An essential map of key players and their value-adding financial transactions in the US Pharma supply chain.
Global pharmaceuticals money flows are the most difficult to appreciate of any industry. However, understanding brings clarity to the value adding processes which result in the price you pay at the counter.
"Tracing the flows of money within the Big Pharma value web define what perceived and realizable value is gained in exchange for the expertise of each player." - Ryan Guzall
The Big Pharma Value Web
Beyond the value chain, which considers only the nodes along the product pathway which add value to the end, consumable product, the flows of money within Big Pharma define a value web of interactions which increase perceived and realizable value for multiple parties beyond those physically tangible.
Drug Supply Chain Security Act defines Big Pharma's Major Players
In 2013, the US Congress enacted the Drug Quality and Security Act, of which the Drug Supply Chain Security Act is part. The DSCSA requires full track and trace of all salable units of product throughout the pharma supply chain by 2024, with deadlines defined by the following functions:
Manufacturers - November, 27th 2017
Repackagers - November, 27th 2018
Wholesalers - November, 27th 2019
Distributors (Pharmacies & Hospitals) - November, 27th 2020
Entire Supply Chain - November, 27th 2023
Additional players include:
Group Purchasing Organizations (GPOs)
Benefit independent pharmacies by aggregating purchasing power to realize economies of scale discounts against wholesalers
Pharmacy Services Administrative Organizations (PSAOs)
Benefit independent pharmacies by aggregating capacity and buying/selling power against PBMs
Pharmacy Benefits Managers (PBMs)
Benefit insurance companies (payers) by aggregating demand and negotiating lower prices against PSAOs, and dispensaries, and by leveraging rebates and incentives from manufacturers, often in exchange for formulary placements of manufacturers' products
Aggregate statistical health risks of represented population to provide healthcare products and services to members in exchange for premiums
Third-Party Logistics Providers
Provide transportation of goods between each node along the supply chain which is not vertically integrated
Big Pharma Hesitant to Commit
Seasoned Big Pharma supply chain and organizational design consultant, Ryan Guzall, notes that major industry players hold a strong appreciation for the upcoming regulatory requirements to be imposed by the federal government, but are reluctant to change. "The [major players] accept the requirements imposed by the DSCSA, but are fighting to define a true business case for the implementation of options which can reach hundreds of millions in investment while they continue to lobby for deadline extensions." While there are myriad public health reasons for industry players to commit to change, the financial case for early mover advantage is one which has yet to be made.
To date, the FDA has delayed enforcement of certain provisions of the DSCSA for wholesalers and dispensers related to saleable returned product and illegitimate product verification until 2023.