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Click the title above for a link to open the Pharmaceutical Commerce August 2022 issue in an interactive PDF format.

Pharmaceutical Commerce - August 2022 Issue (PDF)

Something I’ve been keen to do since joining 

is to take advantage of the magazine’s increased publication rate (now six times a year) and move away from single-themed issues to an approach that offers a broader overview of the key areas. In this way, I hope 

 can reach more regularly into all corners of the readership. This month’s issue is a good example of this approach, with lead features on economic development and the current wholesaler landscape, supported by articles and interviews on a variety of subjects, including visibility and sustainability in the cold chain; the practice of postponement in manufacturing; building effective patient support programs; and the future of the healthcare supply chain.

Complementing the span of topics covered by each magazine issue are 

s editorial podcasts, which we’ve been rolling out for over a year now and which bring additional insights to our key areas of focus. Just in the last six months, 12 episodes of the podcast—each of which features a conversation with an industry opinion leader or vendor—have delved into a range of subjects, including product launch, pricing, manufacturing, pharmacovigilance, artificial intelligence, real-world evidence, and the impact of COVID-19 on mergers and acquisitions. 

To single out a few episodes in particular, in the area of patient support, we spoke to Diana Villanova of COEUS Consulting Group in July about how drug producers can use patient and channel strategies to maximize payoff. In March, Sandra Anderson of Innomar Strategies talked about bringing products to market and the progress of the patient journey in Canada. And in February, Ardy Arianpour, CEO and co-founder of Seqster, detailed his personal quest to topple data-access barriers in digital health.

On the subject of supply chain, in May, David Sanders of Coherus BioSciences talked to us about his role with Securing America’s Medicines and Supply, a multi-industry coalition of companies aiming to strengthen the security of the medical supply chain in the US. In April, Dennis Wright of Omnicell discussed medication nonadherence and efficient ways to use pharmacists’ expertise to create an effective supply chain; also in April, Adham Yehia, co-founder and chief operating officer of DrugStoc, a cloud-based distribution platform connecting manufacturers to hospitals and pharmacies across Africa, outlined the logistical obstacles of distribution in that part of the world.

In the pricing realm, in July, Nelly Rose of NFP addressed the increase in prescription drug spending, along with ways to find more affordable options for driving down pharmacy spend; and in January, AJ Loiacono, CEO of Capital Rx, a pharmacy benefit manager and health tech firm, provided his formula for providing more transparency in pricing and the importance of simplifying complex administrative and workflow barriers between pharmacies, payers, and other entities.

All of these episodes and more are available to listen to at 

www.pharmaceuticalcommerce.com/editorial-podcasts

. At just 12–20 minutes long, they take the sometimes complex issues that are close to the hearts of the 

 audience and turn them into listening that is quick and easy, as well as stimulating and informative.

Julian Update is Pharmaceutical Commerce's Editorial Director. He can be reached at

Pharma Commerce's podcasts offer new angles on its roster of key topics

Easy Listening

The complex pharmaceutical distribution ecosystem in the US was recognized by the federal government as being “critical infrastructure” during the COVID-19 pandemic—and for good reason. Pharmaceutical distributors large and small provide vital connective tissue by consolidating, delivering, and returning orders and handling recalls among thousands of manufacturers and hundreds of thousands of individual pharmacies, hospitals, healthcare facilities, and other sites of care. With disruption being more the rule than the exception these days, distributors continue to react and adapt to an ever-changing array of factors that threaten to undermine the steady supply of critical lifesaving medicines to hospitals, pharmacies, healthcare providers, and patients. All continue to innovate and automate to maximize business continuity for themselves and their manufacturer clients.

Biopharma companies and their third-party distributor partners tend to organize their programs into four main distribution buckets: wholesale, specialty, physician, and direct. The “Big Three”—AmerisourceBergen, Cardinal Health, and McKesson—dominate the distribution of products in the wholesale (primary care) and generic space, and these companies are increasingly distributing specialty therapies. Their prominent role in the overall US economy has helped them to gain favorable recognition in the vaunted Fortune 500 ranking. According to the latest (2022) ranking, based on revenue for the fiscal year that ended in September 2021:

McKesson holds the No. 9 spot, with $238 billion in revenue

AmerisourceBergen holds the No. 10 spot, with $214 billion in revenue

Cardinal Health holds the No. 15 spot, with $160 billion in revenue

The share of market flowing through the Big Three grew from 87% in 2013 to 92% in 2017, according to a 2019 report from Deloitte

“The Big Three dominate the wholesale distribution category, but when considering specialty, orphan and rare, and cell-and-gene therapies, it bifurcates pretty fast,” says Bill Roth, general manager and managing partner of Blue Fin Group, an IntegriChain company. “There are new distribution companies coming into this space that offer manufacturers higher degrees of collaboration and service. So there’s still plenty of opportunity for smaller companies to thrive in this space.” Today, smaller players are continuing to finetune their strategy and specialize their offerings, so they are not left behind. “Within pharma distribution today, it’s pretty much ‘go big, go niche, or go home,’” adds Roth.

For example, there is Accredo, a wholly owned subsidiary of Express Scripts, the pharmacy benefit manger (PBM) giant (which is owned by Cigna). Accredo is the exclusive specialty pharmacy and distributor for Biogen’s Spinraza (nusinersen), a therapy for patients with spinal muscular atrophy. “Accredo is the only distributor of Spinraza, so every doctor and every hospital that wants to access this therapy must buy it from the company,” says Roth. “Many smaller companies say, ‘I can’t play in the specialty distribution space. But if a company is able to win a contract to be the exclusive distributor for even one high-value specialty therapy like Spinraza, that’s still a viable business model.”

What’s keeping distributors up at night?

From the 50,000-foot view, a diverse array of drivers is shaping the pharma distribution landscape today, including:

Labor constraints and the competition for talent

Implementation of the Drug Supply Chain Security Act (DSCSA)

The need for ongoing innovation and improved data-driven visibility

On a more granular level, these additional issues are keeping distributors up at night, says Roth:

How to maintain bundled buying and selling arrangements with national accounts

How to provide value to manufacturers and downstream channels for specialty, orphan and rare, and cell and gene therapies

How to better understand the nuanced differences around products, related to therapeutic area, drug class, product archetypes, and benefit structure

Understanding regulations that manufacturers face relative to fees and discounts

How to reconcile advice coming from other distributors, consulting firms, and legal firms

How to conduct bona fide fair market value (FMV) assessments and by which organizations

How FMV influences downstream healthcare provider reimbursement

The top three distributor organizations recognize these evolving complexities and the need to adjust.

“As more innovative therapies hit the market, it’s our responsibility to make these products accessible for our health system, community practice, pharmacy customers, and the patients they serve,” says Heather Zenk, president of supply chain operations and distribution services at AmerisourceBergen.

Victor Crawford, CEO, pharmaceutical segment for Cardinal Health, who also serves on the board of directors for the Healthcare Distribution Alliance (HDA), adds, “We are continuously troubleshooting issues that impact our customers and are staying close to our sourcing and inventory teams, and [are] working closely with our pharmaceutical manufacturer partners to develop strategies that minimize risks and the potential for disruption.”

Citing its technology, safety measures, and patient-first approach, Ammie McAsey, senior vice president of customer distribution experience for McKesson, says: “We are focused on attracting, developing, and retaining talent that believes in innovation and has the skills required to help bring our growth platforms to life.”

Similarly, ongoing complexities within today’s labor market underscore the importance of maintaining and investing in the right talent. “There is currently a significant need for e-commerce and warehouse workers across the pharma supply chain. That said, as an industry, we need to start shifting how we’re thinking about skills and capabilities within our workforce,” notes Zenk.

With regard to the growing use of automation, she explains: “We’re not replacing human workers, but instead, we’re using technology in conjunction with our talent to increase overall efficiency and augment our overall capabilities. We must continue to evolve our approach to labor to ensure we’re investing in the right ways to create the most value and giving our team members opportunities to grow in their roles.”

Meanwhile, to address what he calls “the unprecedented labor shortages on operations within our own facilities and partners in the global supply chain,” Crawford of Cardinal Health explains, “Over the past six months, we have rebalanced our wages for our front-line workers to ensure market-competitive compensation.”

According to Roth, for several years, pharma distributors had been operating in a classic arbitrage model: “buy low and sell high.” But more recently, these companies have morphed into more of a bona fide fee-for-service model, and this has created constraints on what the manufacturer can pay their distributor partners. Today, drug manufacturers launching a new drug into the US distribution market are confronted with the need to pay all forms of indirect distribution as a FMV fee for service. However, Roth notes that the definition is not always clear, and confusion over the FMV fee for service can arise based on:

How well the drug manufacturer understands the regulations around the topic

What advice the manufacturer is receiving from distributors, consulting firms, and legal teams

Which third-party partner the manufacturer chooses to conduct the FMV evaluation,

The importance of getting this done compliantly is that if the process doesn’t align to regulatory standards, the manufacturer is at risk of violating several federal laws, including anti-kickback statutes, false claims, and defrauding either Medicare or Medicaid. To avoid potential pitfalls, Roth says that drug manufacturers must engage experienced legal counsel and hire a third-party expert that is licensed and insured to conduct this type of due diligence.

Meanwhile, he notes that while inflation and supply chain challenges have continued to drive up the cost of labor, fuel, and raw materials, these economic factors are often not appropriately factored into the current FMV due to lag time, as the FMV is typically updated only every three years or so.

Within the pharma landscape, there are three basic product archetypes—branded therapies, generic therapies, and high-cost specialty medications. Specialty medications are defined as those that are used to treat chronic, complex diseases, orphan drugs for rare diseases, and cell and gene therapies, all of which have complex criteria related to the distribution, delivery, drug administration, and safety. Today, the biggest categories in the specialty medication category are oncology, immunology, and neurology.

Within the wholesale distribution channel, a prime vendor model usually prevails. With this approach, a given distributor typically holds exclusive contracts to deliver pharmaceutical and related products to retail pharmacies, hospitals, and government accounts (Physician offices buy from other forms of distribution).

“By comparison, the distribution of specialty therapies follows a very different path from the primary vendor distribution model,” explains Roth. “Within the specialty medication space, no single distributor is able to carry every available specialty therapy, so hospitals and physician offices will need to purchase specialty medications from all of the different specialty distributors.”

In recent years, a growing number of smaller companies that have made a name for themselves in the specialty medications distribution space include BioCareSD, Morris & Dickson, Anovo, CureScript, and others. “The reason a manufacturer of a given specialty medication will be more open to partnering with these smaller, newer players is that there are really no economies of scale to be found when handling an exclusive or highly limited drug, or a drug with a limited patient base or distribution network,” says Roth. “Frankly, when working with most specialty products, they are used for smaller patient populations and, therefore, fewer sites of care. And these sites of care will source product from where it is available, as opposed to some preferred route of distribution. Again, the patient populations and unit volume are just too small to consider broad distribution access.”

Similarly, the smaller, specialized distributors are able to differentiate themselves by “really getting into the knowledge of the product in terms of the therapeutics landscape and the drug itself, the product archetype, and the benefits structure, as oncology works differently from immunology and neurology,” adds Roth. In addition to being geared toward their area of expertise, these smaller distributors are also more nimble and have lower overheads. “Every transaction matters, so that’s their competitive advantage.”

On the other end of the spectrum, scale brings its own advantages. “We have the infrastructure, relationships, and scale to ensure these critical medications reliably reach their destinations every day, and we continue to invest in and expand our network alongside the growing specialty pipeline,” says AmerisourceBergen’s Zenk.

Later this year, AmerisourceBergen will open a new specialty distribution center in Montclair, CA. The company also acquired Alliance Healthcare from Walgreens in June 2021, one of the largest wholesalers in Europe. “This will help us to significantly expand our reach, solutions, and capabilities in pharmaceutical distribution throughout Europe and beyond,” she adds.

The past two-and-a-half years have underscored the need to ensure business continuity in all facets of healthcare delivery. For today’s leading pharma distributors, that has meant investing in technologies that enable real-time visibility, improved logistics management, increased automation, data analytics through the use of machine learning, and artificial intelligence (AI).

“The integration of technology such as artificial intelligence and advanced automation within our distribution centers will improve operational excellence and create the optimal customer experience,” says McAsey of McKesson. “We’ve been investing in technology to notify stakeholders about contingency plans and business-continuity strategies in order to safeguard patient care.” By way of example, she notes that McKesson has partnered with Accuweather to have access to an advisory meteorologist 24 hours a day, 365 days a year, to plan around potential weather-related disruptions to the company’s distribution and transportation operations.

The goal of recent technology investments, according to Crawford, is to “build a cognitive supply chain that plans and executes with a high degree of accuracy, and delivers phenomenal speed and reliability balanced with the right cost.”

Meanwhile, Zenk adds, “We’re also keenly focused on policy. Through our advocacy arm, we’re constantly watching how the legislative and regulatory landscape is evolving and communicating with our partners and customers accordingly.” For example, she says, “We’re continuing to look for opportunities with not only FDA-approved products, but also Emergency Use Authorization (EUA) therapies, as the industry gets more comfortable using EUA to expand and protect patients’ access to care in times of uncertainty or crisis.”

Cardinal Health has created several strategic partnerships to help address current challenges and meet future demands. In June, the company launched a collaboration with Zipline, 

a provider of instant logistics, to enable long-range drone delivery of on-demand pharmaceutical products to retail pharmacy locations. As part of the initial rollout, Cardinal Health is now using drones to deliver certain pharmaceutical products and medical supplies to Cannon Pharmacy Main, an independent pharmacy chain that services multiple North Carolina locations, to help mitigate the risk of inventory stock-outs and reduce barriers for patient access.

Zipline operates the world’s largest automated on-demand delivery service, which is said to reduce delivery emissions by 98% compared to standard delivery options, and has the potential to create a more personalized and faster customer experience. To date, the company has made more than 300,000 commercial deliveries containing more than five million units of vaccines and other medical products.

Cardinal Health is also partnering with Ember Technologies to deliver a cold-chain solution that ensures product integrity and security “while significantly reducing shipping waste in the transport of temperature-sensitive medicines,” says Crawford. Specifically, the Ember Cube “is the world’s first self-refrigerated, reusable shipping box to transport temperature-sensitive biologic medicines that uses cloud-based temperature reporting and GPS location tracking, providing us with unprecedented visibility to action if real-time intervention is needed,” he contends.

Meanwhile, by partnering with FourKites, whose supply chain visibility platform integrates machine learning and AI, Cardinal Health is working to enhance real-time visibility and improve the reliability of pharmaceutical product shipments in transit.

The full track-and-trace serialization requirements of DSCSA go into effect in November 2023. “We believe DSCSA is a key step forward in securing the pharmaceutical supply chain in the United States,” says Zenk. “Currently, the different standards and regulatory requirements across state lines create complexities and a patchwork system, so we are looking ahead to full DSCSA implementation, which will bring greater interoperability, and the standardization of technology, data, third-party logistics (3PL), and licensing requirements will help create a harmonized, safer, and more secure system for all.”

“By including new rules impacting wholesalers and 3PLs into DSCSA, there will be process and standardization across the country, building upon some of the more stringent existing state rules, and hopefully resulting in a more streamlined licensure process,” adds Crawford. However, he notes, “To smooth the process, FDA must be clear and consistent in the guidance as to how the states will act to enforce the new federal standards and traceability provisions.”

Zenk believes it’s important for the industry to continue to help lawmakers better understand the distribution space and inform the most effective change. “Connectivity, communication, and transparency between stakeholders will be critical throughout the implementation process, as any weak link in the supply chain creates a weak link for all,” she says.

In March, the HDA Research Foundation released survey results that indicate that healthcare supply chain partners “remain in the formative stages” of establishing the interoperable transaction data connections required to comply with DSCSA by the pending deadline of Nov. 27, 2023. HDA’s latest Electronic Product Code Information Services (EPCIS) Implementation Benchmarking Survey assesses the industry’s progress in adopting the GS1 system of standards for EPCIS and trading partner plans for sending data.

According to HDA, EPCIS is currently the only widely recognized international standard that allows supply chain partners to share DSCSA-required data in a secure, electronic, and interoperable manner. “Clearly, industry stakeholders have made important decisions and progress since last spring, but establishing EPCIS connections remain a slow and complex process,” said Perry Fri, executive vice president, industry relations, membership education for HDA and chief operating officer of the HDA Research Foundation.

DSCSA implementation is creating opportunity for third-party experts, as nearly 70% of drug manufacturers report that they plan to use a third-party partner to connect (a seven-percentage-point increase from the previous survey). According to HDA, respondents cite a range of challenges for their progress to date, including a lack of guidance, delays due to FDA’s past enforcement discretion, and the perception by some that the agency will postpone the deadline, insufficient employee resources, and the inability to dedicate an IT team to test and implement EPCIS.

“Supply chain partners have their work cut out for them over the next [several] quarters. While we acknowledge that many manufacturers have made progress to exchange data via EPCIS, very few are sending it in production,” said Justine Freisleben, vice president, industry relations, HDA, at the time of the survey announcement. “With more companies relying on solution providers to connect, open lines of communication and coordination with distributors will be key—especially since a third-party connection adds a layer of complexity. Reversing the perceived lack of trading partner commitment and resources also will be important to share the continued safety and reliability of the US healthcare supply chain beyond 2023.”

When it comes to DSCSA implementation, a big, albeit widely overlooked, question is how ubiquitous the track-and-trace serialization will impact legacy policies and processes such as recalls, returns, and chargebacks. Because traceability down to the unit of sale doesn’t currently exist, our industry uses broad policies to guess at what a reimbursement scenario should be.

“Once DSCSA takes full effect, a big unknown is what drug manufacturers could request from their distributors regarding unit-level serialization,” explains Roth of Blue Fin Group. “Will serialized identification help or hurt when stakeholders are able to track a unit of sale down to a finite transaction and dollar amount? Can returns now be a 1:1 for what was paid versus some percentage of a moving dollar value?”

Under the current chargeback scenario, not all returned products have a reverse chargeback associated, and even if there is one, it’s not always at the then-current wholesale acquisition cost (WAC) or contract cost that ties back to the original transaction set. (Note: For returns, there are manufacturers that have policies that cover returnable goods to the manufacturer at the WAC less 10% or WAC less 5%.) “Now that transactions can be tied to the unit level, returns can be credited at the exact dollar amount that ties to the original transaction,” adds Roth. “Similarly, recalls don’t have to involve the nation’s pharmacies searching their shelves for lot numbers that may be affected. Following DSCSA implementation, the last shipper of the product should have 100% visibility to all the products in question for recall. It will be fascinating to see what visibility manufacturers are provided. And this might unlock a new set of fee-for-service, which could be another revenue stream for distributors.”

“While COVID-19 jumpstarted collaboration between supply chain partners and government entities and showcased the resilience of the supply chain, we need to keep that momentum going,” says Zenk. “As we begin to settle into a ‘new normal,’ we can’t revert or lose sight of the progress we’ve made as an industry. We must continue to collaborate across the public and private sectors to co-create solutions that drive efficiencies and increase overall visibility across the supply chain.”

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-health-care/us-hda-role-of-distributors-in-the-us-health-care-industry.pdf

Pharmaceutical distribution today is anything but monolithic. While companies in this space are grappling with issues ranging from inflation and supply chain disruption to workforce scarcity and DSCSA implementation, there’s still plenty of room for smaller players to stake out part of the terrain to call their own

Pharma Distribution: Carving New Ground

 (July 7, 2022) discussed how New York was struggling to lure large-scale life sciences companies in the shadow of Boston, San Francisco, and San Diego, those “thriving” life sciences hubs that are “the envy of mayors and economic development planners.” New York City, bemoaned Joel Marcus of real estate firm Alexandria, is simply “too expensive to host large-scale life sciences companies.” The article countered though that after a “sluggish start,” the life sciences industry has “begun to percolate in NYC,” with a record 433,000 square feet leased to companies in the city in 2021. Nevertheless, it is interesting to note that even a commercial powerhouse like New York has a very long way to go before it can reach the heights of Boston–Cambridge, the San Francisco Bay Area, and San Diego, the biggest three life science clusters in the US.

With its cost of living, taxes, and premium real estate, New York may not yet present a viable alternative to those other high-profile areas, but there are other regions across the US that offer facilities, expertise, and talent on a par with the big clusters for a lot less capital outlay. 

 looks at the some of the competitive offerings and unique life sciences opportunities in three such regions—Texas, Wisconsin, and Minneapolis–Saint Paul (MSP)—and reviews how success in these areas has been boosted by COVID-19.

Texas is home to the headquarters of Fortune 500 companies McKesson, Tenet Healthcare, and Kimberly-Clark, as well as more than 6,000 firms in the biotech and life sciences sector. Galderma, Novartis, Abbott, Allergan, Lonza, Johnson & Johnson (J&J), and Merck all have significant operations in the state. Texas also houses six of the nation’s top 100 medical schools and $6.6 billion in annual research and development (R&D) expenditures. The Texas Medical Center (TMC) in Houston is the largest medical complex in the world and is partnering with three universities—University of Texas Health Science Center, University of Texas MD Anderson Cancer Center, and Texas A&M University Health Science Center—to develop a state-of-the-art collaborative campus called TMC3, which “will help keep Texas on the cutting edge of discovery and innovation in medicine.” The Texas Medical Center features JLABS@TMC, part of J&J Innovation, a network of incubators hosting emerging pharmaceutical, medical device, and consumer and digital health companies.

“The state of Texas is working to position itself as the premier location for biotech, life sciences, and biopharma companies to relocate and expand,” Adriana Cruz, executive director at Texas Economic Development & Tourism, tells 

. It is also a leading pharmaceutical research state. “The Lone Star State ranks No. 2 nationally for number of clinical trials, with more than 32,600 studies underway, according to the National Institutes of Health (NIH).”

Wisconsin’s biohealth sector is responsible for more than 47,000 jobs statewide, not including academic research institution and health systems jobs. The state is home to more than 1,800 biohealth companies. Wisconsin’s research universities are especially focused on bioscience, with $914 million allocated to bioscience academic R&D in 2016, accounting for more than two-thirds of all academic research at these institutions. Federal grants contribute over $1 billion in funding to Wisconsin’s economy each year, with the NIH supporting more than 900 grants in 2016. The University of Wisconsin system alone contributed more than 9,100 academic R&D projects that year.

On the manufacturing front, the Wisconsin Economic Development Corporation (WEDC) proudly asserts, “We build things in Wisconsin, and we’re good at it.” The state “excels in the manufacturing of diagnostics, molecules, cells, and tissues.” Active pharmaceutical ingredient (API) manufacturers such as Scientific Protein Labs, Alcami, MilliporeSigma, and Catalent are located in Wisconsin. The Waunakee-based Scientific Protein Labs is among the largest commercial suppliers of heparin sodium, a widely used anticoagulant to treat and prevent blood clots. Ongoing stem cell research at UW-Madison and its affiliated institutes has led to a concentration of medical and scientific instruments in 2018, making it the state’s third-largest export category, with 131 medical device manufacturers based in the area.

The Minneapolis–Saint Paul region accommodates the country’s largest private health insurance company, UnitedHealthcare; the largest digital health company, Optum; and the largest medical device firm, Medtronic. With more than 750 health and life science companies, the region has the highest concentration of medical device jobs in the US, and the fifth-lowest operating cost among life science clusters. According to the Minneapolis Saint Paul Regional Economic Development Partnership (GREATER MSP), Minnesota companies average FDA premarket approvals over six months faster than average.

“In the last five years, the number of life sciences firms in Minneapolis–Saint Paul has grown by 15%. In the last two years, the monthly job postings for life science occupations have doubled. And over the last decade or so, venture capitalist (VC) investment for bio-related companies is up 80%,” GREATER MSP’s CEO, Peter Frosch, tells 

. “One of the reasons for this growth is that the future of this sector is based on existing sectors of strength. Human health and medical devices are strong, long-standing sectors in the region. As are food and agriculture; Cargill and General Mills are based here. Companies in these sectors are growing fastest at their bio edge.”

GREATER MSP is strongly linked with the Medical Alley Association, based in Minneapolis, MN. Widely recognized as a “critical piece of the healthcare landscape,” Medical Alley supports and advances Minnesota’s healthcare industry and its connectivity around the world. Founded in 1984 by Lee Berlin, chairman of drug delivery company LecTech, and Earl Bakken, creator of what is now Medtronic, Medical Alley has honed its focus in recent years—shifting from Life Science Alley, which included agriculture, back to Medical Alley in 2016, with three key components: starts, global, and health transformation.

“Our vision is to be the global epicenter of health, innovation, and care,” says Medical Alley’s new president and CEO Roberta “Bobbie” Dressen. “A legacy work product of our transformation pillar is revolutionizing health through state and national government policy and advocacy, not just for med tech and pharma, [but] rather for the health ecosystem. Everything that touches us as a patient across our life health journey.” Medical Alley Starts is a program focused on startups and innovation. Roughly 20% of startups associated with Medical Alley are in the bio space. Another component, Medical Alley Global, includes startups and companies of all sizes from around the world. “Our strongest international relationships are in Australia, New Zealand, the UK, and Canada, followed by Germany, the Nordic countries, and with increasing interest from South America, Africa, and Eastern Europe. Last year, Medical Alley was responsible for 14 companies choosing Minnesota to open their first United States facility,” notes Dressen.

Wisconsin has a variety of incentives aimed at attracting businesses, promoting startups, and encouraging mature businesses to grow. These include new business venture tax credits for Wisconsin investors and technology development loans for startups; business development and enterprise zone refundable tax credits, which provide performance-based incentives for job creation and expansion, capital investment, and training; and an R&D credit that offers a refund of up to 15%. Wisconsin also exempts the purchase and use of machines and specific processing equipment, fuel and electricity, and qualified research and biotechnology equipment from state and local sales taxes.

“Apart from these financial incentives, our state has an effective and growing network of formal and informal organizations and partnerships to assist businesses in the life sciences, most notably BioForward Wisconsin,” Missy Hughes, secretary and CEO of WEDC, tells 

. BioForward Wisconsin’s 200-plus members include biohealth companies, research institutions, and healthcare organizations, from startups to larger, well-known companies such as GE Healthcare, Exact Sciences, Promega, and Illumina. To assist startups with their operational needs, the organization Forward BIOLABS offers co-working life science labs that are fully equipped, maintained, and come with concierge introductions, training, and networking. “This incubator enables organizations to begin their important work in the first week instead of the first year, because time isn’t spent leasing, designing, and setting up the lab,” says Hughes. “Their investment funding can go into product development, not lab development. Many companies have graduated from this shared lab space to become successful second-stage companies.”

Texas offers the Governor’s University Research Initiative (GURI), which helps recruit Nobel Laureates and other distinguished researchers to the state’s schools in the fields of science, technology, engineering, mathematics, or medicine. The Research & Development Tax Incentive is available for companies conducting qualified research activities. The Product Development and Small Business Incubator Fund (PDSBI) is a revolving loan program with the primary objective of aiding the development, production, and commercialization of new or improved products and to foster and stimulate small business in Texas, while the Texas Enterprise Fund (TEF) is the largest “deal-closing” fund of its kind in the nation. This fund is used as a performance-based financial incentive for projects that offer significant projected job creation and capital investment, and where a single Texas site is competing with an out-of-state option.

In MSP and across Minnesota, the Minnesota Job Creation Fund provides financial incentives to new and expanding businesses that meet certain job creation and capital investment targets. Companies eligible for the Minnesota Job Creation Fund can receive up to $1 million for creating or retaining high-paying jobs, and in some cases may receive awards of up to $2 million. There is also the Destination Medical Center project in Rochester, MN, which is a $5.6 billion, 20-year economic development initiative with strong biotech components. There are other incentives around real estate, workforce, and manufacturing. “There is a surplus of working capital available and ready to be deployed through private equity, venture funds, or investment banks,” says Dressen. “Medical Alley has a history of successful entrepreneurs in the bio space who want to give back with their time and financial resources.”

The MSP region is also competing in the national Build Back Better competition, which received 529 applications in October 2021. From those entries, 60 finalists were chosen, among them GREATER MSP’s Bold North BioInnovation Cluster. Explains Frosch, “We’re seeking around $60 million to fund a portfolio of seven projects. To add to our application, we’ve had 59 letters of support from all kinds of different entities that, in total, add up to $2.1 billion of pledged investment, 3,200 additional jobs, and 4.8 million square feet of bio-related real estate. We’re aiming to win, but win or lose, we’re going to really catalyze and accelerate the momentum that we already have.”

“A great deal of work is also underway focused on talent development for the Medical Alley region,” says Dressen. “For example, the Alley has an active partnership with Takeda and Minneapolis Community and Technical College to attract, educate, and retain talent.”

Talent has always been a differentiating factor for MSP, adds Frosch. “We have nearly 2,000 graduates completing a degree or certificate in biologic or biomedical sciences in the region every year, and that number is increasing. There’s a cost advantage to that, especially if you’re a fast-growing company. You need to find people, you need to find real estate, and you don’t want to burn a lot of capital. You want to put your capital into your science.”

In Texas, the medical universities “continue to churn out top talent, with 18,000 industry-related graduates annually,” says Cruz. The state boasts, she adds, “some of the brightest minds in medicine,” pointing out that Texas is among the top 10 for the number of doctorates awarded in biotech-related fields. The state’s network of academic and research institutions, including seven of the nation’s top 125 medical schools and $6.6 billion in annual R&D expenditures, is further developing this talent pipeline. “There’s no doubt that Texas can readily supply life science companies with a highly-skilled pool of talent across all areas of the state, well into the future,” notes Cruz.

Wisconsin, meanwhile, boasts two R1 research universities: the University of Wisconsin-Madison and the University of Wisconsin-Milwaukee. UW-Madison consistently ranks in the top 10 of research universities by expenditure, with more than $1.3 billion spent on research annually. Wisconsin also established the first technical college system in the US. With 16 two-year colleges, the Wisconsin Technical College System enrolls about 250,000 people every year. “Madison College even offers a Stem Cell Technologies certificate program to support local workforce needs,” says Hughes. “Wisconsin has a strong history of promoting collaboration between the public and private sectors and between education, industry, and state government, particularly in the field of life sciences,” she continues. “These relationships have provided a talent pipeline for local firms, especially in the Madison and Milwaukee areas.”

The spread and location of clusters and companies within a region is driven by the talent, the real estate, and the economic incentives offered by the communities there. In Minnesota, Texas, and Wisconsin, these areas of concentration are expanding, and, importantly, there is the space for them to grow further. When Medical Alley was founded in 1984, its activities “followed the Mississippi river through Minneapolis and St. Paul,” says Dressen. Today, however, Medical Alley’s influence extends across the region and beyond. “In Minnesota, we reach as far north as the Canadian border with a bio company in Baudette, through the southern part of the state, where the Mayo Clinic was established more than 150 years 

ago. Our membership also stretches into Wisconsin and the Dakotas,” says Dressen.” Urban Minneapolis–St. Paul is also spreading. Back in 1984, it was known as the Seven County Metro area; today, there are 15 counties, with much larger populations. “There are about 3.6 million people living in this metropolitan area,” explains Frosch. “In addition to our largest city, Minneapolis, our region includes other major population centers, such as Saint Paul and Bloomington. In this sense, we are different from, say, Chicago or Atlanta.”

Last year’s JLL Life Sciences Emerging Markets Index, looking at up-and-coming cluster markets, pointed to the success of three Texan clusters in areas such as employment acceleration and STEM graduates. They are Dallas/Fort Worth/Arlington; Houston/The Woodlands/Sugar Land, which, as noted, hosts the Texas Medical Center, “which conducts more clinical trials than any other single site in the world;” and Austin/Round Rock/Georgetown. Complementing these biotech clusters are other emerging regions across the state, such as San Antonio and College Station. “In San Antonio, the Texas Biomedical Research Institute is developing vaccines and treatments against infectious diseases. The department’s facilities include the nation’s only privately owned biosafety level four (BSL-4) maximum containment laboratory,” Cruz tells 

. “Additionally, Texas is home to the largest military medical complex in the nation, the San Antonio Military Medical Center. In College Station, the Texas A&M University System and Fujifilm Diosynth Biotechnologies are manufacturing a COVID vaccine. Also, in December 2021, Fujifilm announced a new commercial manufacturing facility in College Station. The project is expected to create 150 new jobs and $300 million in capital investment.”

Madison, Wisconsin’s state capital and second largest city, offers specialized concentration in four of the Biotechnology Innovation Organization’s (BIO) five bioscience subsectors: bioscience-related distribution; drugs and pharmaceuticals; medical devices and equipment; and research, testing, and medical laboratories. The Madison metropolitan area is home to Promega, Exact Sciences, the biospecimen company, Gentueri, and the contract research organization, PPD, among others. University Research Park, located off-campus in Madison, supports businesses in a wide range of sectors, including biotechnology. The state’s largest city, Milwaukee, specializes in medical devices, with the fifth highest concentration of medical devices and equipment jobs in the nation.

Milwaukee, which is close to the Chicago metropolitan area, also accommodates companies such as GE Healthcare and Alcami. Outside the Madison and Milwaukee metropolitan areas is Phillips-Medisize (headquartered in Hudson, WI), which employs 2,600 people.

In any given economic development region, there is a focus on available real estate, on facilities, and on the proximity to research and educational institutions and, sometimes, to government departments and agencies. As such, one might reasonably expect that the COVID pandemic inflicted some damage to such regions’ ability to function effectively. During the health crisis, however, the life sciences industry attracted extra attention, along with increased funding and investment. Even so, the boost to pharma and biotech companies in Texas, Wisconsin, and Minnesota has been quite remarkable. During the pandemic, for example, MSP “has seen some of the highest investment from private equity and venture capital in our history,” says Medical Alley’s Dressen. “There’s a pent-up demand for spending that capital. There’s more interest in drug development and manufacturing and finding ways of doing things sooner, earlier, faster. And we have proved to ourselves that things can be done more quickly.”

GREATER MSP’s Frosch identifies three “macro forces” that are reinforcing the momentum in the region’s bio sector. “There is more capital flowing into the space because of the pandemic,” he says. “There is increased concern about the security of American food and drug production, which is encouraging more manufacturing in the US. And, third, the enhanced real and perceived supply chain risks are driving the idea of locating, or at least diversifying, production in the US, as opposed to outside it.”

In Texas, says Cruz, as well as the Texas A&M University System and Fujifilm Diosynth Biotechnologies mass-producing a COVID vaccine, many other companies in the state “were able to pivot their operations to help manufacture personal protective equipment and other supplies for their communities.” Thus, the growth of the biotech industry continued apace. “In 2021,” says Cruz, “our team tracked 58 biotech-related relocation or expansion projects in Texas, expected to create more than $1 billion in capital investment and more than 4,700 new jobs in areas across the state.”

While Wisconsin has seen a lot of “the same benefits and challenges as other states from the shift to remote work created by the pandemic,” WEDC’s Hughes says that increased remote work “has opened a broader pool of talent beyond Wisconsin’s borders.” She explains, “For certain positions, Wisconsin-based life sciences companies’ employees can work from anywhere across the US or even the world, giving employers a larger pool of talent to choose from.” Of course, this has also led to increased competition for talent, but businesses in the state are addressing this challenge by working with the University of Wisconsin-Madison to develop specialist training programs. “These help students to develop valuable skills and encourage them to stay in Wisconsin to put those skills to use,” she adds. In addition, notes Hughes, “more individuals are starting their own businesses—and in the biohealth industry, entrepreneurial spirit is very much coveted.”

Encouragingly, there is no shortage of this entrepreneurial spirit in Texas, Wisconsin, Minnesota, and any number of their neighboring states. It is a spirit that seems to be flowing through these regions, just as healthily as it does through those high-flying clusters on the East and West Coasts.

Wisconsin: Outpacing Employment Growth in Biotechnology

Exploring the competitive and unique offerings in three of the US’s lower-cost economic development regions—and how success in these areas has been boosted by COVID

Regions On Rise: Life Sciences Across US

Maryland is home to one of the US’s largest life sciences clusters, housing more than 3,400 businesses in the sector. The state’s life sciences companies generate $20.7 billion in economic activity and receive more than a billion dollars in federal contracts annually. The region offers proximity to “a powerhouse supply of research and development”—more than 74 federal laboratories, including FDA and the National Institutes of Health (NIH), and over 50 universities, many with thriving university research parks, as well as “50+ incubators, accelerators, and co-working spaces for Maryland innovators and international entrepreneurs.”

 sat down recently with Ulyana V. Desiderio, PhD, director of life sciences at the Maryland Department of Commerce, to dig deeper into the state’s industry opportunities and to look at how the last couple of years have affected its fortunes.

Can you tell us about Maryland’s life sciences sector and what makes it attractive to new and established companies?

Maryland is part of the larger capital region of the US and the East Coast; we talk about Maryland, but we’re also very close to Washington, DC and Virginia. So, depending on who you ask, the BioHealth Capital Region is actually the third or fourth largest in the US. Accordingly, we house a very large and diverse life sciences sector. We have over 3,400 organizations in the state that touch life sciences in one way or another, whether that’s biotech R&D or service providers. We have a lot of clinical research organizations, lots of contract manufacturing. The state is also very attractive for biomanufacturing. We offer many financial incentives for that, which have attracted, for example, Kite Pharma, which has its largest CAR-T manufacturing facility in the US in Maryland. And from outside the country, our incentives have led Ellume, an Australian company manufacturing diagnostics, including the COVID-19 at-home test, to establish a facility here. We also have a very strong medtech and device sector; there’s a lot of innovation coming from the medtech side as well as in digital health and health IT.

What makes us unique, in terms of our ecosystem, is that Maryland is home to a very large federal government presence. NIH, FDA, and the Centers for Medicare and Medicaid Services (CMS) are headquartered here. There are over 70 military and civil installations here. [There is] proximity to these agencies—agencies that fund, regulate, and set reimbursement policy for life sciences products. Businesses really benefit from the proximity to these agencies. If you need to meet with the FDA, for example, you can just drive over there.

And let’s not forget our top universities, which include Johns Hopkins University and the University of Maryland. Johns Hopkins is consistently ranked as the top school of public health in the world. There’s a healthy pipeline of life science companies that are spinning out from these universities, which, over the years, have been very successful in getting funding. It’s been wonderful to see the natural progression and evolution of these companies from “babies,” if you like, to teenagers and then to adults.

How is Maryland further incentivizing companies to come to the state?

We’ve had great success incentivizing companies to come to Maryland. That’s really down to the leadership of our state; our governor and our general assembly have worked to establish Maryland as a very business-friendly region. Our motto is “Maryland is open for business.” The kind of incentives we provide may be similar to other states, but there are a few important exceptions. We have over 50 different programs that companies can tap into, whether they’re already here or they’re thinking of coming here. They fall into the categories of grants, low insurance loans, tax, and credits. A lot of our programs are tied to job creation; if a company is coming in and they’re going to hire people locally, we incentivize them with a generous tax credit, either per employee or per a percentage of their salary. Salaries are pretty high in life sciences, so over the years, these tax credits can add up to a substantial sum.

There are specific programs targeting R&D, and we have a special program for manufacturing. If you are manufacturing here and creating manufacturing jobs, there is a very lucrative tax credit tied to job creation that helps companies offset their payroll taxes. Among the most popular incentives are low-interest loans that sometimes can be forgiven. If a company plans significant capital expenditures, building out its facility here in the state over the next five to 10 years, we can help them grow their footprint with programs such as low-interest loans. Depending on how fast the company progresses and how many people it hires, some of these loans can be forgiven.

A unique Maryland program offers generous tax credits to incentivize investors, no matter where they are in the world, to invest in Maryland companies. If you are a Maryland organization and you identify someone who wants to invest in your company, you can apply to this program and, depending on where you are in the state, your investor gets back anywhere from 33 to 50% of their investment. This helps our companies when they’re out there looking for venture capitalists; they can say to investors, “Maryland believes in us, Maryland qualified our company. If you invest in us, your money will go much further.”

So, we are encouraging investment in Maryland and also from within and outside of our state or even the US. It’s a popular incentive, especially for mid-sized companies.

In life sciences, we hear a lot about economic development activity in California and Massachusetts, but perhaps less about what’s going on in states such as Maryland. Is Maryland aspiring to that higher profile?

We obviously want to be as big as and successful as our friends in Massachusetts and California, but we are also different from them. We have the similar types of assets, the same kind of expertise, the same types of companies, but to that we can add access to decision-makers and funding, and very importantly, a much lower cost of living and cost of doing business than in California and Massachusetts (see sidebar on next page). And we’re only a 45-minute flight from Boston or New York. In Maryland, we’re kind of in the middle of everything; we’re very international, very metropolitan. We have three international airports; we have one of the largest functioning ports. It’s an attractive place to do business and to live in. We’ve got mountains, we’ve got beaches, we’ve got cities, we’ve got farms, we’ve got great schools. We have a substantial federal government presence that feeds everything and makes everything faster. Yes, we’re aspirational in terms of trying to be as well-known as the high-profile regions, but I’m very proud of what Maryland has already achieved and what it continues to achieve.

How are life sciences companies spread around the region? Is there a focus on the Baltimore area?

We have a pretty good spread of life science companies across the state. But when it comes to “classical” biotech and pharma, if you like, the biggest concentration of companies, probably over 50%, is based in Montgomery County. This is where NIH and FDA are headquartered (in Bethesda and Silver Spring, respectively). The other big hub is Baltimore City. The big universities are there, biotech is there, there’s a lot of medtech there. There is also a big medtech contingent in College Park, Prince George’s County, where the University of Maryland is located. The university has a very famous bioengineering department, a medical device center, and they have just opened a quantum computing foundry. Last but not least, we have an incredibly fast-growing biotech center in Frederick Country, in the west of the state. That’s where the Kite facility is and it’s where Ellume is coming. There’s a lot of activity going around the Frederick area. It’s beautiful and also has a lot of space, which is especially useful for manufacturing.

Some of our incentives are tied to these regional geographies. We incentivize companies to build and develop there. It’s a win-win when a company expands in these regions because they can hire locally; they don’t have to bring their workforces with them, and Marylanders can get really good jobs.

Did the COVID-19 pandemic derail or disrupt the process of attracting companies to the region?

I will say categorically no. During the pandemic, we were most successful in attracting companies to Maryland, and our existing companies continued to be very successful. Life sciences, of course, was one of the few industries that didn’t suffer too much through the pandemic.

There are still some supply chain issues that are ongoing, but since initial access to material was sorted out, the level of activity remains high. In life sciences, you have to be in the lab doing things. Once companies figured out how to stagger their staff and how to strengthen their supply chains, they went back to work. And with all the expertise here in infectious diseases, vaccines, and diagnostics production, a lot of our companies were able to pivot completely to addressing the COVID problem, while others started producing personal protective equipment or reagents for tests or vaccines. Based on the incredible success of our companies in responding to the pandemic, we’ve had a lot of interest from businesses wanting to come to Maryland because they have seen the proximity to the federal government, to the agencies that make decisions during a crisis. Our companies actually raised more private money in the first year of the pandemic than they have ever done before. They also did really well raising federal dollars.

What are you doing to ensure the long-term supply of life sciences talent in the region?

The state of Maryland is producing more STEM PhDs than any other state in the US. We have a large local workforce, and that’s one of the most attractive things about Maryland. There’s also an understanding that it’s important for people to have jobs in this industry even if they’re not PhDs—people with manufacturing skills and those who have had other work experiences that may not have required a lot of formal education. There are school programs across the state, boot camps for people who lost their jobs in other industries, and re-skilled them to enter life sciences. One of the best examples is the retraining of people from the hospitality and food industries, which suffered a lot through the pandemic, as lab technicians or entry-level associates for biotechs and pharmaceutical companies. A lot of food industry skills, for example, are very transferable to biotech. The state’s leadership has been very focused on not requiring bachelor’s degrees for some of these jobs. There’s a big push for career changers or people just coming out of high school or community college to get good jobs in this industry.

Our workforce development partners also do a lot of outreach to high schools and middle schools. The kids may say, “Oh, I’m not smart enough to work in this industry,” but we say, “Absolutely you are.”

There are also young people and adults who have seen all the pandemic-related work on the news and they want to be part of it. They’re inspired to work for some of these companies. So, it is important for them to know that they have what it takes and show them all the different ways they can get there. That’s something that I’m really excited about, opening up this industry and creating equal opportunities for everybody who wants to be part of it. Because the jobs are here in Maryland—the industry is growing.

A look into one of the East Coast’s major life science hubs

Tapping Industry’s Reach in Maryland

Every morning I get my breakfast sandwich and a cup of hot latte at the café on the first floor of my office building. It’s a morning ritual that I’ve been doing for the last six months. Four months ago, I started bringing my tumbler for my morning cup of coffee. It is a small change of routine that I hope will make a small impact on the environment.

Our daily routines have a small impact on the environment, where business practices have a much more considerable one. Currently, environmental, social, and governance (ESG) values and goals are center stage in business. ESG activities are being used to paint a holistic picture of a company’s supply chain management and sustainability in the long term. Investors are reprioritizing their asset management goals and focusing more on sustainable business models.

Many people assume that establishing environmental, social, and governance ideas are the main blocks of ESG. This is true to some extent, but the key to ESG is sustainability. The sustainable supply chain allows an organization to optimize processes, increase productivity, and conserve resources, which, in turn, allows them to identify opportunities to reduce costs and innovate products. The supply chain has always played a pivotal role within the pharmaceutical industry, especially when it comes to meeting patient needs. Its importance is seismic, not only within the pharma industry but across all industries, and that has been more evident in recent years due to COVID-19 challenges.

Supply chain sustainability can be achieved by:

 Companies must first map out their current supply chain processes and identify all the connections they have with their clients and vendors. This includes mapping out suppliers of suppliers, and suppliers of suppliers of suppliers, and identifying raw material sources, as they can have a sequential impact on the supply chain.

 Based on the identified supply chain connections, companies then need to highlight potential risks to their supply chain. For example, capacity constraints within certain contract manufacturing organizations (CMOs) or lack of transparencies with their customers or vendors may provide inaccurate demands or projections.

Build partnerships with vendors and clients to mitigate against potential risks: 

As a biosimilar company, we work with carefully selected CMOs and supplier evaluations are conducted on a regular basis to minimize risks in these relationships, while boosting competitiveness. Ongoing communication channels are established to maintain supply chain sustainability, and risks are identified via roundtable business review meetings, partnership decision meetings, and health check surveys.

 These communication channel activities reinforce our supplier and partner communication, and ensure that we and our partners are aligned to ensure supply chain sustainability. 

Ensure evaluation of the risk mitigation plans and activities identified on a regular basis to confirm sustainability: 

Devise plans to ensure those risk mitigation actions are executed via business review processes. These processes also ensure that ongoing day-to-day activities are completed without impacting additional actions to mitigate against risks identified between clients and vendors. For example, grouping of deliveries to certain destinations and ordering enough inventory so there won’t be remaining products that would go unused. This, in turn, would minimize potential wasted resources and lessen additional carbon footprint due to unnecessary transportation of drugs.

Include innovative ideas and process improvements identified:

 When the existing supply chain is sustainable, new ideas can be implemented and enhancements applied. Since day-to-day operations are optimized, innovative ideas can be developed and implemented on top of existing processes without constraints, such as package size-reduction projects, or implementation of new raw materials or new raw material vendors.

This entire cycle repeats on regular basis.

Companies that have resources and processes assuring supply chain resilience and sustainability show to their investors and stakeholders an ability to navigate within the complex maze of the global supply chain. Sustainable supply chain management starts with increasing transparency and accountability, and the setting of clear guidelines and standards, particularly for companies that work with suppliers and vendors. A pharma company usually works with a diverse group of partners, including raw material suppliers, contract research organizations (CROs), CMOs, and logistics companies. For a business to operate a sustainable supply chain, it is necessary that the company, as well as its partners, adhere to the codes of conduct and ethical standards to ensure the health and well-being of patients, employees, and local communities. It is also about keeping the communication channel open with suppliers and vendors, identifying potential risks, redundancies, and unmet needs that would benefit both sides, and addressing operational inefficiencies. This requires investment and efforts in building trust and mutual respect for each other.

Like any other industry, pharma has an impact on the environment. Drug production inevitably results in emission of greenhouse gas and excretion of wastes and ingredient residuals that can have an impact on air, soil, and water resources.

 However, what differentiates a pharma organization from others is the ability to redesign its business strategies and approaches in a way that can create shared value for both the individual company and the society. This could involve using highly efficient equipment that requires less energy consumption or developing eco-friendly packaging and shipping materials that are recyclable or less wasteful. It is also about ensuring safety of the workers, including those working in partner companies, and the health and well-being of patients, through rigorous quality management of medicines, from cell line production to delivery of final drug products (FDPs).

Biosimilars play a significant role in sustainability, not just environmentally, but also in terms of social sustainability. One of the major promises of biosimilars is an affordable option to existing treatments, which widen patients’ access to medicines. Increasing the accessibility of medicines, as well as being the pressure valve for ever-rising healthcare costs and alleviating the financial burden for more innovation, is one of the ultimate aims of ESG.

Kris Soyoung Lee is Vice President and Commercial Team Leader, Samsung Bioepis.

1. Samsung Bioepis 2021 Sustainability Report.

2. Lotfi Belkhir, Ahmed Elmeligi. “Carbon footprint of the global pharmaceutical industry and relative impact of its major players.” 

Six steps pharma organizations can follow to help achieve sustainability in their product supply chains

ESG is Reshaping the Supply Chain

Last year saw a few reports pointing to the current buoyancy—and major forecasted growth—of the contract sales organization (CSO) in the life sciences space. Visiongain valued the 2020 global pharma contract sales market at just over $5 billion and reported that it is set to grow at a compound annual growth rate (CAGR) of 5.8% by 2031. Transparency Market Research’s 2021 Pharmaceutical Contract Sales Outsourcing report placed the market’s 2020 value at $7 billion and forecasts a CAGR of 7% to 2031. India’s Maximize Market Research expected the market to reach $14.5 billion by 2026.

Firms offering contract sales services range from those well known in the pharma support space to others more focused on the sales operation. Companies include Promoveo Health, IQVIA, Ashfield Engage Medical Sales, and Syneos Health. As Visiongain noted in its 2021 report, however, many firms are now widening their service offerings, “simplifying their customers’ operations and gaining the maximum share of their outsourcing budgets, driven by the willingness of pharma to reduce the number of outsourcers they use.”

Jennifer Meldrum, co-founder and managing partner of PEAK Pharma Solutions, agrees that the CSO market is strong. The pharma industry is evolving, she says, and while this evolution began before COVID-19, the pandemic forced the industry “into a revolution of sorts.” As such, she explains, “organizations are looking for flexible solutions and partners that allow them to remain nimble, adjust course of action quickly, test new concepts, and prove return-on-investment (ROI) before significant investment of time, effort, and financials.”

And just as the pharma landscape has evolved, so have the CSO services provided. While “CSO” is widely recognized as an acronym for contract sales organization—traditionally providing contracted sales teams to supplement an organizations’ existing structure—at PEAK Pharma Solutions, for example, CSO “actually stands for ‘contract solutions organization,’” says Meldrum. She explains, “This is because we provide solutions that go well beyond the sales function, including medical, marketing, project management, training, recruiting, etc.”

In EVERSANA’s case, the company offers solutions to support commercial growth across the pharma and life sciences, “helping manufacturers deploy field deployment teams—comprising both sales and medical professionals—to accelerate brand awareness and grow their prescriber base.” It really comes down to efficiency and costs, says Greg Skalicky, EVERSANA’s chief revenue officer and head of global commercialization. “If a brand is launching a product and needs a dedicated sales team to connect with clinicians to educate them on the product, manufacturers must determine the costs to find, onboard, train, and manage a sales team, versus partnering with a company to outsource the same solution.” The right outsourcing partner, he says, can bring experience and knowledge of a therapeutic area, training, and other infrastructure support that can help manufacturers focus on their product launch while knowing the outside sales team is being built and managed by a proven entity.

Partnering with a CSO also allows new firms to set up their footprint in a strategic way, says Meldrum. “CSOs like PEAK are in a position to support, adjust, identify gaps, and provide timely and curated solutions for the ever-changing industry,” she says. CSOs can help pilot concepts and ideas and demonstrate proof of concept for partners. “You can essentially test out a strategy, with the ability to initiate and execute relatively quickly, and evaluate the outcomes before launching such a concept internally.”

Pharmaceutical companies of all sizes can benefit from outsourcing sales. For small startup biotech and pharma companies, an outsourced partner “can really help scale growth quickly to meet the company’s needs as they evolve,” says Skalicky. “Initially, a manufacturer may launch a therapy in one market and need a team of six sales reps, but as they grow, an outsourced partner can quickly help ramp up the team to meet demand while providing consistent training without having to invest in larger training and development teams.” The same holds true for large pharma, which faces the same challenges but may just need larger volumes of reps based on the depth of the therapy’s impact. However, using a data-first strategy can help companies understand that a large team may not be needed, adds Skalicky. EVERSANA’s approach allows its field deployment teams “to make educated, informed decisions based on patient and healthcare provider (HCP) populations, [and] create a more customized plan for an outsourced sales team," he says.

Meldrum agrees that all kinds of pharma companies can be served by a CSO. For example, for a startup company or a new affiliate to a particular country looking to evaluate the response to their company and brands in a new market, a CSO can step in and tackle much of what is required. PEAK also partners with pharma companies that have a small footprint/infrastructure but are now looking to grow to the next phase, with the move toward growth achieved “in a flexible manner allowing for rapid adjustments if need be," says Meldrum. PEAK serves large, established pharma organizations as well, which may not require additional support services, such as training, analytics, etc., but are “looking for opportunities to capitalize on market dynamics quickly,” she explains. By having the option to add share of voice in a variety of ways, these organizations can quickly implement strategies to ensure they do not miss unique opportunities. In addition, says Meldrum, with the significant restructuring that has occurred across the pharma industry, “There can be many brands, perhaps later in their life cycle, that have been left unattended." This is where a CSO can “jump in and offer solutions to still provide share of voice to that audience, for that brand, in creative, customized ways,” she notes.

In all engagements, a good CSO will sit down with companies and talk about goals and objectives from the beginning. “We dig deep into the therapy that will launch and carefully analyze both current and historic data sources. From there, we can work together to build a program to drive maximum success that will ultimately help patients,” says Skalicky. EVERSANA works with companies to understand what they hope to accomplish in years one, two, and three. They ask how many patients the therapy will impact. How strong are the pricing and reimbursement models? And what will the patient and HCP experience be like when the product launches?

CSOs work with companies to “solidify strategies, fine tune tactics, and implement and execute programs allowing for the best chance for their success,” says Meldrum. PEAK, for example, can use a client’s existing IT/CRM systems and training and integrate with the client’s sales/marketing team. Alternatively, CSOs can work more as a stand-alone, arms-length partner. “This is where we would be responsible for all aspects of the program/mandate, including but not limited to, recruiting, on-boarding, managing, CRM, IT, sample accountability, analytics, training, etc." The key, says Meldrum, is that the CSO works closely with its clients to ensure they are fully aware of all that is transpiring with the program, how it can be improved, and where there are opportunities to increase ROI.

Contract sales organizations are evolving alongside the companies they serve

Securing Sales Solutions in Pharma

Industry experts from ZS—Maria Whitman, global head of the company’s pharmaceutical and biotech practice, and Anshul Agarwal, who leads the global supply chain and manufacturing practice—offer their perspectives on the current and future supply chain challenges facing global biopharma, and how these challenges are being met by a shift to technology adoption that owes much of its urgency to COVID.

: As we move beyond the pandemic, what are the supply chain challenges that pharma is facing?

Before we even get to the challenges, we see that the pandemic actually propelled supply chain from a necessary function to a very strategic group with a seat at the table in terms of how global pharma companies move forward and in terms of decisions that will affect patient experience and profitability—all the things that were more traditionally part of the brand sphere. And there’s a very big difference now between paying attention to and driving the supply chain. This isn’t from a globalization and efficiency perspective, but from a perspective of resilience across regions and countries, and also in terms of what else the supply chain can do to support the business and patients.

Of course, there were a number of vulnerabilities exposed. The conversion to an efficient global supply chain was well-intentioned and made economic sense, but in a pandemic became a significant challenge. But that did not result in a catastrophic effect on drug availability; most companies were able to do what they needed to do and supply disruptions were short lived.

From my perspective, working with many different clients, there are three key challenges; as Maria indicates, none of these are new or related to pandemic. Rather, they are, in general, part of the life cycle or journey; they’ve just become more apparent, more visible, and companies are focusing more on addressing them to avoid falling flat on their faces.

The first challenge is in running the manufacturing capacity. There has been a shift from blockbusters to molecules with a smaller revenue pipeline; there’s now a lot more complex manufacturing versus small molecule manufacturing, such as gene therapies. This has put pressure on manufacturing capacity; producing one small molecule and thousands of batches is, of course, much easier than having to keep changing batches from one to another or maintaining a complex production cycle. Companies are investing millions of dollars in opening new manufacturing capacities, but it takes three to five years and a huge CapEx investment to get things running.

The second challenge we see is on the logistics side. Many products, such as cell and gene therapies and vaccines, require cold chain storage. The latest data shows that an estimated 50% of the future launches will require some kind of a cold chain storage. So that has made things more complex, and there are a lot of wastage in that area.

There is also a problem on the provider reception side, having the facility to actually accept those cold-chain materials and store them for any period of time.

 Yes, from the manufacturing side to logistics and then to the providers, there is around 20% spoilage rate for non-COVID-19 vaccine due to temperature failures, which is a huge number.

The third challenge is to do with the suppliers, who are still fairly concentrated in a few countries outside the US. Then there is a fourth challenge—a price pressure. Typically, pharma companies would not think as much about the cost, but that is no longer the case. And now the situation in Ukraine is adding to these pressures. These are not problems that can be solved very easily.

Just to touch on the pandemic again, it brought the industry’s reliance on sourcing materials from India and China into sharp focus. Is that something the industry was already trying to move away from, having very few or sole sources, before the crisis?

Not before COVID. As Maria mentioned, the general trend was “Let's optimize, globalize, reduce the inventory as much as we can. Let’s do just-in-time production.” All those well-known terms, supply chain gospels, were being implemented at that time. There were some efforts in terms of diversifying suppliers, but it was more a case of India versus China. Now, the question is more about risk and resilience versus more about cost.

 I think about one-third of pharma leaders are now trying to manage risk by dual-sourcing, but, still, 80% of all active pharmaceutical ingredients (APIs) that are used in medicines in the US have no domestic manufacturing source. So, we’re still very, very far from having that closed internal resilience. But having at least a dual mechanism of supply will help to reduce the risk.

Some  organizations are making ambitious claims about establishing more manufacturing in the US. Do you see that as a feasible way forward?

 I believe it is necessary to create more local support and sourcing. You do have companies producing more capacity and trying to vertically integrate with certain types of APIs. And there are some companies, plasma-based companies for example, that produce all of their own raw material. You’ll see some non-traditional companies coming into this space too, Kodak for example, using their own manufacturing facilities to try to meet some of these challenges. I think we will see more conversion to a US-centric supply source, but I think it’s going take a very long time for us to achieve a significant lack of dependence on some of the bigger countries. There is just too much supply needed.

 When we think about manufacturing, there’s the manufacturing that companies were already doing that is now moving to the US. In the last six months, Eli Lilly, Pfizer, Catalent, Cambrex, etc., have all announced plans to set up sites in the US, but this was manufacturing they were already doing. But if we talk about API manufacturing, that can only happen if the government comes into the picture. Generic medicines and APIs, that’s a big shift, a $160-billion market. There are efforts being made toward setting up an infrastructure hub in the US, and government will have to play a significant role in helping that. But it will be a longer journey.

 The other thing to consider is that other countries’ governments are concerned about the global supply chain and their citizens’ accessibility to medicine. So, you are seeing around the world a bit more stipulation around having manufacturing sites in proximity. For example, for cell and gene therapies, there were a lot of companies relying on one or two sites for all manufacturing capacity. They'll be challenged with that part of the equation in the future, because of the requirements that countries are looking for.

We mentioned the Ukraine–Russia situation, which isn’t yet having a huge impact on the industry in terms of sales, but there is the disruption to the supply chain and pricing. Can you talk about what may happen if this conflict goes on for much longer?

 When we look into the direct supply of either raw materials or MedTech devices, a very small percentage (single digits) comes from Russia or Ukraine directly. For example, only 138M of a 160B market comes from Russia. However, there are indirect effects on raw materials, and on logistics, which have affected pricing. The shift is not as significant as it was with COVID; at the moment, it is impacting the margins. What we are noticing is that companies are working to address those margins in different ways. There’s a whole discussion in Europe right now, for example, to adjust the pricing so companies can maintain some of the margins. Companies are investing heavily in terms of manufacturing to digitalize it so that they can improve the yield and reduce the cost. If the conflict continues for longer—a few years—we are likely to see another shift in supply chain and manufacturing. Like the way COVID shifted things to digitalization, to connectivity, this shift will result into pharma finally becoming more sensitive about making decisions related to cost and investment in supply chain and manufacturing.

 I will add that the Russian API market is less than 0.01% of the total API market, so it’s not a player in that sense. Early in the conflict, I was tracking the impact on supply as it relates to clinical trials and overall clinical trial accessibility in Ukraine and Russia, because pharmaceutical supply would be exempt from any sanctions. Fortunately, they tend to stock about six months of supply for clinical trials. So many trials remained unaffected in the beginning. As of March, only about 4.4% of global trials were halted in the Ukraine and Russia, and some patients from the Ukraine were able to enter trials in Poland.

How are you advising companies that come to you for help with supply chain matters?

 With every challenge comes an amazing opportunity. There's a lot of technology that has been evolving that supply chain organizations hadn’t necessarily implemented in the way we can now. As I look forward and think about how they need to address supply chain in the future, there’s three things. One is building an end-to-end, transparent supply chain; we now have the data and the technology capabilities to do that. Another is investing in those digital technologies so that you can innovate with that data in multiple directions. The third thing is, as we were discussing, the dual- or multiple-sourcing perspective.

A conversation with ZS’s Maria Whitman and Anshul Agarwal 

Pharmaceutical Commerce - August 2022

Pharmaceutical Commerce - August 2022 Issue (PDF)

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