The year 2021 was, for not entirely favorable reasons, the Year of the Supply Chain. From creating massive backlogs at global ports, to being held responsible for a spate of inflation in the US economy, the intricacies of modern supply chains have been spotlighted as never before. The global pharma industry, requiring both sources of supply and outlets for distribution, has been subject to these same global problems. But within the overall industry, the situation of cold chain product distribution—the pharma cold chain—has had an extraordinary evolution.
The primary reason for this evolution is the need for refrigerating the vaccines that will eventually cure the world of COVID-19, the disease that has killed some five million over the past two years. Some eight billion doses of vaccine have already been delivered, globally, since January 2020, and the majority of them required either conventional 2-8°C storage, or, in the case of the mRNA vaccines of Pfizer and others, subzero storage and transport. These requirements, on top of the double-digit growth that pharma cold chain logistics has been experiencing for over a decade, supercharged business activity among the companies that provide equipment, technology and services.
For over a decade, I have been involved in developing a market study and forecast of global pharma cold chain activity, the Pharmaceutical Commerce Biopharma Cold Chain Sourcebook. The last edition was 2020, projecting an overall expenditure of $17.2 billion in that year by the pharma industry and its trading partners (wholesalers, primarily) to deliver cold chain products. Based on an analysis of industry trends since then, we projected an expenditure of $20-21 billion (call it $20.5 billion to split the difference) in 2021. If there had been no pandemic, this level of spending would not have been reached until, approximately, 2024, based on the projections made in the 2020 forecast.
Only some of this growth can be accounted for by growth of traditional cold chain pharma shipments. A significant portion of the growth is due to the extraordinary effort to deliver refrigerated COVID-19 vaccines around the world (more about that in a moment). However, the biggest source of the growth has been the widespread disruptions in supply chain and logistics services around the world, with both air and ocean freight jumping by multiples of magnitude in 2020 and 2021.
… the biggest source of the growth has been the widespread disruptions in supply chain and logistics services around the world, with both air and ocean freight jumping by multiples of magnitude in 2020 and 2021.
Nick Basta, Founder of Pharmaceutical Commerce
The Baltic Exchange Index, a widely cited measure of air freight costs, jumped from around $3.19 per kg in February, 2020 (just before pandemic restriction took hold internationally) to $12.72 per kg in December 2021 for the Hong Kong-North America route; the Hong Kong-Europe route jumped from $2.52 to $8.00 in 2021. A majority portion of international pharma cold chain shipments travel by air. In the U.S., reefer trucking rates, according to DAT Freight Analytics, were up 64.6% in 2021 alone. Ocean freight rates (a small but significant portion of pharma cold chain shipments) were up tenfold from pre-pandemic to mid-pandemic periods, and are still elevated sixfold or more.
IQVIA, a well-recognized source of data on global pharmaceutical sales, reported in its Global Medicine Spending and Usage Trends: Outlook to 2025, that some $55 billion was spent on COVID-19 vaccines in 2021; that will drop to around $35 billion in 2022, and continue to decline for several more years. (IQVIA makes an assumption that booster shots will be needed biennially for the next several years, even as the overall vaccination rates rise.) The bulk of that expenditure is for the vaccine itself, but included within that is several billion dollars of logistics spending.
There are now eight COVID-19 vaccines approved around the world; most if not all require temperature-controlled shipping and storage. The Pfizer-BioNTech vaccine (now marketed as Comirnaty) was introduced with a requirement to ship and store at -70 °C, a temperature that required the use of dry ice in most situations. Moderna’s vaccine is somewhat less demanding, and most of the others require 2-8 °C maintenance. In the early days of the vaccine distribution in 2021, there was a concern that there wouldn’t be enough dry ice—or high-performance refrigerators—available to handle the vaccine; but that concern dissipated as logistics managers and public health authorities grew more experienced in managing the distribution. (One response, by logistics companies like UPS Health Solutions and others, was to install their own dry-ice production capacity.)
The pharma cold chain is getting bigger, faster and more professionalized…
Nick Basta, Founder of Pharmaceutical Commerce
The addition of dry ice production capacity among logistics providers is just one aspect of how the pharma cold chain has evolved during the pandemic. Companies across the board have added new warehouses, new equipment services and higher levels of training for support personnel—and in many cases, done so with GMP or GDP (Good Distribution Practices) requirements in place. The pharma cold chain is getting bigger, faster and more professionalized—at least, once the disruptions caused by COVID-19 are ironed out.
A showcase example of this is the U.S. company Cryoport, which specializes in deep-frozen (below -80°C) transport of cells and biologic products. Beginning a number of years ago with a delivery service based on insulated dewars, it expanded in mid-2020 with the acquisition of MVE Biologic, a supplier of such dewars. More recently it has acquired a handful of companies involved in clinical trial logistics, and is now forward-integrating into providing 3PL (third-party logistics) to both commercial and clinical-research organizations in cell and gene therapy. (It also handles 2-8 °C shipping, as well as fertility and animal-insemination therapies.) The services are being offered globally on an increasing basis.
Growth has occurred by acquisition, too. CSafe, a supplier of unit-load devices (ULDs) that are used in air freight to transport pallet-sized loads of pharmaceuticals, has acquired Softbox, a provider of passive insulated containers. (Both companies had previously been involved in supplying containers for shipping the Pfizer-BioNTech vaccine.) Last year, BioLife Solutions, a provider of containers and supplies for cryopreserved biologics, acquired Stirling Ultracold, a manufacturer of low-temperature refrigeration systems. ELPRO, a leading developer of sensors and instrumentation for temperature and humidity monitoring, was acquired by Bosch Group, which provides environmental monitoring in commercial and industrial facilities.
Although far outshadowed by the investments in social media or other internet technologies, leading venture capital firms have been the backers of many of the companies in the pharma cold chain. Cryoport was boosted by investment from Blackstone Group; CSafe by Thomas Lee Partners; Envirotainer, one of the pioneers in pharma air freight, is owned by a combination of Cinven, a private-equity firm, and Novo Holdings, an investment arm of the pharma company Novo Nordisk. The bottom line is, where private equity capital flows, business growth is expected.
Another trend, supercharged by the pandemic, has been the development of IT services to track shipments across borders and transportation modes, while providing near real-time reporting of conditions including temperature, location and status. The ultimate expression of this tracking is to be able not only to report, step by step, where a pharma shipment is and what its status is, but also to be able to respond quickly if, for example, a dry ice component needs to be recharged to sustain the temperature of the shipment. Traditionally, integrated, global logistics providers have been able to do this with their proprietary tracking systems—but a shipper like a pharma company needed to have such an arrangement with that global logistics firm. Now, through a combination of sensors and dataloggers with the shipment, plus GPS tracking and reporting via cloud-base data services, the shipment itself can be an entity in the internet of things (IoT), reporting back to the shipper regardless of the container, the airline or trucking firm, or the logistics provider on each leg of the journey. Tracking services will enable yet another element of the pharma cold chain to grow: more sustainable business practices.
The industry is trending toward a more sustainable level of operation. Tracking data will enable this process to grow and improve.
Nick Basta, Founder of Pharmaceutical Commerce
From reusable containers, to more efficient shipping practices by any transportation mode, to more tailored services such as decentralized clinical trials, the industry is trending toward a more sustainable level of operation. Tracking data will enable this process to grow and improve.
The upshot of all this activity is that the pharma industry will have access to a wider range of services, and better capacity globally, for temperature-controlled shipping across a wider range of temperatures. The services are still in a state of adjustment, given all the vagaries of global supply chains. But when (soon, we hope) “normal” conditions prevail, the industry will find more service providers, with a better level of capability, covering a wider range of geographies.
Founder of Pharmaceutical Commerce
He is a life science and business journalist and consultant, founder and former editor in chief of the print and online magazine Pharmaceutical Commerce.