Temperature Control and Monitoring in Third Party Logistics

The following edited excerpts are from an Executive Insight interview between Nick Basta, founder of Pharmaceutical Commerce, and Richard Beeny, CEO of LifeScience Logistics. Executive Insight is a video series providing informative and educational perspectives from pharmaceutical, life science, health care and logistics industry leaders produced by the ELPRO Leading Minds Network™.

Nick Basta:
Hi everyone, this is Nick Basta, founder of Pharmaceutical Commerce. Today I am with Mr. Richard Beeny, CEO of LifeScience Logistics. Today we are going to be talking about 3PL services and related services that companies like LSL can offer to the pharma industry. We will also get some insight into what is going on with this supply chain craziness that the whole world is experiencing right now. With that, I'm going to turn it over to Mr. Beeny. Mr. Beeny can you start by telling us a little bit about LifeScience Logistics, its origin, and where it has evolved to today?

Richard Beeny:
I started LifeScience Logistics back in 2006 after having spent a dozen years or so in the supply chain group at UPS. The reason I started the company is, at the time, there was a gap in the market in terms of 3PLs that were healthcare specific serving sort of the mid-market pharma med device space. I thought there was an interesting opportunity there.

I left UPS and started it. We've been going crazy ever since. We do a fair bit of work in a couple of very specific areas. We do a lot of work for the federal government and you can imagine we've been pretty busy this last couple of years with the COVID response. We do a lot of work in the traditional sense of the 3PL where we sit between the manufacturer and the wholesaler. We've had great success. We started the company with one small warehouse in Louisville, Kentucky, that was about 40,000 square feet. Now we are up to almost five million square feet in the US and closing in on fifteen different facilities.

The last five or six years of growth has been a lot larger opportunities within that 3PL market, a different kind of client mix, and a much heavier emphasis in cold chain. So if you think about happened with COVID and all of the -70 °C, -80 °C distribution that nobody had really much heard of prior to the COVID-19 vaccines coming out, we're not responding to many opportunities today that don't also include some sort of a cold chain application to them.

A key development that we announced recently is that Blackstone has taken a significant stake in the company. We're excited about that relationship because Blackstone brings a different set of resources to the table. We're able to leverage their capabilities, their relationships, what they can do from a real estate perspective, and bring that to the table. As you can imagine, the 3PL space is nothing without the distribution capabilities, which leans heavily on warehousing space.

Although we have done a tremendous job growing over the last 15 years, we're now at a place where that growth requires much more capital and a different set of sensibilities. Our average warehouse used to be 250,000 square feet. Now our average warehouse is close to six or 700,000 square feet. It is just a different game right now. We're super excited about what the future holds for us. We've got around 600 employees so far, 15 or so locations, and some pretty aggressive growth plans going into the next few years.

Nick Basta:
Okay, great. Just to clarify, because we have an international audience, does LifeScience Logistics operate solely within the United States? Then the addendum to that: do you export from the United States or import into them?

Richard Beeny:
The answer to that is yes. We only have distribution centers in the US and we have broad coverage here, as you can imagine. We do in fact import, so we get many of our products from overseas, specifically, from Europe and Asia. We do manage that typical sort of transportation, brokerage components to the supply chain where we are bringing in finished goods and raw materials for our clients from those countries and regions of the world.

We also do a fair bit of export as well. Typically, the export part of our business is finished goods and a fair bit of raw materials. We do both but primarily our footprint is here in the US.

Nick Basta:
Okay, good. Now, in your earlier comments you made mention of what you called mid-market pharma. It actually sounds like, at this point, you're evolving a little bit beyond that. Can you tell me, the companies that are not big pharma, do they have different concerns, different ways of doing business and is that what you're attuned to managing?

Richard Beeny:
So how is mid-market pharma different from say, large pharma? In our view and experience, the mid-market pharma space really is comprised of companies that have matured beyond the place of a startup organization. They don’t necessarily a broad portfolio of products, but certainly more than one or two different products. They tend to be a little bit more mature than startups.

There's a different expectation level in that environment. Let me describe what I mean by that. Startups tend to rely heavily on us for guidance. We've never been in this market. How do we do this? What does pricing need to look like? How do I get access here? What should my packaging look like? What are the implications of this mode of transportation versus that? What are the regulatory issues around product launches and that kind of stuff. Mid-market pharma companies, biologics companies and the device companies have already figured out most of that stuff. Those folks are not trying to prove a model or prove a market, they really just want to grow share.

What we tend to focus on are items around efficiency, quality control, track and trace, new product launches, that kind of stuff. What they are trying to do is compete against some of the larger players in the market. They want to be able to compete on some sort of level playing field in terms of infrastructure. They rely on us to be that infrastructure component for them--where some of the big pharma companies may have their own distribution capabilities and transportation capabilities.

Nick Basta:
Okay, I understand. You had said that a lot of your business is cold chain and that's intriguing. Off the top of my head, I cannot think of any 3PL that focuses on cold chain. Can I explore that a little bit? I assume the company is not 100 percent cold chain, but maybe majority cold chain. If so, are you already seeing the introduction of the cellular and genetic therapies that have a super specialized form of cold chain management?

Richard Beeny:
To go back to your earlier question, we're not 100 percent cold chain. We do a significant amount of cold chain. More and more of our expansion capabilities tend to be around cold chain than say controlled ambient. Now if you were to visit any of our warehouses, you would not see any non-climate controlled space. We're a company that, because all we do is healthcare, you would only see a temperature-controlled environment. Those expansions are a heavy emphasis on refrigerated, so 2 °C to 8°C type space, little bit more in the -20 °C to -25 °C space, and then much more emphasis on deep frozen--what you would've seen in the COVID-19 distribution headlines recently.

We've even gotten to the place recently where we're building out the capabilities to make dry ice in one of our facilities. It's a little bit new for us, but we don’t want to put ourselves in a position where we're reliant on a vendor that we have limited control over, to make sure that we have the necessary components to ensure safe delivery of some of these therapeutics--whether it's an injectable or a biologic or the like. We really need to make sure that when duty calls we're able to fulfill the mission.

It brings up much more intense regulatory and quality oversight internally, right? The tolerances involved here, and the cost of failure is so high, that we just can't accept any errors at all in that sort of a distribution network. If you're talking about solid oral generics for example, you've got much more leeway in terms of time, transit and those types of things in the supply chain. So this order of magnitude is much more complicated in terms how you manage that type of a distribution network.

Nick Basta:
I can imagine. So, for those members of the audience who are perhaps just beginning to think about pharma logistics--I'm thinking about startup companies that are just approaching the FDA approval process, things like that. For their sake, can you walk us through what a "typical" shipment handled by LifeScience Logistics looks like? I know each one is going to have its own intricacies, but if there's a way to generalize?

Richard Beeny:
We'll bifurcate the discussion between cold chain and non-cold chain. Our typical non-cold chain supply chain looks like product coming in from Asia (typically) on an ocean container into some port in the US. Being trucked to our facility, unloaded, put away in the rack, and inventoried. The pick, pack and ship operation tends to be cases, sometimes pallets, master cartons, all the way down to kind of units which then get over packed in a carton that can survive the transportation network here in the US, limiting the damage. It typically ends up in the hands of a wholesaler. We do a fair bit of distribution to hospitals and pharmacies, but most of the drug buy here in the US goes through the wholesaler network and that tends to be what that looks like.

From a cold chain perspective, it's very different. Refrigerated product, frozen product and ultra-frozen product are very different from each other. Refrigerated product of that 2 °C to 8 °C therapeutic range tends to go in a refrigerated passive cold chain box, for example. This might be an insulated carton where we’re putting in gel bricks and something to monitor the temperature and track it. Those products tend to go to hospitals, doctors’ offices in small batches of 10-12 items at a time small parcel, unless it is a large shipment.

If it is a large shipment, then it's going to go on some sort of a refrigerated truck, such as FedEx Custom Critical. Small ultra-frozen product, like your COVID-19 vaccines, tend to be packaged in a similar fashion, albeit on dry ice. Depending on the size, that is either going to go straight into an overnight parcel delivery or in some sort of a frozen vehicle. They do make ultra-frozen ocean containers. You may see these things in a -80 °C, 20 or 40-foot TEU on the ocean.

The refrigeration capabilities have come a long way, being able to sustain temperatures for long periods of time. The handling of those sort of packages tends to take place in a frozen environment. So we've got employees wearing protective equipment. As you know, dry ice tends to sublimate and release CO2, so there's additional protection that needs to be in place such as CO2 monitoring.

It's an interesting environment. Packages that tend to come in from overseas are put in a small parcel or a truckload network. Then, depending on temperature requirements, they’re either packed in temperature-sensitive packaging, or not—and tracked in that fashion.

Nick Basta:
That's interesting. I didn't know there was such variation based on temperature among these. One of the things I've been reporting on in my work is the expansion of what you might call data tracking real-time monitoring services in the pharma cold chain. I want to put that in an overall context of how quality control and FDA compliance functions from your perspective. I don't know if you're involved in delivering data to your clients. If you could expand on that and talk about the overall QA process.

Richard Beeny:
Really good question. How does data play into quality control, especially in a cold chain environment? It actually also applies to solid oral doses. We have product coming in from overseas where there are temperature data loggers in those containers. As the 3PL, we download those data from those temp monitoring devices and upload it to their quality control function at the manufacturer location. If we're not doing it, sometimes we get involved in that process.

While we're waiting for those data to get reviewed and approved, the product is put in a quarantine hold so that we're not shipping out product before it's approved for release by the manufacturer. The same thing holds true on the outbound. We're monitoring on the inbound, even when it's not specifically cold chain product, and going through those quality control checks. That same procedure would apply.

So you would see in some of our work instructions where we're taking a temp monitoring device, recording when we turn the device on, the serial number of that device, the temperature environment in which we're packing out that product and the start and stop date for the pack out requirements. Because there's a stability life to the product.

Nick Basta:
Yes, the stability budget.

Richard Beeny:
Yes, we’re making sure that we are keeping track of the length of time that these products are in certain environmental conditions so that we can make sure we're keeping to that budget requirement. So you would see us recording all of those data--sometimes manually on a sheet--and uploading that information to the manufacturer's quality control group. Once it is received, if it is a cold chain shipment at a doctor's office or pharmacy or clinic, they're doing sort of the same thing in reverse.

They are uploading those data. Sometimes they're sending those data loggers back to us and we're uploading it. Sometimes there's a visual indication on the packaging material that indicates whether it's good or it's not. There's a sort of stoplight effect to it: red, yellow, and green. That way a doctor's office knows whether it can use it or not. That tends to be the case. Our quality control group is always involved in that process. The ops folks have their role in the distribution, but our quality group oversees and reports on all of it.

Nick Basta:
Okay, makes sense. I've heard mention made in the pharma 3PL context of having a “control tower” where all this information is centralized. The trucking companies, you know their routes, all that comes together. Do you run a control tower?

Richard Beeny:
We do have a control tower. It's a small group of individuals here at our headquarters in Dallas. They do that process you just described. Also, because we do a lot of work for federal and state governments around pandemic and emergency response, the control tower helps us bring visibility into the madness that you can goes on in a pandemic response, whether it's at the federal or state level.

The control tower is really the hub of information. We are decision-making based off information from various sources, whether it's, "Hey, do I need to expedite this? Hey, do I need to reshape something? How do I inform the folks that are downstream and upstream of where we are?" It's an interesting process in our normal day to day lives, but it's especially interesting when we're in the middle of some sort of an emergency response scenario.

Nick Basta:
Any good stories to tell from pandemic response?

Richard Beeny:
It's interesting. We visited 30 to 35 different states over the last 18 months or so. Not exactly coming out of COVID, but after the balloon went up and we were all working 24/7 for months on end. We started visiting the states and their public health departments and their emergency management groups, and trying to get a handle on what worked, what did not, how could we do this better in the future?

It was remarkable how well the states did despite some of the headlines. In an environment where you are in the middle of a pandemic, the emergency management team is often tasked with response to a huge public health emergency for which they have not been trained, and they do not have the infrastructure to respond to it. These states are working with limited resources. Through sheer force of will, and kind of grinding it out, they were able to do amazing things.

We are rather spoiled because you walk into our warehouses and you can eat off the floor and we have every capability you can imagine, redundant this, and back up that. These states were really handed a tough situation in which to respond. Watching them all do exceptionally well without the training and proper infrastructure--that was my big takeaway. It was just remarkable and something to be proud of, for sure.

Nick Basta:
So, I want to wrap things up now. Aside from building a lot more, and much larger, warehouses, what do you see for the near term future of pharma logistics, pharma cold chain and LifeScience Logistics’ place in that?

Richard Beeny:
You're going to see us move a little bit further upstream. We've gotten really good at traditional distribution, whether it's cold chain or not. You're going to see us in a continued effort to focus on client needs. You're going to see us take on activities that typically a manufacturer may take on, but they’re now asking 3PLS to do. I'll give you some examples: repackaging, relabeling, some clinical trials work, raw materials and API dispensing, that kind of stuff.

I've been curious how much of this was COVID and how much of it was just an accelerating response by the pharma industry to continue down this outsourcing path. Pharma companies want to create drugs and save lives. There's a lot of stuff at which they don't want to be experts. They don't want to be the experts at distributing pharmaceutical products. That shouldn’t be their core competency. That trend, which has existed for at least the last 20 years, seems to be accelerating for some reason.

How much of this is COVID and the effects of some of the heartache that we've all experienced in the supply chain? Is it really just shown a light on the fact that these companies don't want to be doing some of this stuff. We're seeing a lot of interest in having us take on those types of activities. Even some of these big pharma clients are saying, "You know what, that's just not something that we want to be doing anymore." It has been very interesting. I think you'll see us continue in that direction.

Nick Basta:
That is interesting. It is a trend. I have seen indications that it is accelerating due to the pandemic. However, I've also seen a lot of companies that are in a variety of contract services to pharma popping up saying, "Hey, we do 3PL too."

Richard Beeny:
Yes.

Nick Basta:
It's going to become a more crowded environment for you folks I think. Ultimately, that'll benefit the pharma industry, I would assume.

Richard Beeny:
I think so. There's been so much consolidation, especially over the last five or six years. I would say that it shouldn't be a surprise to anybody that where there's consolidation, you create margin opportunity and where there's margin opportunity, you create competition. That makes total sense. We're looking forward to the future and there should be growth in the space for sure. We're going to continue to do what we do and be experts at that and we welcome the competition.

Nick Basta:
Okay, that's great. Thank you again for your time. We look forward to seeing how this plays out at LifeScience Logistics.