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One the surface, the pharmaceutical supply chain is quite simple: you have one company who manufactures and produces medical prescriptions to which they are then delivered to patients. The end. When in reality, although the industry has done a good job and improving the consumer experience, the pharmaceutical supply chain is rather complex including a diverse number of stakeholders ranging from the manufacturer, the wholesale distributor, and the third party administrative pharmacy that mediate between drug prescription companies and insurers. So you see, it's not so straightforward. According the McKinsey & Company, the global value of pharmaceutical goods traded has grown to $629 billion in 2019. This is a six-fold increase compared to the year 2000 when goods were valued at $113 billion. During those two decades of growth, the supply chain has transformed into a very complicated, global network of systems. Today, it's common for companies to outsource operations. This speaks to why there is so much more complexity in the pharma supply chain as some drugs may start in a lab in Asia with a destination point set in North America. With advanced and changing supply chains comes new vulnerabilities and risks. There is a lot at stake for pharmaceutical companies. A report from the Pharmaceutical Research and Manufacturers of America (PhRMA) found that the complexity and number of players involved in the drug supply chain may one of the main reasons prescription drug costs are making headlines. Some of the challenges the supply chain faces most prominently today is supply chain visibility, increasing prescription costs, and navigating cold-chain logistics.
Compared to other industries, the pharma industry has historically weaker working capital performance which hinders it's ability to keep up with the pace of demand and supply chain innovation while managing the company's bottom line and remaining profitable. Pharma supply chains must leverage working capital to alleviate the strain on the supply chain due to extensive lead times and growing price pressure.
With supply chain finance pharmaceutical companies can improve their cash flow positions to fund the supply chain, support growth initiatives, and reduce supply chain risks. Discover how your company can unlock a revolving credit line to unpack some of the challenges that pharmaceutical supply chains are facing to equip themselves to sustain disruption and grow their business. Contact info@traderiver.com to get started today!