescriptions directly from the doctor’s office, but now in portion slowly being replaced by online prescriptions, ordering, and delivery[vi]. The E-commerce space will offer a more direct, less costly way for drugs to move through the supply chain, while offering more granular point of service data for demand forecasting and other analytics.
Pfizer is indeed investing in supply chain digitization, but stepping beyond what is almost a necessity is required to elevate themselves above competitors. Pfizer should turn their focus on how to expand their integrated, cloud-based supply chain information system to emerging markets, where often paper trails and inconsistent internet are still the norm[vii]. As the company and industry as a whole are expanding into these developing markets as a source of continued growth for the future, their full integration into the global supply chain is essential, and can achieve unprecedented synergies of scale with decreased overhead costs and rapid movement of drugs across the chain to adeptly meet demand. Furthermore, in the age of personalized medicine, Pfizer can leverage their more digitized supply chain to collect real time data from patients through various consumer technologies (wearables, phones, etc) for care analytics to iteratively improve treatments. Finally, in order to remedy the conflict between need for speed of delivery and rising inventory holding costs, Pfizer needs to invest in technology of the future, such as drones for same day delivery.
While the potential for efficiency savings is huge with digitization, patient safety is always at the forefront of the drug industry. Will moving into this new age of data analytics and high technology (e.g. drones) be able to sufficiently maintain patient safety and confidentiality and pass federal patient safety requirements? What is the feasibility of complete global digitization in an industry looking for growth in emerging markets? How can Pfizer differentiate itself when digitization is becoming just short from forced onto the entire industry?
[i] PWC, “Digitization in phama, gaining an edge in operations” 2016.
[ii] Allen Jacques, “2017 Trends and Transformations in the Pharma Supply Chain”
FusionOps, December 29, 2016, [https://www.pharmpro.com/article/2016/12/2017-trends-transformations-pharma-supply-chain], accessed November 2017.
[iii] Evren Ozkaya, “Pharma’s Digital Supply Chain Transformation,” Pharmaceutical Manufacturing 2017.
[iv] Paul Taylor “Pfizer moves supply chain to cloud,” Financial Times, September 11, 2012, [https://www.ft.com/content/1608e5d6-fc59-11e1-ac0f-00144feabdc0], accessed November 2017.
[v] Pfizer, 2016 Annual Review, “Transforming Delivery of High Quality Products.”
[vi] “Digitizing the supply chain: Why Pfizer is investing in IoT, drones, and personalized medicine,” January 31, 2017, Internet of Business,
[https://internetofbusiness.com/digitizing-supply-chain-pfizer-iot/], accessed November 2017.
[vii] Allen Jacques, “The Digital Supply Chain: Seizing Pharma’s Untapped Opportunity,” Pharmaceutical Technology (2017) 1: p20-23.
Student comments on Pfizer’s digital supply chain transformation: innovation or necessity?
Having read this interesting article, I thought of the idea of Pfizer providing physicians with visibility to its own inventory and availability on different points of sales as a possible differentiation.
I believe that Pfizer can take advantage of two important trends mentioned in the article, the rise of generics and the shift to e-commerce space for prescription medications, to differentiate itself in digitization. As the main threat for Pfizer in the generics trend is commoditization of medication, the rise of generics may erode the physicians’ desire to write a prescription for a unique, specific medicine. Under these circumstances, a big brand such as Pfizer that its medicines are available on many points of sale across the country might gain a competitive advantage that smaller, generic companies cannot gain. Consequently, Pfizer may cooperate with clinics and physicians, exposing them to online inventory of prescription medication near the patient’s home, thus driving convenience and gaining the patient’s and physician’s trust. During the patient’s visit, the physician will ask the patient where the most convenient place for him to get the prescribed medication is. Exposed to Pfizer’s daily update (and, obviously, not directly to Pfizer’s inventory data base), the physician will then check availability of Pfizer’s medicine and inform the client with the results. This might be a classic example of how a manufacturer cooperates with its client to create value along the supply chain: the manufacturer preserves its market share in a competitive market, reinforcing its customer promise of providing best care in real time across the country; the physician makes sure that her patient takes his medication and gains the patient’s trust; and the patient saves time by being confident that his prescription is available on his favorite point of sale.
A main drawback of this proposal is its compatibility with ethics- too-close connection between a commercial giant and physicians is problematic. However, is there a real difference from today’s close relationships between pharma giants and doctors?
Great article Tracy, thanks for sharing! It’s encouraging to see an industry leader like Pfizer adapting proactively both for its own good and to proliferate access to healthcare/pharmaceuticals. One issue that came immediately to the front of my mind while reading your article was how Pfizer would leverage its new and improved supply chain in different geographies. I’m thinking particularly of emerging markets- the areas that often need access to life saving drugs the most, and have the least capital and and ability to store said drugs. If Pfizer invests heavily in digitizing its supply chain, will it focus only on how to get the best return on that investment, ie channeling drugs more efficiently to the first world? Or will they look for synergies in their newly-efficient supply chain that allow them to use first world markets to subsidize their ability to better provide drugs to emerging markets as well?
Thanks for this post Tracy! The pharmaceutical industry is one that continues to emerge in conversations about improving efficiency and reducing costs in healthcare. As you mentioned, the challenges in the industry range from the complexity of the trials to regulations to patient access. While I do think digitization can minimize some of these issues, such as minimize the hurdle of recruiting participants via cleaner and more accurate data, the most prevalent challenges such as the complexity of the trials and regulations might not be addressed with these changes. .
In addition, it appears that the number of volunteers registering to participate in clinical trials in the US has been declining due to lack of awareness, fear or distrust, and preconceived notions about clinical trials. Physicians also don’t like to engage in clinical trials because they believe standard practices are best, lack of awareness, or the perception that they would lose control over the care of their patient.  I worry that unless digitization can help in educating and eliminating the perceptions, digitization won’t address the root of the problem that the pharmaceutical companies are facing.