Cold chain


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Cold chain

  1. 1. Meeting the Demands of Cold Chain Management in Asia developing markets, where demand for devices is outstripping the government’s ability tomonitor procurement and use, there are inevitable shortfalls in appropriate product management Steve StineDirector,Life Sciences – Medical,TNT Asia, SingaporeMeeting the Demands of Cold Chain Management in AsiaAsias healthcare sector is in flux. A confluence of events fed by a rapidly ageing population,downward pressure on public healthcare costs and growing patient demand for leading edgemedical technology, has forced regulators, hospitals and medical products manufacturers toscramble and adjust. Feeding Asian market demand comes with a new set of supply-sideresponsibilities. Todays generation of treatments and technologies require very specialisedtransportation, shipment and handling.Since the U.S., Europe and Japan remain the primary manufacturing sites for these products, theymust travel long distances and endure untold stress before they arrive in Asia’s hospitals andlaboratories. The question for manufacturers of these products, therefore, is how to ensure thesafe and assured delivery of these products? It is a critical question that concerns not justcustomers (i.e. hospitals and laboratories), but government regulators and patient end-users aswell.Keeping up with growing healthcare demandsAs a leading global provider of advanced supply-chain solutions, TNT is working with thegreater medical device and diagnostic community to develop new means and methods forensuring the safe and secure delivery of medical products. Since 1982, TNT has been workingwith the world’s leading Contract Research Organisations (CROs) and pharmaceuticalcompanies to develop temperature-precise packaging for moving clinical test kits and clinicalsamples from one point of the world to the other. Leveraging this expertise, TNT has extendedits offer to a large and growing community of medical device and diagnostic manufacturerswhose products require a similar quality of temperature-control, or otherwise known as “cold-chain” management.
  2. 2. In pursuing this endeavour so far, three key issues emerged. Firstly, the cost of healthcareservices throughout the region are rising, thereby forcing medical products manufacturers to cutcosts, while regulatory protections are strengthening, placing the onus on medical manufacturersto better protect and ensure their product integrity. In addition, competition is on the rise from anew generation of medical manufacturers, requiring incumbents to develop product or servicedifferentiationFor manufacturers, product quality is central to commercial success. Hospitals in the region (ex-Japan) purchase an estimated US$ 30 to 40 million of diagnostic reagents and instruments eachyear. Expired, defective, or inappropriately handled reagents can mean the difference between acorrect and incorrect diagnosis, and in some cases, the life or death of a patient.In some markets with clear regulations and careful monitoring, reagents are delivered andperform as intended. Yet in developing markets, where demand is outstripping the government’sability to monitor procurement and use, there are inevitable shortfalls in appropriate productmanagement. For instance, maintaining reagents at 2 - 8° Celsius is critical if the diagnosticregents for laboratory testing are to perform their intended function.While manufacturers typically take charge of moving a product from a factory location to anAsian port of entry, the efficient handling of a product thereafter is anyone’s guess. We know,for instance, that drugs, devices and reagents can be held at Customs for days on end. On otheroccasions, incorrect documentation can stall transfer of goods, and even when in-countrydistributors do take ownership, controls on product handling and expirations are uneven at best,and dangerous at worst.Track and Safeguard your products with RFIDThe good news is that new service solutions and IT platforms are available to track andsafeguard your product from point-to- point. RFID, or Radio Frequency Identification, is onetechnology that is proving both technologically effective and affordable. In recognition ofRFID’s improved performance and lower cost, TNT embarked on a six-month pilot project toprove RFID’s ability to track, monitor and report on the products’ temperature integrity frompoint-of-origin to point-of-destination.Our proposed solution incorporated three key operating parameters. The first was to introducenew lower cost transportation networks while the second was to adopt new technologies toautomate and regulate product movement. Finally, we wanted to introduce only those newtechnology-driven solutions that show promise of generating business benefits for our customers.
  3. 3. A win-win scenarioHaving successfully completed the trial together with an existing customer, based on our results,TNT can now provide customers with significant cost savings by having determined the lowestcost cold-chain packaging option with the greatest possible performance level through the trial aswell as identified the appropriate road and air network transport option capable of reducing airfreight costs.The solution decreases financial “write-offs” from products that fell outside of the prescribedtemperature requirements which in turn ensures service level improvements. In addition, havingdiscovered a new-found method for manufacturers to offer their customers (hospitals andlaboratories) guaranteed temperature-performance records, we can now help them comply Asiangovernment regulations that hold manufacturers accountable for temperature management andproduct integrity.Knitting the Cold Chain April 2010As MNCs continue to focus on manufacturing in India and the product shelf for Indianpharma companies will have more of biotech products, the cold chain is becoming a vitalpart for the industry. The need of the hour is better infrastructure capabilities, powersubsidy, tax incentives, grants from the government, use of modern technology andintegrated freight forwarders. By Arshiya KhanThough not at the front end, logistic providers may become theweakest link in supply chain of drugs, by the time it reaches theend consumer. This is apparent by the recent spurt in cases ofdeath caused due to the consumption of drugs and vaccinesstored in improper conditions. The latest one being from MadhyaPradesh, where a nurse had carried vaccines home in a thermosflask and stored it in a refrigerator overnight before bringing itback in thermos and distributing it. These measles vaccines wereadministered by the Health Department at Anganwadi Centres,which is run by State Women and Child DevelopmentDepartment causing the death of four infants. This incidencereflects how critical and vital it is to maintain the requiredtemperature in the supply chain of drugs.This is well backed by numbers as according to a recent study conducted by the UKMedicines and Healthcare Products Regulatory Agency (UK-MHRA), 43 percent of critical andmajor product deficiencies are related to ineffective temperature control and monitoringduring storage and transportation. Similarly, the World Health Organization (WHO) recently
  4. 4. maintained that 25 percent of all vaccine products arrive at their final destination in adegraded state. Looking at these numbers, the importance of maintaining a drug while intransit is of utmost importance, as the financial loss due to this may be recovered by thecompany over a period of time, but what about the deaths caused due to consumption ofsuch deteriorated drugs?The next question is also whose responsibility is it to maintain the safety and efficacy ofdrugs? As K V Subramaniam, President and CEO, Reliance Life Sciences says, "Logistics is avital component in the entire supply chain of pharmaceutical and biotech products. Innutshell, logistics deserves the same level of importance as any other function." Going bythis, it will not be an over statement to say that they should therefore share equalresponsibilities too. Also, given the high cost of conducting global clinical trials and the evenhigher cost of failure, regulatory agencies, pharma companies and CROs alike now demandthat every party involved in the pharma and clinical supply chain - transportation andlogistics providers included - conform to GxP guidelines. Therefore, the logistic providershave geared up to meet the demand and protocols. But they need an extended co-operationfrom the government too.Transition of the cold chain saga"Today, cold chain Earlier pharma manufacturers had to make do with optionsmanagement is that were available at that point of time. The typical cold chainlooked more in termsof regulatory provision involved gel packs or dry ice. But it was a tediouscompliance rather and high risk business, and not many manufacturers werethan its role in willing to produce such goods. In addition to this, developedproduct quality andpatient safety. This nations had their own manufacturing facilities so the demandleads to documentary for shipping such goods didnt arise. "Since the advent ofcompliance ignoring the challenges globalisation we saw the world turning more flat, plus thein reality" liberalisation of our countrys policies helped, developed nations could no longer keep manufacturing and maintain - Ajit Tamhane Director, Lisa Line costs that could be rational to the masses. The natural extension was to outsource manufacturing to developing"Since cold chain nations," says M Ajaz, Director, East West Freight Carriers.maintenance is anexpensive Hence the boom in the logistics industry specific to the pharmaproposition, it would necessary forvarious serviceproviders to share Elaborating he says, India has now positioned itself well in thistheir resources in space. At some point of time we had only vaccines and serumsorder to justify the capitalrequirement" that required temperature controlled shipping, but now there are additions with clinical trials, blood samples, critical vials, - K V Subramaniam and anti-venom. "Therefore, today we cannot only look at President and CEO, Reliance Life exports and imports. Expertise in handling such movements is Sciences required to transport goods domestically as well, and therefore the pressing need to have fully integrated logistics providers,"feels Ajaz.As the demand rises, the need for a more integrated chain becomes crucial. At present theregulatory scenario in this segment is not very concrete. Though there are GoodManufacturing Practices GMP principles for the manufacturers, packaging and storage ofactive pharmaceutical ingredients (APIs) and medicinal products are well defined in the formof regulations, guidance and recommendations. However, pharma logistic segment needs to
  5. 5. relate cold chain management to GMP for the distribution practice namely Good DistributionPractices (GDP), points out Ajit Tamhane, Director, Lisa Line.Given the sensitive nature of the industry it therefore becomes imperative for the logisticsteam to continuously monitor and maintain the temperature of the products during storage,transportation, distribution till the point of consumption. Therefore the advent of newtechnologies and automation required. As Robert Klinck - Vice-President, Sales andMarketing, DDN stresses on the fact that logistic providers must model solutions thatprotect temperature sensitive product throughout the entire transit cycle; from point oforigin to final delivery to the distribution facility. He makes an interesting point that, "Thisservice must identify the areas within the supply chain where the inventory is at risk. Theseareas of risk include transport via truck from the shipper, staging time at the port/orairport, what temperature range will the product be transported at while inside the aircraft,will the product require it to be offloaded on additional flights, and finally how is the productdelivery to the warehouse."Entry barriersThe market is dominated by private players and can be divided into two major segments.The first, surface storage, which forms 88 percent of the cold chain market, is valued at Rs88 billion and is expected to reach Rs 352 billion by 2015. The number of cold storagesstood at 5386 in 2008 up from 5101 in 2006. In terms of capacity, the cold storage capacityincreased from 21.7 million tonnes in 2006 to 23.7 million tones in 2008.The second segment, refrigerated (reefer) transport, which forms 12 percent of the coldchain market, is valued at Rs 12 billion and is expected to reach Rs 48 billion. In terms ofvolume, current reefer transportation business is about four million metric tonnes and isexpected to reach 14 million metric tonnes within five years. Majority of the demand(62.5percent) for refrigerated transport is export driven. Though these numbers showpositive growth, there are certain barriers that restrict players from tapping this segment.As cold chain is a very capital intensive business, the returns are limited and the investmentis huge, points out Saigal. Unless players are able to scale up quickly and achieve higherutilisations it will be hard to justify the high capital spending, he adds. And a large-size ofcold chain has a payback period of approximately five years, he informs. This indicates thatthe cold chain market in India is at a nascent stage and cold storage facilities are currentlyavailable for only 10 percent of the agri-produce alone. The total market for cold chains inIndia valued at Rs 100 billion in 2008 is estimated to reach Rs 400 billion in 2015, indicatinga plus 22 percent growth rate for the industry, according to Saigal.Automate the chain? "Service providers must identify the areas within the supply chain where the inventory is at risk. These areas of risk include transport via truck from the shipper, staging time at the port / or airport, what temperature range will the product be transported at while inside the aircraft, will the product
  6. 6. Also as manual monitoring may not be 100 percent possible all require it to be offloaded onthe time, therefore there is a need to use temperature additional flights, and finally how is the product delivery to themonitoring with automatic reporting, suitable alert systems so warehouse"that appropriate timely actions are taken in case of deviations,suggests Tamhane. It is proven that such measures improve - Robert Klinckthe quality of cold chain and also minimise wastage in long Vice-President, Sales and Marketing,run, he adds. DDN "As cold chain is aThe need of the hour is therefore to have a very capital intensive business, the returnssystem/product/technology in place that can track and trace are limited and thethe product while in shipment till it reaches the end consumer. investment is huge"This is some what smoothened through the use of dataloggers.Informs Tamhane, during execution of contracts for import orexport the temperature monitoring is done as per the - Manish Saigal Executive Director and Head -requirement of buyer. Most of the buyers ask for temperature Transport & Logistics, KPMG Indiamonitoring of the cargo. For incidental supplies the use oftransport dataloggers is common. Many freight handlers are using their own temperaturelogging devices. But for regular shipments use of dedicated reusable Datalogging solutionwhich can download data at supplier as well as at consignee end is recommended. Todaymulti-location data access is also possible for shipments. Most of the Datalogging devicesinvolve manual downloading of data by swapping the datalogger to a device attached to acomputer. But it is beneficial to use wireless Datalogging as this does not involve anymanual intervention for data downloading. Today GPRS based Datalogging solutions areoffering real time monitoring even during transit.Also, for air freight the Unit Load Devices (ULDs) have to be sufficiently stacked with dry iceor gel packs to maintain the required temperature. Recent advances in technologicaldevelopment and initiative by airlines to introduce product specific ULDs for exampleenvirotainers are great but have not reached the correct economies of scale to be a regularfeature in belly space capacity. It will be a while before these are standardised, adds Ajaz.As Saigal elaborates with a classic example, most of the modern cold storages are beingplanned for more and more automation. Mechanical equipments like pressure gauges,thermometers, physical logbooks etc. are being replaced with micro process controls andtransducers and automatic recorders. The Information Technology, with suitable fullycomputerised and proper softwares are being developed and used. For example, Intels spinoff with industrys first wifi cold storage monitor is first of its kind and reinforces the sametrend in more automation to control temperatures. But many small cold storages stillheavily depend on old manual labour.Need of the hour"Setting up FreeTrade WarehousingZones is easy overthe transportation ofthese drugs. Also theinvestments costsare manageable thanthe operational ones.If anything, the government shouldgive power subsidy to the logisticsproviders in major metros"
  7. 7. The pharma logistics segment requires retaining the - Mahesh Malneedi temperature at transshipment hubs, real time track and trace, President, MakroCare qualified persons to handle pharma cargo, special packaging solutions that are cost effective, immediate custom clearance,"Indias growth anoutsourcing hub is and compliance to regulatory requirements at the origin and atmaking MNCs being the destination. These needs are not entirely met, and thereparticular about strict are gaps, feels Sandeep Pingle, Director - Marketing & Sales,regulatorycompliance and DHL Global Forwarding. Agrees Ajaz, as of now the cold chaincosts. This may does exist but the services are fragmented. There arerequire the pharma manufacturers that have climate controlled storage on site,cold chain cargo to be consolidatedand moved via ocean mode" then there are individual warehousing companies that offer climate controlled storage, these warehousing units in order to - Sandeep Pingle be more cost effective use either ammonia based cooling Director - Marketing & Sales, DHL technology or a liquid re-cycling plant. The next in the chain Global Forwarding are the refrigerated vehicles, these use fairly modern"The government technology. Ajaz informs that, the airport authorities haveshould offer ensured that equipment and facilities at all internationalincentives to fullyintegrated logistics airports, but then again the general business is to cater to allcompanies (benefits perishable goods (flowers, fruit, meat, vegetable, pharma).on electricity, tax, There is no designated area or chamber for exclusive productpurchase of vehicles)to keep a check on storage. Every perishable commodity requires special handlingthis, a minimum and different temperature variants, he adds.turnover and incremental slab wiseincentive scheme should be workedon, keeping in mind that better The Mumbai International Airport Private Ltd. (MIAL) has already installed four new cold rooms for pharma and hasfacilitation of export cargo will resultin higher and better export earningForex income to the government" trained handling staff to ensure adherence to standard operating procedures. Organization of Pharmaceutical - M Ajaz Producers of India (OPPI) has tied up with Delhi International Director, East West Freight Carriers Airport Limited (DIAL) to overhaul and add to the existing cold chain facility in the Capital. Under the project, DIAL is planningto construct 4,000 square metres of additional cold room capacity compared with thepresent cold room capacity of 400 square meters available in Delhi.Ajaz also feels, the present cold storage capacity in India is grossly inadequate and with apositive future outlook for the pharma industry there is an urgent need to scale up anddevelop integrated cold chain facilities across India. "The government has taken initiativesin the incentive scheme of climate controlled storage of facilities for agricultural produce;the scope of products should be re-evaluated. The government should offer incentives tofully integrated logistics companies (benefits on electricity, tax, purchase of vehicles) tokeep a check on this a minimum turnover and incremental slab wise incentive schemeshould be worked on, keeping in mind that better facilitation of export cargo will result inhigher and better export earning Forex income to the government," avers Ajaz.However, Mahesh Malneedi, President, MakroCare feels, setting up Free Trade WarehousingZones is easier than transportation of these drugs. Also the investments costs are moremanageable than the operational ones, he believes, as operating costs for Indian coldstorage units are almost double of those in the US. As Manish Saigal, Executive Director &Head - Transport & Logistics, KPMG India, shares the numbers, energy expenses make upabout 28 percent of the total expenses for Indian cold storages compared to 10 percent inthe West. Additionally, Indias power deficit is about 10 percent, with a peak deficit of 17percent leading to chronic power shortage. And the power shortage in the country couldlead to significant impacts on cold chain sector, which is dependant on electricity for
  8. 8. refrigeration. Saigal feels, the purpose of setting up cold chains will be defeated if the powersupply is erratic. Along the same lines, Maheesh feels that if anything, the governmentshould give power subsidy to the logistics providers in major metros. At present a majorityof cold storages are located in the states of Uttar Pradesh, Uttaranchal, Maharashtra, WestBengal, Punjab and Gujarat. In fact 49 percent of the cold storage facilities are located inthe states of Uttar Pradesh, Uttaranchal, Maharashtra and West Bengal, informs Saigal.Loopholes, and hence the repercussionsToday, cold chain management is looked more in terms of regulatory compliance ratherthan its role in product quality and patient safety. This leads to documentary complianceignoring the challenges in reality, feels Tamhane. 83 percent of the primary care physiciansand paediatricians and 72 percent of the specialists (eg. endocrinologists,haematologists/oncologists, and rheumatologists) reported having experienced a break inthe cold chain.Four out of five of the physicians surveyed said they felt there was a need for a device totrack temperature at the unit level and that they would have more confidence in companiesthat produce medicines with such tracking capabilities, as reported in the journal in LifeScience Leader.Ways to recuperateTo keep a tab on this, Pingle informs that DHL has launched Life Science CompetenceCenters in key locations in India and worldwide. These augment DHLs on-going innovationsin the industry by filling in the gap in the existing supply chain, by providing improvedtemperature controlled handling and storage, greater product transparency and visibility,and complete end-to-end logistics capabilities.Additionally, the company has invested in imparting training to the personnel handlingpharma shipments. The company is also collaborating with its vendors to educate them onthe needs of the pharma sector, so that effective solutions are devised and implemented.The company is also reaping the benefits as pharma would constitute approximately 10percent of is airfreight export volumes, informs Pingle.Whereas US based DDN knows the tricks of the trade, which is apparent from its businessmodel. Many companies move boxes, but DDN excels in complex, high-touch producthandling, with multiple controls and system redundancies that guarantee product integrityand security. Some of which would be, high touch biologic handling, client-specific SOPstailored to meet the high-touch products needs, and orphan drug fulfilment - direct tophysician or to specialty pharmacies. No wonder it has some of the big names as its clientsin the kitty ranging from large Indian companies to SMEs. DDN is the largest 3PL serviceprovider in the healthcare industry in the US and supports over 100 pharma companies inthe US, Europe and India. DDN is strictly focused on the life science industry which providesfocus on satisfying pharma, biotech and medical device requirements.Also, East West Freight Carriers has ventured into warehousing, climate controlled transitfacility, synergy creation with specific service providers, and has also ensured a streamlinedprocess with cross value creation all of this. And this is working for them too, as pharmasegment contributes approximately eight percent of its total revenues which is growing, andwe would like to be in the mid 20s with this, hopes Ajaz. The company has a separate unitfor the storage of vaccines, serums and blood samples.
  9. 9. Lisa Line is active in pharma, food and diagnostic/laboratory market. More than 60 percentof its revenue comes from pharma segment. And its maximum clients are from vaccine andbiological manufacturers/exporters. Tamhane informs that many biopharmaceuticalcompanies are closely working with Lisa Line to develop cold chain monitoring strategy frombeginning to end.Players need to work along with the government in addressing these challenges. Thevarious government incentives and initiatives are likely to resolve or improve the currentstate of challenges facing the sector. The PPP route is a viable proposition for players toundertake cold chain activities, feels Saigal.Since cold storages are highly concentrated in few regions and in few commodities,companies need to identify new pockets and segments of growth which in turn will improvetheir presence and also provide diversification benefits, adds Saigal.Growth driversFew industries pose as much of a challenge to shipping and logistics as the life scienceindustry. The size of the Indian vaccine market is around Rs 10 billion growing at 25-30percent annually. "And as there is a major shift in the product portfolio of leading pharmacompanies, many of them are bringing to the market products developed through advancedtechnology like vaccines, which requires maintenance of a proper cold chain right from themanufacturers premises till it reaches the patients, feels Saigal. Also as Indian pharmacompanies are increasingly seeking opportunities to supply drugs to the world market, thuscold-chain management practices will be required to achieve this goal, adds Saigal.Ajaz underlines an interesting point, as India is making tremendous progress in thehealthcare sector; it is probably the only country that is building a fully integrated medicalcity and healthcare parks at multiple locations. Within the sub-continent the country ranksas the best medical and healthcare supplier and internationally we are developing as amedical destination. Pharma will be crucial to the sustainability of such large scale demand,but contrary to this, he complains of the lag as within the logistics space they have not beenable to make progressive development. "The whole chain is still fragmented and whywouldnt it be, we havent been awarded an industry status yet and are yet to receivegovernment incentives. This has restricted a freight forwarder to come out of the usual andthink and develop differently. An alternative to investing into all of the above businessmodels is to create synergies," he opines.Growth in this sector is being propelled by tremendous growth in organised retail, shifttowards government initiatives and demand from pharma sector, notes Ajaz.Of the more than 130 biotechnology drugs and vaccines approved by the US Food and DrugAdministration (FDA), 70 percent were approved in the last six years. At the same time,there are more than 350 biotechnology drug products and vaccines currently in clinicaltrials, targeting more than 200 diseases. Many of these biotechnology drugs aretemperature-sensitive. It is estimated that the temperature-sensitive segment is growing ata rate of about 15 percent per year.Visible trends
  10. 10. Future trends identified in this space include rail based reefers, product specific cold chainfacilities at airports, warehousing management, fully integrated logistics service, educationand information access. Also Indias growth an outsourcing hub is making MNCs beingparticular about strict regulatory compliance and costs. This may require the pharma coldchain cargo to be consolidated and moved via ocean mode, feels Pingle. It is also possiblethat pharma companies will outsource their storage of temperature controlled finishedgoods to logistics players, who can also handle freight. They would prefer to move the cargoon an end to end basis so that there is control on the supply chain, Pingle adds.With more clinical trials and clinical research being outsourced to India, the last legtemperature sensitive transportation to cities beyond C class will require investment inhighly validated temperature controlled boxes and last mile transportation, he adds.Citing an interesting point, Subramaniam says, since cold chain maintenance is anexpensive proposition, it would be necessary for various service providers to share theirresources in order to justify the capital requirement. So clearly there seems to be sufficientavenues of growth for the logistics market in India. This opportunity will be doubled if theservice providers also tap the rural market, feels Malneedi.Therefore, going forward a lot of consolidation is expected to take place with many playersmerging and weak players leaving the market. Another two-three integrated cold chainplayers are likely to emerge while current strong players would try and achieve scale andhigher utilisation levels. Players who are able to achieve scale and create a strong footholdin the market will dominate the industry and would create strong entry barriers for others,says Saigal. But this will be possible only when there is enough support from thegovernment too.