Global pharmaceutical companies have faced significant scrutiny for various issues, such as inconsistent drug availability, a lack of transparency in environmental, social, and governance practices, and a surge in counterfeit medications. This increased scrutiny indicates that the traditional manufacturing and distribution processes of Industry 3.0 are no longer adequate.
According to analysis, pharmaceutical companies need to undergo a substantial level of digitalization to include supply chain-related data, such as tracking raw materials and global movement across facilities. The need for digitally mature pharmaceutical supply chains goes beyond ensuring resilience and data-driven decision-making. It also enhances compliance with regulations, helps meet environmental, social, and governance targets, and ultimately safeguards patients.
Meeting Regulatory Compliance
Regulatory compliance is a key aspect that pharmaceutical companies must prioritize. Governments and regulatory agencies worldwide are imposing stricter regulations to ensure drug safety and quality. For instance, the United States has the Drug Supply Chain Security Act (DSCSA), which mandates serialized, electronic, and interoperable systems to track prescription drugs throughout the supply chain. The deadline for compliance is approaching rapidly (November 27, 2023). Similar regulations are being adopted globally to push pharmaceutical companies to digitalize their supply chains for enhanced traceability.
Achieving digital maturity in the supply chain is no longer optional but necessary for pharmaceutical companies to mitigate increasing risks. Organizations like GS1, the World Economic Forum (WEF), and the World Health Organization (WHO) provide guidance on developing traceability best practices for the healthcare sector as a whole. Compliance with these regulations is crucial to avoid penalties and litigation, which can damage trust from healthcare providers, patients, watchdog groups, media, financial institutions, and investors.
Combatting Counterfeit Products and Theft
Addressing the issue of counterfeit products and theft in pharmaceutical supply chains is vital. Approximately 11% of medications in developing countries are estimated to be substandard or falsified, causing significant economic burdens, especially in low- and middle-income countries. The number of pharmaceutical crime incidents increased by 38% in 2021, affecting 142 countries worldwide. The global counterfeit pharmaceutical market is estimated to be valued between US$200 and US$432 billion. Even legitimate online pharmacies can be challenging to find, as the majority violates applicable laws.
ESG and Transparency Expectations
The pharmaceutical industry has been criticized for its lack of leadership in addressing climate change and social injustices, attributed to greenwashing and a perceived lack of transparency. Large pharmaceutical companies have been found to generate 55% more emissions than the automotive industry, largely due to carbon-intensive operations such as cold storage. However, the industry is now taking more concrete actions to meet environmental, social, and governance (ESG) targets, including participation in initiatives like the Pharmaceutical Supply Chain Initiative and monitoring emissions across various scopes. Supply chain traceability is crucial for substantiating sustainability claims and accurately assessing the industry’s impact.