Pharma 4.0

For over a decade, the ‘4.0’ moniker has been impossible to avoid. From ‘Logistics 4.0’ and ‘Airport 4.0’ all the way to ‘Waste Management 4.0’, the term has been on the tongues of industry experts for years. And why not? Involving digitalisation, real-time data management and AI, among countless other innovations, the ubiquitous neologism promises to make industries faster and more efficient, all while it cuts costs and offers advantages for end consumers. Certainly, this enthusiasm is clear from even a cursory look at the numbers. Since 2011, when the term was publicly introduced by then-German chancellor Angela Merkel, Google searches for the term have jumped by 140%. According to work by Fortune Business Insights, meanwhile, the global industry 4.0 market is projected to reach $377bn by 2029, up from just $130bn last year.

Given how fast the bandwagon is speeding, at any rate, it makes sense that the pharmaceutical sector should have climbed aboard too. Again, the statistics here are revealing, with the international ‘Pharma 4.0’ market forecast to enjoy CAGR of 17.7% between 2022-31. If, moreover, the latent potential of new technology is clear across pharma – hardly strange given the sector’s complexity – the supply chain feels like especially fertile ground for the fruits of 4.0. That’s clear across the board, from internet-of-things (IoT) devices that track sensitive shipments through to AI that helps route planners predict storms and other obstacles. Considered together with even more esoteric technologies, notably around so-called digital twins, and those spectacular CAGR figures seem even less surprising.

Not, of course, that the success of Pharma 4.0 is a foregone conclusion. Whatever the theoretical excitement for technology, it’s less clear how far humans have embraced it. Whether they like it or not, even industry giants are reliant on a tangle of partners, which raises difficulties around how exactly digital insights are shared. That hints at wider challenges too. It risks being lost in the flurry of think pieces and consultancy papers, but technology can’t fix supply chain problems all alone. Rather, success requires careful training, and worker uptake – and ultimately an appreciation that geopolitical complexity involves more than ones and zeros.

Pulling the chain

Imagine you’re holding a pill between your fingers, for example a small single molecule drug like paracetamol, and you’re about to swallow it down. Pause for a second and reflect on where it came from. The active pharmaceutical ingredient, let’s say a type of bark, could well have come from a place like Puerto Rico, before being formulated in the Netherlands. From there, the packaging process could have happened somewhere like Greece, even as secondary packaging occurred in Japan. That packaging, in this case paper, was likely manufactured in China, even as your pill’s reagents were Belgian and its excipients American. Nor do we even need to stick to hypotheticals. Pfizer, for its part, boasts 36 manufacturing sites and 11 logistics centres, altogether employing some 31,000 manufacturing and distribution workers.

To put it differently, today’s global pharma supply chain, now a $1tn dollar business, is bewilderingly complex – and with complexity comes inefficiency. Consider, for example, unopened vial wastage, with the National Academies of Sciences, Engineering, and Medicine’s reporting that spoilage in the form of heat exposure or damaged packaging causes $2.8bn of dumped medication each year. Theft is another problem. At the height of the pandemic, for instance, €500,000 worth of goods were stolen from EMEA supply chains every day. With rising regulatory hurdles, and the greater sensitivity of drugs like live cell therapies, it’s no wonder that Hui Zhao, associate professor of supply chain management, Smeal College of Business, Penn State University, should suggest that track and trace has become a “very hot topic” across pharma supply chains.

Technology, the supply chain expert says, is absolutely central to these developments: “I think technologies make it possible [for there to be] better information flow – more timely sharing of the data – that would facilitate better decision-making among the business and business partners.” Certainly, it’s a point amply bolstered by external research. As one recent study uncovered, the digital pharma supply chain management market will be worth some $1.8bn by 2030. That’s reflected at the company level too. Johnson & Johnson, for instance, is rushing ahead with a plethora of changes worth millions, with everything from digital tags to delivery drones enjoying attention. Not to be outdone, Bayer last year announced it was throwing €2bn into its manufacturing and supply chain capabilities.

What’s possible with 4.0?

Beyond these headline figures, how is the pharma supply chain being digitalised in practice? Let’s return to our hypothetical single molecule drug, the one about to be swallowed by some headachestricken punter. Perhaps the most important thing to ensure is that it can actually be consumed – by no means certain if it was exposed to extreme temperatures or damp. Fortunately, IoT can help, as Zhao explains. “Wireless sensors along the supply chain can ensure the integrity of the supply chain – by using these sensors for temperature, for location, for all kinds of things.” That’s just as well: at higher than 30°C, simpler medications like paracetamol can fail, a threshold that’s much lower for certain gene therapies, which may need to be transported at -70ºC. At the same time, being able to remotely track shipments as they move from factories to patients can prevent theft, and as Zhao emphasises, spotting problems early can make recalls easier to handle.

IoT, for its part, is clearly proving popular in practice. According to GlobalData, Q2 2023 saw a 23% rise in pharma company filings mentioning the term, compared to the previous three months. It’s a similar story with AI – and no wonder, given all it can do. For Zhao, the most exciting development here involves so-called neural networking, where algorithms can be trained on masses of data to make robust predictions about demand. In a field as uncertain as supply chain management, this can be a godsend. “Once you better forecast your demand,” Zhao says, “you can optimise your inventory levels, you can reduce your waste, and you can ensure timely availability of medication.”

In a broader sense, meanwhile, AI can also forestall the many specific obstacles pharma logistics now faces. Imagine, for instance, that our imaginary pill had to get from Greece to Japan for secondary packaging – but a strike at the dock at Piraeus disrupted things, something which actually happened as recently as September 2023. With AI, Zhao suggests challenges like these could easily be overcome, as predictive models “optimise transportation routes” and help staff reroute shipments elsewhere. That’s even before you consider the potential of other 4.0-adjacent technologies, like digital twins, which allow manufacturers to test out theoretical supply routes from the comfort of their computers. Especially given the drug shortages affecting both sides of the Atlantic – in Europe alone, recorded deficits increased 20-fold from 2000-18 – Zhao is optimistic about what all these technologies can do. “They definitely are good things,” she says, “for the patients and also for the shortage problem.”

Human error

We don’t have to take Zhao’s word to understand the impact 4.0 technologies can have on pharma supply chains. At Pfizer, to give one example, integrating a so-called digital cold chain into operations is just one of the tactics that’s seen the successful delivery rate soar to over 99%. All the same, we shouldn’t necessarily be envisaging the pharma supply chain at large in ‘4.0’ terms just yet. For Zhao, this fundamentally comes down to the human element of the process. No matter how powerful the AI, for instance, she contends that what really matters is “how people will use this information” in practice. A happy outcome here is by no means certain. As Zhao points out, rugged training is vital to make the most of complex algorithms, with some exploiting literally billions of individual data points. It hardly helps that global healthcare continues to suffer from a workforce shortage stretching into the millions.

There are other human-centric issues here too. A bottleneck-busting AI is all well and good in theory, after all, but who owns the data it uses? Where is it stored? Which partners in the supply chain get access to it – hardly an immaterial question when one French pharma distribution company recently leaked 1.7 terabytes of confidential data. On these quandaries, Zhao is blunt, arguing each requires “agreements and human relationships” to be satisfactorily resolved. With all this in mind, at any rate, the Penn State professor is reluctant to ascribe the ‘Pharma 4.0’ label to the medical supply chain just yet. If the term encompasses “the convergence of people, systems, and data,” she argues that, though data and systems may be present and correct, those pesky flesh-and-blood humans are a little further behind. “As an industry,” Zhao suggests, “mentality” is as important as investment and resources. “So I think it probably requires some more time”. Especially given the questions not even AI can solve, from the potential of another pandemic, to rising geopolitical tensions in the Far East, such caution feels sensible – even if a digitalinflected future feels inevitable in the end.