The pharmaceutical industry is undergoing tremendous changes. Numerous forces are re-shaping the new pharmaceutical ecosystem. Technology, demographics, regulations and shifts in wealth are creating transformative change. Increasingly becoming a more patient-centric world, patients use Smart devices to monitor research and evaluate pharmaceutical products. Healthcare reform regulations, the devaluation of the existing pharma model and trend towards patient empowerment and access to information are shaping the changing pharma industry, much as the retail industry was shaped by the multichannel and omni channel retailing trends of recent years. Regulators have become increasingly more cautious when improving innovative medicines. As pharmaceuticals have become more successful in prolonging life and treating illness, many medical conditions are now chronic. Today healthcare providers have become increasingly interested in measuring the outcomes of pharma performance and basing pricing accordingly. There has been a dramatic increase in prescription volume and an increased production and use of generic drugs. Producing pharmaceuticals in other countries can be complicated. Customs, local regulations and other factors impact products and require brands to adapt. Generic pharmaceuticals are becoming the dominant category globally, especially in developing rather than just industrial countries. Adding to the complexity, a large number of pharmaceutical products are made by multiple countries. These factors and the move towards specialty pharmaceuticals and greater production of pharmaceutical products globally have resulted in more pressure on global supply chains. Because supply chains have moved from local to global in operation, even one significant event can interrupt the global supply chain. Events such as hurricanes and typhoons, earthquakes, political and economic upheaval can have serious impacts on global supply chains, adding unforeseen costs and delays. Health care reform magnifies the effect of longer supply chains and increases the intense cost pressure on drug manufacturers. In order to reduce costs, more production as well as research and development are being offshored and outsourced.

1. 2014 TrendsReshaping the
Pharmaceutical Supply Chain

2. A NewEvolving Pharma Ecosystem
• Technology,demographics, regulations and shifts inwealth are creatingtransformative change inthe pharmaceutical
industry.
• As it is becoming a more patient centricworld, patients use Smartdevices and apps to monitor and search for pharma
product info.
• Pharma is moving to moremulti-channeland/or omni channelmodels.
• Major forces shaping this: healthcarereform,patient empowerment, devaluation of the currentpharmamodel, need
of pharma businesses to drive efficiency and product traceability.
• Patients arechangingfaster than reform: keydriveris spread of data, emergenceof personal health records and
growth of value networks that allow more informeddecisions and confidence in an outcome-based approach
• Patients and medical practitioners want a balancedand integrated approach frompharma partnersto reflect their
needs, causing greater emphasis on providing information digitally
• Digital provision of product information is animportant component of the newpharmamodel
TransformativeChange

3. Major Trends Reshaping the Pharma Ecosystem
1. Concernedabout approving more innovative medicines, regulators havebecome
more cautious
2. Medical advances havemade dramatic advances: some formerlyfatal diseases are now classified as chronic;the self-
medication sector has been expanded
3. Healthcare policy-makersand payershave become increasingly more involved inmandating what physicians are
allowed to prescribe
4. Thenumberof healthcarepayersthat arenow measuring the pharmacoeconomic performanceof various
medications is expanding. Digital medical records acceptance will enablegreater access to data to insist on
outcomes-based pricing
5. Healthcare budgets arebeing continuallystretched due to the increased instances of chronicdisease
6. As governments havebegun to focus moreon prevention ratherthan treatment
7. Emergingeconomies demonstrate a faster growing demand for medicines than the industrialized economies
Outcome Based Approach Focus

4. Prescription Volume Increasing
• Thevolume of prescriptions has almost doubled in less than 15yearsin the U.S.
• Globally, drug consumption has increased 32%from $735billion in 2007to $965billion in 2012
• Globally drug consumption is forecast to reach $1.2trillion in2017
• Over the countermedicine consumption has increasedat a higherrate
$735.00
$965.00
$1,200.00
0
250
500
750
1,000
1,250
2007 2012 2017
Consumption inBillions $
Dramatic Increasein Prescription Volume

5. Pharma Product Globalization
• Because supply chains have gone from local to global, evenone significant event can interruptthe global supply chain
for certain products
• Customs, local regulations and other factors impact products and brands to adapt
• Product packaging requires adaptation to local language
• Demand signals must beaggregated to plan the early steps inthe supply chainand local information details must be
maintainedfor accurate supply chainplanning close to the consumer
Global Pharma Production= Complex Supply Chains

6. The Rise of GenericPharmaceuticals
• Generic pharmaceuticals are becoming the dominant category globally, particularly in developing countries
• Generic drugs now accountfor over 80%of filled prescriptions
• Increasein genericdrug products= large majority of products are made by multiple companies
• This results innew challenges: patients safely exchangingone manufacturer’sproduct for another
• Margins for generic products inmanycountries are razorthin
New Dominanceof Generic Drugs

7. Pressure on Existing Pharma Supply Chains
• Need for tight cost controls since margins for generic products inmanycountries is verythin
• Pharma manufacturingis becoming increasingly moreglobalized
• Explosive growth indeveloping regions of Asia
• Manufacturingsites inChina&India now comprise 40%of all FDAregistered foreign sites, increasedfrom
30%in 2002
• In2011Chinabecame the 3rd largest pharma marketin the world, approximately 50%larger thanGermany
in4th place
• Brazil overtook UK,Italy,Spain &Canada to rank6th
• Increasinglymore clinical trials areoccurring in countries whereit is challenging to import
products
0%
50%
100%
2002 2014
Manufacturing Sites
Explosive Growth of Pharma ManufacturingGlobally

8. MoveTowards Specialized Pharma Products
0
100
200
300
400
1990 2012
Number of Specialty Drugs
Number of
SpecialtyDrugs
• Increasedfocus on “orphan drugs”, those with patient populations of 200,000or less
• TheOrphan DrugAct: promotes funding&reimbursement of these drugs, resulting in verylucrativemarketfor pharma
companies
• IncreasingR&D costs with lower success rates &decreasing margins
Specialized Drugs: Higher R&DCosts, Lower Success Rates, Less Profitability

9. GreaterNumber of Specialized Pharma Products
• Greater demand for specialized pharmaceuticals with morecomplex formulations
• Manyproducts requirespecialized handling and storage
• Why is the demand for specialty drugs growing so fast?
1.Researchersare increasingly more successful in creating special
agents orcombinations of agents to address maladies more effectively and/or with
fewer negative side effects
2.Doctors want to more narrowlyprescribe specific drugs for smaller,
moredistinct groups of patients
3. Legal changeshave permitted manywidely prescribed medications
to be produced generically
4. Investors havere-valued“Big Pharma”downward dueto increasing
R&Dcosts, intense competition, greater liability and legal risks and
reduced profit margins due to increasingpopularity of generic drugs
More Specialized Pharma Products Needing Special Handling &Storage

10. Health CareReform Magnifies Effect of Longer Supply Chains
• Health care reform has been increasing the intense cost pressure on drug manufacturers
• Drugpurchasing control has been concentratedinto fewer hands by the reducednumberof insurancecompanies
that now sell government-qualified plans
• Pharma companies need to find cheaper source of product supply. This leads to a longer more complex supply
chain
• Adds more pressure on the supply chainparticipants and vendors to improvetheirefficiency and/or lower their
own costs
• To reducecosts, more production, research and development will beoffshored and outsourced
• Today’s pharma manufacturesand supply chainparticipants need to use supply chainmanagement tools to
provide real time visibility and improved ways to control costs
Health Care Reform Stresses Supply Chains

11. Contact Us
800.933.2839
Online demonstration
marketing@datexcorp.com
Web chat
@Datexcorp
Datex Corporation