Annual UPS survey takes a deep dive into healthcare logistics landscape

The merging of the complex web of healthcare with efficient logistics operations is one that comes with more than a few challenges.

These challenges are spelled out in detail in the fifth annual UPS “Pain in the (Supply) Chain healthcare survey, which was conducted for UPS by TNS, a provider of global market research services, and was based on data and feedback from senior-level healthcare supply chain decision makers in the pharmaceutical, biotech and medical device and supply companies in the United States, Western Europe, Asia, and Latin America.

The survey explained that 83 percent of respondents maintain that the top two planned investments for healthcare companies on a global basis are tapping into new global markets and investing in new technologies, with both of these strategies being employed within 3-to-5 years to do things like increase competitiveness, maintain product integrity, and gain efficiencies, said UPS. And it added that the countries where healthcare companies will most focus their efforts during that time will be China, U.S., Brazil, and India.

Even with an eye on the future the survey highlighted the myriad challenges healthcare decision makers are up against, including a difficult economy, pressures to reduce costs, and increasing regulations and reform.

Regulations were cited by 52 percent of survey respondents as their top business concern, and healthcare reform and other legislative changes was right behind at 51 percent, with intellectual property protection rounding out the top 3 at 48 percent.

And the top supply chain-specific concern was regulatory compliance, according to 65 percent of respondents, with cost management second at 60 percent, with only 41 percent of respondents saying they have had success in managing supply chain costs.

In an interview, Scott Szwast, director of healthcare marketing for UPS, said that this survey serves as a diagnostics tool and helps UPS to better understand what challenges its customers are facing, coupled with what healthcare logistics and supply chain improvements they can make.

“Healthcare is an incredibly large industry,” he said. “It is projected to be a $1 trillion global industry by 2015 (according to IBISWorld data), and it is also one of the most complex businesses in the world, with the products that move through the healthcare supply chain being increasingly sensitive, sophisticated, and valuable. The healthcare supply chain piece of it is around $60 billion.”

The fact that increasing regulations was the top concern among survey respondents was hardly surprising, explained Szwast. The reason for that, he explained, was that it places a higher burden—or bar—to be able to successfully operate.

What’s more, increasing regulations continually cause shippers to change the playing field, in terms of how they manage distribution processes, transportation networks, and in some cases reverse logistics operations.

“In the last ten years, we are seeing that our customers are having to do a lot more than they have ever had to do in their healthcare supply chain,” said Szwast. “They are having to reach a much larger audience in terms of the demographics and where patients being treated and also in terms of where products are being distributed globally. There are challenges with compensation and reimbursement and their ability to get paid for what they do and having to do it with much more sensitive products.”

Regulations also impact how shippers expand healthcare logistics services in countries where they want to expand into, and he said customers are “very concerned” about the implications of changing U.S. regulations and also globally in Asia and Europe, not only related to product distribution but also how healthcare products are dealt with, moved and disposed of and what the reverse logistics implications are. Szwast noted that there are as many regulations related to reverse logistics aspects of the healthcare supply chain as there are for forward distribution processes.

The United States Affordable Healthcare Act law received a mixed response among survey respondents. 38 percent said they were cautiously optimistic of progress, with 26 percent having a negative view, and 22 percent indicating they were neutral.

“This legislation will create significant opportunities and significant challenges,” said Szwast. “Its key goal is to extend healthcare coverage and make it broader, with the individual mandate and expansion of Medicare, which were both upheld by the Supreme Court. The latter part is expected to add 18 million new patients to U.S. coverage rules. These additional 18 million patients creates a significantly larger universe of covered patients for healthcare manufacturers and distributors and care providers to serve. That is a good thing but also a challenging thing, because some specifics of the law mandate ways in which particular products are made available to patients as well as specific ways in which they are delivered. It also puts some additional operational burdens on companies, including a 2.3 percent excise tax on medical device manufacturers on the first sales of any medical device, which will definitely impact the operational profitability of these products.”

But even with the additional tax, Szwast these manufacturers will have access to a significantly expanded universe of patients with healthcare coverage

Another one of the most interesting changes UPS saw annually in the survey, according to Szwast, is how much healthcare supply chains are focusing on product protection for both product security and intellectual property protection. The company said that in a five-year analysis of survey data product protection concerns include product security and product damage and spoilage, coupled with growing concerns regarding intellectual property protection that have been growing for the last three years.

Other constants cited by UPS over the past five years include ongoing concerns regarding cost management and regulatory compliance.