The pharmaceutical industry is dynamic and is likely to experience a high growth in the coming years. Today, growing sales of drugs and biologics, changing dynamics of the pharmaceutical industry, and stringent regulatory controls are some of the factors boosting the demand for pharmaceutical logistics services. Outsourcing logistics operations is trending in the pharma industry for cost optimization and technology advancement. Pharmaceutical companies are facing tremendous pressure for cutting down the cost of drugs and biologics. Thus, outsourcing logistics is one of the key strategies adopted by these companies to control their operational costs. The pharmaceutical revenue is expected to be tripled between 2017 to 2060, representing the growing demand for logistics services.
More biologics are entering the market than small molecules. Temperature-controlled products are witnessing considerable growth and their sales volume is growing at twice the rate of the overall pharma industry. Healthcare Distribution Alliance reported that 49% of the warehouse volume is attributed to frozen or refrigerated products among specialty distributors. Out of 57 U.S. FDA approved products in 2017, 28 of them were the cold chain products. In 2013, out of top 50 drugs, 24 required cold chain. This number is expected to increase to 28 by 2020, which at the same time drive the demand for cold chain services.
Technological advancements, in terms of process automation, is positively impacting the market growth. Rising adoption of advanced techniques in transportation and warehouse automation are among the examples of advancements streamlining the process of logistics. For instance, integration of GPS for temperature-sensitive shipments enabling protection against thefts & counterfeiting and ability to be proactive in case of temperature excursions. Regulatory agencies are in the process of mandating monitoring of shipments through GPS.
Dynamics of Supply Chain and Services Types in Biopharmaceutical Logistics
To understand the market dynamics, we have segmented the market by supply chain and types of services. By supply chain, the market is segmented into the cold chain and non-cold chain. The cold chain segment is expected to register a lucrative CAGR of 7.3% over the forecast period. Growing demand for biologics and ongoing trend of personalized medicines are the key factors contributing to growth of the cold chain logistics. The number of precision medicine drugs is expected to increase by 69% by 2024. Many of the gene therapies are awaiting the regulatory approvals in the next five years. This is expected to boost the demand for temperature-controlled logistics systems for the distribution of gene therapies and precision medicines.
The global biopharmaceutical logistics market is further segmented by type of services into transportation, warehousing, and others. Warehousing services is projected to grow at a CAGR of rate of 6.9%. Growing volume of pharma sales is one of the key factors for the market growth. Moreover, the Demand for warehousing services is set to increase with the rising volume of biologics and other temperature-sensitive drugs. Warehousing is a crucial component of logistics services. Currently, warehousing industry is experiencing process automation for increasing the effectiveness. Changing dynamics of the warehousing industry is also contributing to the market growth. For instance, ‘UPS’ entered the cold chain warehousing industry by acquiring ‘Marken,’ a global provider of supply chain solution to the life science industry.
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Emerging Economies to Witness Healthy Growth
North America accounted for the largest share in 2018. However, Asia Pacific is expected to emerge at an exponential growth rate. This can be attributed for rising patent expiry and subsequently growing volume of generics, increasing treatment accessibility, and rising pharma volumes in the countries such as India and China. As per India Brand Equity Foundation, Indian pharmaceutical industry suffices more than 50% of global demand of various vaccines, for instance, 25% demand for medicines in the U.K. and 40% generics demand in the U.S. is fulfilled by Indian pharma industry. Economic developments in these countries and growing spending on logistics infrastructure are also representing growth opportunities. For instance, in October 2018, China announced to spend USD 328 billion on developing better transport infrastructure.
LAMEA is another emerging region in the biopharmaceutical logistics market. Brazil, Argentina, Chile are among the prominent markets in Latin America. Growing pharma trade in these countries represents favourable growth conditions. For instance, in 2017, Brazil imported medicines and raw materials worth USD 6.5 billion, which was increased to USD 6.6 by 2018. MEA region is also experiencing transition in terms of the trade of pharmaceuticals.
Some of the key players in the global biopharmaceutical logistics market are DHL International GmbH., United Parcel Service of America, Inc, SF Express, DB Schenker, AmerisourceBergen Corporation, Kerry logistics Network Limited, Kuehne and Nagel, and Agility.
Global pharmaceutical logistics market is fragmented and is undergoing through consolidation. Players across the globe are opting for mergers, acquisitions, and strategic collaboration to maintain market competitiveness. For instance, DHL and Shanghai Pharma signed an agreement in 2017 to streamline pharmaceutical supply chain amidst stringent regulations. In 2016, ‘UPS’ acquired ‘Marken,’ a leader in the clinical supply chain to extend its supply chain efficiency. ‘FedEx’ acquired ‘TNT Express’ to expand its footprint in the global pharmaceutical logistics market.
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