Regulatory compliance biggest pain in global health care supply chain, annual survey finds

An annual survey of health care logistics executives has found that regulatory compliance issues remain the main concern confronting the global health care supply chain. However, for the first time in the survey's six-year history, product security surpassed cost issues as the second most frequently cited worry by health care logistics professionals.

The 2013 study, commissioned by Atlanta-based UPS Inc. and conducted by TNS Global, a London-based researcher, canvassed 441 executives in North America, Western Europe, and Asia employed by biotechnology, medical device, and pharmaceutical firms of varying sizes. The survey found that 63 percent of respondents listed "regulatory compliance" as an issue of very great or great concern. In last year's survey, 65 percent cited regulatory compliance as a chief concern, more than any other issue.

Product-security issues such as theft and counterfeiting were cited by 57 percent of the executives as a major concern, according to the survey. That was up from 51 percent in 2012. The ability to manage supply chain costs was cited by 51 percent of respondents as a major concern, down from 60 percent in 2012. Worries over product damage or spoilage was cited by 43 percent of respondents. That was down from 47 percent in 2012.

Product-security concerns were most profound among Asia-Pacific health care executives. According to the survey, 76 percent cited that issue as a grave threat to their business, the most of any category. Compliance issues came in second, with 70 percent of the region's executives saying it was a key concern. Robin Hooker, director of global health care logistics strategy for UPS, said the Asia-Pacific market is home to a large and agile "grey market of counterfeiters" adept at eluding law-enforcement agencies. Relatively lax enforcement measures in the region's developing countries also make it easier for thieves to ply their trade than in the more mature North American and Western European regions, where oversight is considered stronger, Hooker added.

About 66 percent and 57 percent of respondents in North American and Europe, respectively, cited regulatory compliance as a major worry. In North America, 60 percent polled cited cost issues as a chief concern, while 45 percent cited product security, according to the survey. It was the reverse among Western European executives, with 47 percent citing product security and 35 percent citing cost management as a major worry. European executives were, in general, more reluctant to cite any of the issues as major concerns to their business.

Cost worries are receding as health care firms do a better job of improving their expense structures, increase their reliance on technology and on industry best practices, and partner more with third-party logistics firms that can balance innovative economic solutions with the overriding need to support timely and proper patient care, Hooker said.

Because treatment needs must take priority and can be costly, there is a floor below which expenses are unlikely to fall, Hooker said. However, costs will continue to moderate as global market and regulatory forces exert pressure on health care providers to operate more efficiently, he forecast.

In recent years, there has been much talk of "low-hanging fruit" in the health care supply chain because the industry has been a laggard in accepting the efficiencies that accompany it. Hooker said a fair amount of that fruit has been picked, but not all of it. "We're not into the leaves yet," he said.

One area that may be ripe for the picking is the large—though often overlooked—market for products transported by sales teams in the trunks of their cars, Hooker said. Sales forces carry around more than just product samples, and many of those items find their way into the hospital pipeline, he said. Moving goods in such a manner may not be cost-effective, Hooker said. The efficacy of the cargo could be jeopardized if their handling did not meet acceptable safety standards, he added.

According to Hooker, those companies that have successfully navigated the increasingly complex global regulatory environment say they have expanded their in-house staffing levels, increased their IT investment, and partnered with third parties with a wide range of expertise, including on the regulatory front. Regulatory-compliance challenges will remain at the forefront of concerns as health care firms continue to expand into markets that demand an understanding of formerly unfamiliar laws and policies, he added.