New transportation regulations coupled with growing demand for vaccines and biologic medications are resulting in robust growth in the airfreight of pharmaceuticals. These products are more temperature-sensitive than products of the past and must have precise temperature control to maintain their efficacy.
The European Union toughened its transport regulations effective Sept. 8, 2013, and other governing agencies are following suit. While this drives up costs, it is also good for airfreight as manufacturers seek to move products as expeditiously as possible to comply with the regulations that require that quality is maintained through the transportation process.
Industry observers expect growth of this airfreight niche to continue for the foreseeable future. While the growth is global, some of the hot spots will likely be in the BRIC (Brazil, Russia, India and China) countries.
“Biological drugs and the process for making them, make them temperature-sensitive in almost all cases,” says Kevin O’Donnell, a partner with Exelsius Cold Chain Management, an international consultancy. “They are just like a carton of milk in your refrigerator. If you leave it out, it begins to degrade. The process starts, and you are not going to stop it. It makes the drug less effective.”
O’Donnell says biologic drugs dominate the growth in health care products. He says by 2016, about half of the world’s top-selling drugs in terms of value will be biologic. One high-value product is Humira, an injectable drug for treatment of rheumatoid arthritis and other diseases. O’Donnell says the product generates US$11 billion (8.1 billion euro) a year.
He says the increased responsibilities involved in the handling of pharmaceuticals has been beneficial for the logistics sector, with about US$4.9 million (3.6 million euros) spent annually on transportation with an annual overall growth rate of 12 percent. Airlines are benefitting from the rapid growth of these products and investing in equipment, facilities and personnel to handle them. More are participating in pharmaceutical handling. Just a few years ago, only a handful of airlines marketed their products to the pharmaceutical industry, O’Donnell says. Now that figure is more than 30 and growing.
Among the carriers making major investments are IAG Cargo and American Airlines.
“There is increasing use of vaccines and preventative health care across not only developing countries, but all countries,” says Alan Dorling, IAG Cargo’s global head of pharmaceuticals and life sciences. “There has been huge increase in the use of insulin for diabetes, particularly type 2 diabetes. It’s a global problem anywhere there is westernized culture with soft food and fizzy drinks. These products require very sensitive management.”
IAG greatly expanded its temperature-controlled network, which it calls Constant Climate, in 2013. In Europe, it added Prague; Vienna; Las Palmas, Spain; Basel, Switzerland; and Zurich. In Latin America, it opened stations in Colombia, Costa Rica, Panama, Venezuela and Guatemala.
Tom Grubb, manager, cold chain strategy for American Airlines Cargo, says that while costs are one important measure of moving critical pharma products, the most important aspect is maintaining quality. Collaboration of all the participants, including manufacturers and freight forwarders, is essential in this effort, he says.
“Even though there are a lot of positive signs in the economy, there are still many cost concerns in the industry, given the nature of moving pharmaceuticals,” Grubb says. “There are many products that require such extreme handling that that kind of flies in the face of trying to save costs.”
American will open its latest controlled room temperature facility at London Heathrow early this year and will likely open at least two more in 2014.
Grubb, who is a member of the International Air Transport Association’s Time and Temperature Task Force, says the entire supply chain must work to “harmonize” the approach to develop comprehensive services. He says the regulatory oversight aspect will become more important and will likely push costs upward.
“We’re not talking about ball bearings here,” he syas. “These are very time-sensitive products.”
The recently approved merger with US Airways will allow American to penetrate some key U.S. pharmaceutical markets. American’s cool chain program has been much more robust, Grubb says, and for now, it’s a sorting out process as the merged carrier looks at synergies.
“We are going to be looking at the programs, but basically it will open up additional markets that we are excited about,” Grubb says. “There is very little overlap in route structure. It’s no secret that Philadelphia is a key hub for US Airways and that it is a very desirable pharmaceutical market, in the pharma corridor.”
Grubb says that while there has been some modal shift of some pharma products to oceanfreight, most products requiring temperature control are biologics – and that’s where the time-critical aspect of airfreight comes into play. He says greater volume and newer products going to airfreight balance the shift.
“There are some finished products that have a greater degree of stability and therefore can tolerate longer transit times,” Grubb says. “But much of what we move is biologic, and that’s where the air piece is very critical.”
Terry Sell, Kuehne + Nagel’s director, pharma and temperature controlled airfreight services for North America, says a slight modal shift is evident.
“More and more companies are trying to go to seafreight for obvious cost savings,” Sell says. “Shippers are looking for more creative ways to reduce costs while still maintaining product efficacy.”
Sell also notes that quite a few blockbuster drugs will soon come off patent in the coming years, starting in 2015. It’s uncertain the exact effect this might have on airfreight, but he expects it to be sizeable.
“Some of the changes within the generic sector will mean that patented drugs will now be made available to new markets as these products become more affordable, and typically these will move in greater supply,” Sell says. “At first, these products will move airfreight as first-to-market is critical within the generic market. However, once inventories are established in these markets, we will see a trend back to seafreight for the more stable drug products.”
Another change affecting airfreight is in the presentation of drugs. This is particularly true for newer vaccines, O’Donnell says, making them much more expensive to produce. The new presentation method also results in drugs requiring more cargo space.
“Instead of making large dose vials in quantity, companies are making more vaccines that are in individual syringes,” O’Donnell says. “Instead of one vial in a box that contains 10 doses, you now have a box that has 10 single doses in 10 pre-filled syringes. Volume increases 10 to 13 times to deliver the same amount of doses.”
Chicago O’Hare International Airport is regarded as the largest handler of pharmaceutical airfreight in the U.S. Other top pharma airports include Atlanta, Miami, JFK, San Francisco, Memphis, Louisville and Philadelphia, he says.
O’Hare uses U.S. Census Bureau Economic Statistics to calculate the value of goods, says Karen Pride, spokeswoman for the Chicago Department of Aviation. The latest available figures, from 2011, show that of O’Hare’s US$79 billion (58.2 billion euros) in exports that year, about US$10 billion (7.3 billion euros), or 12 percent, were medicines. Of the airport’s US$36 billion (26.5 billion euros) in exports, US$3 billion (2.2 billion euros) or about 8 percent were medicines. Total pharmaceutical shipments were about 11 percent of all shipments. Pharmaceuticals are the second-largest export from O’Hare (after aircraft parts), and the third-largest import to O’Hare (after phones and computers) by value.
O’Donnell says top pharmaceutical-handling airports outside the U.S. include Toronto, Frankfurt, Amsterdam, Paris, London Heathrow, Dubai, Istanbul, Singapore, Tokyo, Mumbai and Luxembourg. Mexico City, Sao Paulo, Brasilia and Rio de Janeiro are among the top airports in Latin America, he says.
Technology providers are also benefitting from the sector’s growth, including the two major producers of mobile refrigeration units.
Mark Mohr, director of customer support and partner management at CSafe Global, says several transitions in the marketplace will have big effects in 2014.
“There are a number of carriers that are going through a complete assessment and looking for opportunities,” says Mohr, who used to head Continental Airlines’ cold chain program.
He notes that the market is maturing and is much more competitive with a greater number of carriers participating.
“The obvious implication is that there is more choice in the marketplace and there is some pricing pressure,” Mohr says. “Those who are willing to change and adopt will rise to the top, and business will be driven more in their direction. Every survey I’ve seen is that the industry can expect double-digit growth going forward for the foreseeable future.”
Mohr says a growing trend is that pharmaceutical manufacturers are much more in tune with how freight forwarders and airlines price their products. He says that is driving change with increased visibility in how pricing is structured.
Envirotainer says it continues to grow in the mature markets of Western Europe and North America. Stephen Maietta, Envirotainer’s health care sales director, says the company aims to meet increasing demand in Asian markets with a controlled expansion plan.
“We will continue to focus on the temperature-sensitive health care air cargo segment,” Maietta says. “As GMP [Good Manufacturing Practice] regulations related to temperature control continue to harmonize across countries and aviation, tighter controls for a larger range of label temperatures will only increase. As a result, this will continue to include, but not limited to, biological, pharmaceutical, API, clinical and diagnostic products.”
DuPont has big hopes for its Tyvek air cargo covers, which were introduced in 2011. They are used to protect pharmaceutical shipments from temperature changes due to solar radiation.
“We think we have developed the right product at the right time for a very compelling need,” Diego Boeri, global business director for Tyvek, says. “Ultimately, it protects the patients, which is one of the key missions of DuPont.”
Boeri declines to be specific, but he says some of the key pharmaceutical companies around the globe are using the covers. Other users include third-party logistics firms, airlines and integrators. DuPont collaborated with Cargolux on the product’s development.