In pursuit of a growing share of the lucrative pharmaceutical delivery market, U.S.-based parcel carriers are expanding their specialty services for clinical trials and drug research into a growing array of countries.
Pharmaceutical firms have traditionally run their drug trials in the U.S., using strict Food and Drug Administration (FDA) regulations as a proxy for global regulatory approval, but the industry is preparing for much greater growth in international markets.
The allure of seeking high profits from international express shipments was one reason driving FedEx Corp. in its $4.8 billion acquisition of the Dutch delivery firm TNT Express N.V. The move, which closed in May 2016, allowed Memphis-based FedEx to complement its worldwide air-freight network with European ground parcel-transportation capabilities.
More recently, Atlanta-based UPS Inc. announced that it would expand its ability to provide temperature control, precision parcel tracking, and other specialized services for handling international shipments of drugs and biological specimens.
Both companies are in pursuit of a large stream of revenue driven by the burgeoning global medical market. The U.S. pharmaceutical market will increase from an estimated value of $395.2 billion in 2014 to reach $548.4 billion by 2020, according to research and consulting firm GlobalData PLC. The numbers are even greater worldwide, with global pharmaceutical sales on track to soar from $1 trillion in 2014 to $1.3 trillion by 2018, according to the 2015 CMR Pharmaceutical R&D Factbook.
Carriers attempting to serve this market face a tough challenge, experts say. As carriers continue to expand, they must provide a specialized range of tracking, cooling, and import/export services, and do it all in global regions with unfamiliar roads and languages.
Companies with existing parcel-delivery networks in specific geographies—such as Germany-based Deutsche Post DHL Group's coverage of Europe and Asia—have an advantage over newcomers to those areas, such UPS and FedEx, said industry analyst Dick Armstrong, chairman of the research and consulting firm Armstrong and Associates.
But the market is growing so fast that the race is on to expand into new territory. The international drug market is swelling rapidly to accommodate the 20 to 30 million new Americans who have recently become insured under the Affordable Care Act and, more broadly, the "silvering" of an aging global population with growing medical needs.
"This is a very lucrative area; you're moving high-priced goods, so there are a lot of value-adds and special services required. It pays a lot better than moving candy and canned goods," Armstrong said. "But if you're going to stay competitive, you're going to have to keep innovative and keep moving."
In pursuit of that goal of participating in the international market, UPS has improved its ability to support clinical-trials research by building a network of more than 50 dedicated healthcare package-sorting facilities around the globe and supporting them with a streamlined shipping process dedicated to healthcare parcels, the company announced in July. The new process includes a simplified shipping website for clinical investigators; a healthcare control-tower network to enhance visibility during transit; and improved package-intercept capabilities, which allow UPS employees to divert delayed parcels and add fresh supplies of dry ice so delicate blood samples or vaccine doses don't spoil.
Additionally, UPS has upgraded its international shipping practices to speed sensitive shipments across borders. It also has expanded its network of partner carriers that give customers extra time to pack their parcels with coolants at the last minute before handing them off to couriers, adding precious minutes to the cold-shipping chain.
By combining these specialized capabilities with its existing core shipping infrastructure, UPS says it can better serve the demands of medical researchers, who use these services to ship specimen kits and medical devices between investigator sites and diagnostic labs.
That urgency in monitoring the shipping time and temperature of each package is crucial because of the high costs involved, said Ron Swistock, director of healthcare strategy at UPS. Clinical trials can burn through millions of dollars in funds and six to eight years of work before the FDA approves a new drug for U.S. markets.
The job is even harder because of logistical hurdles, such as delays in crossing international borders and a 48-hour limit on shipping blood samples to testing labs. Despite these challenges, business is booming in pharmaceutical research. The FDA approved 57 new drugs in 2015, its highest approval total in a decade, Swistock said.
UPS will target that growing market by offering specialty services around its existing parcel-distribution system. "Ninety percent of this can be done without additional investment, through our global small-package network," Swistock said. "We're adding investments around the margin, such as a third-party partner for first-mile pickup, or enhanced monitoring in case a package needs additional dry ice."
LEARNING THE ROPESAs U.S. carriers expand into new countries in pursuit of greater market share for pharmaceutical shipments, their success will hinge on their ability to operate efficiently in unfamiliar regions.
Pharmaceutical companies are conducting drug trials in an ever-wider array of global regions, so their carriers must be able to deliver reliable service in countries such as India, which is famously difficult to navigate for logistics providers that do not have an established network in the country, said Paul DellaVilla, product marketing engineer at Onset Computer Corp.? The Bourne, Mass.-based firm makes wireless data loggers to monitor and report temperature in pharmaceutical cold-chain shipments.
UPS' success in expanding internationally will depend on its ability to provide the specialty services demanded for handling vaccines and other biological products, he said. No one doubts that UPS already has a strong network for delivering standard parcels, but most existing providers of clinical logistics services offer white-glove, end-to-end, hand delivery complimented by additional services such as warehousing, temperature monitoring, and consulting.
"There's a reason these are usually handled by specialty couriers; you have shorter timelines and a need to get materials to their destination within certain temperatures," DellaVilla said. "Clinical trials are massively expensive to run, and having logistics services to get products to their destination is integral to their success, which is why specialty couriers can charge a premium. So this is an opportunity [for UPS] to expand their portfolio."
Gartner, Inc.
