Supply Chain Brain - March 2010

Generic Biotech Impacts
Healthcare Supply Chain

Lower-cost “biosimilars” are coming to the U.S.

Gillian Woollett, chief scientist with Engel & Novitt LLP, discusses the implications for drug companies, supply-chain managers and patients.

Consumers have long benefited from the lower cost of generic aspirin, cold remedies and other popular therapeutic drugs. Now they’re about to witness the arrival of generics that were produced through biotechnology. Patents on key biotech drugs are about to expire, bringing new options and savings to the marketplace. At the same time, the development will bring an additional level of complexity to the healthcare supply chain, Woollett says.

These “biologics” or “biosimilars”—medicines developed from living systems—can in theory be produced by multiple manufacturers, who will widen the availability of products while driving down costs. They can also help to smooth out demand, says Woollett. In the process, biologics will begin to account for a greater portion of healthcare spending.

There is still some question as to when those products will hit the marketplace. “The devil is in the details,” says Woollett. The speed of approval by the U.S. Food & Drug Administration will hinge on the structure of the regulatory process and the data that is made available to the agency by manufacturers. With more than a dozen generics already approved, Europe is ahead of the U.S.; its experience should help to alleviate concerns in this country about the drugs’ safety, purity and potency, she says.

Not just any company can produce a line of quality generics. It must have the experience and resources to conduct clinical trials and surmount the government’s regulatory obstacle course. Woollett estimates the cost of entry into the market at between $50m and $100m. Still, she says, there should be enough competition among successful providers to ensure significant savings for patients.

The benefits won’t materialize all at once. Over time, Woollett says, the new breed of biologics will come to have a big impact on healthcare spending and access by consumers to critical drugs.

To view this video interview in its entirety, visit www.SupplyChainBrain.com.

Big Changes Coming in
Healthcare Supply Chains

Laurel Junk, vice president of supply chain with Kaiser Permanente, details the transformation that’s under way in the hospital industry, driven by healthcare reform and a new focus on the ultimate “customer”—the patient.

There’s a general assumption that the delivery end of the healthcare industry— the hospitals—are “recession-proof.” Not so, says Junk. In the most recent downturn, they too have lost business. Meanwhile, the looming prospect of healthcare reform has created a “two-wave tsunami,” forcing the industry to restructure and take a close look at costs.

Kaiser, which runs some 37 medical facilities and 450 office buildings, has undertaken a number of initiatives as it seeks to become more efficient and forge stronger links to the clinical side of the business. The goal is to get a better handle on how the delivery of services is related to cost. “We have not had to understand this in the past,” Junk says.

Kaiser’s efforts are already paying off on the clinical end.
Patients can go online to schedule appointments and talk to a doc-
tor. There has been less investment on the back end, in key areas
such as accounts payable. Junk says Kaiser is implementing its first
enterprise resource planning system in 30 years. At the same time,
it has become acutely aware of the impact of efficient supply-
chain management on patient care delivery. “We’re making sure
that our hundreds of thousands of products are there every day for
our patients,” she says. “There’s a lot we can learn in how to better
run our supply chain.”
Kaiser still needs to get some of the fundamental processes into
place. There’s plenty of room for improvement in demand planning,
forecasting and inventory management, Junk says. By tracking the
flow of products more closely, the company hopes to link its supply
chain “with our core mission of treating patients.” She sees additional
opportunities for becoming greener, while continuing to drive out
costs. In the end, Junk says, supply chain can “earn a complete full
seat at the table, in terms of senior leadership.”