The global healthcare logistics market size was valued at USD 167.07 billion in 2022. It is estimated to reach USD 323.27 billion by 2031, growing at a CAGR of 7.61% during the forecast period (2023–2031).
Healthcare is the maintenance or improvement of an individual's health through the prevention, detection, treatment, rehabilitation, or correction of infection, injury, illness, and other physical and mental impediments. Health professionals in allied health professions deal with healthcare help. Aspects of health care include dentistry, medicine, optometry, midwifery, pharmacy, nursing, audiology, psychology, occupational and physical therapy, and other health professions. Logistics refers to managing the gathering, storing, and transporting of resources to their destination. Finding potential distributors and suppliers and maintaining their efficiency and accessibility are part of it. Healthcare logistics refers to packaging and transporting pharmaceuticals, medical devices, surgical and medical supplies, and other healthcare products to hospitals, pharmacies, diagnostic and research laboratories, and other end-users.
The expanding global demand for medicines and medical devices is one of the primary growth factors of the global healthcare logistics market. The production of pharmaceuticals and medical devices is getting more complex as companies expand their product portfolios to align with the rapidly changing market and meet customer requirements. The growing prevalence of chronic diseases also accelerates the demand for modern healthcare products and services and improved medical assistance, especially in rural areas. Such demands have also generated a need for the safe transportation of pharmaceutical products and medical devices.
Additionally, healthcare manufacturers increasingly demand specialized healthcare logistics services to deliver efficient warehousing, transporting, and distribution services for large pharmaceuticals and medical devices to hospitals, home care patients, labs, and other healthcare facilities. The growing demand for temperature-controlled products, especially pharmaceutical products, and the development of numerous advanced human cell-derived therapies have necessitated cold chain logistics. Furthermore, the COVID-19 outbreak also forced healthcare product vendors to manufacture more medical supplies to overcome the situation.
The healthcare sector has undergone significant transformations, such as the shift toward a value-based model, which has given the supply chain a critical role in supporting the industry over the forecast period. Many healthcare providers are now using innovative technologies to streamline their supply chains so that customer-centric solutions can be delivered cheaply. Several healthcare product manufacturers are also building direct or on-demand delivery models with the proliferation of online and home care channels.
Furthermore, the Internet of Things (IoT) has endless potential in the healthcare logistics industry. Hospitals are now using smart kits and wearables that help gather granular patient health data, enabling marked improvements in virtual treatments, adherence monitoring, and clinical trials. For instance, Aarhus University Hospital in Denmark uses Radio-frequency Identification (RFID) tags to track asset flows, which provides hospitals with a real-time view via computers and mobile devices to effectively channel resources, retrieve moving assets, and redesign their process flow.
The fluctuations in fuel prices are one of the significant challenges for transport and logistics companies with plans to hike the prices of their services to retain margins. Fuel price accounts for about 40%–60% of the operational costs of any individual transporter or logistics company. Typically, such fluctuations in fuel prices force logistics companies to either raise their service price or suffer losses. Pharmaceutical and medical device companies opt for sea freight shipping over shipping services by airways and railways due to rising fuel prices.
Also, rising fuel prices will trigger cost hikes for products such as medicines, appliances, and household consumables. For logistics companies such as C.H. Robinson, which specializes in truckload transportation (the largest source of the company's adjusted gross profits), fluctuating fuel prices may result in decreased adjusted gross profit margins, thereby restricting the market's growth.
A clinically integrated supply chain involves close collaboration between clinicians and supply chain professionals. Physicians often collaborate with their supply chain partners for support, knowledge, and guidance on product price points, outcomes, and alternatives to improve the patient experience by adjusting their processes. Additionally, the supply chain professionals will gain clinicians' trust by illustrating the value the supply chain and its data can deliver. A clinically integrated supply chain approach can help provide patient care with the highest value in terms of best outcomes with high quality and minimal waste at the lowest cost of care.
Furthermore, the assimilation and coordination of supply chain and clinical data, knowledge, and leadership across the entire care continuum ensure the timely delivery of evidence-based, safe, equitable, efficient, and patient-focused care. Applying clinical evidence can enable clinicians and supply chain stakeholders to collaborate and determine the best products to deliver the best care at the most optimal price. Additionally, clinical evidence also makes inventory tracking more convenient by offering real-time alerts to clinicians about expired or recalled products about to be used on a patient. Such factors are estimated to provide tremendous opportunities for market growth.
The global healthcare logistics market is segmented by product, functionality, and end-user.
Based on product, the global healthcare logistics market is bifurcated into pharmaceuticals and medical devices.
The pharmaceuticals segment dominates the global market and is projected to exhibit a CAGR of 7.8% over the forecast period. The pharmaceutical market has experienced significant growth in the past two decades. Vaccines and medicines contribute to the sustainability of healthcare systems by generating higher savings by reducing costs in other areas of healthcare, such as hospital stays and long-term care costs. Usually, the developing and the least developed countries have high marginal costs, which inflates the prices of essential drugs. This inflated cost includes import tariffs, value-added taxes on medicines, distribution costs, port charges, and high margins in the retail and wholesale components of the supply chain.
Medical devices play a critical role in delivering many healthcare services. It includes medical supplies such as latex gloves and syringes, advanced imaging equipment, and implantable devices such as cardiac defibrillators. According to a report, the top ten leading medical device manufacturing companies worldwide are highly varied and manufacture medical devices for various therapeutic areas. Some vendors often manufacture a comprehensive range of medical devices for a therapeutic area. Several governments worldwide spend a substantial amount of money on medical devices.
Based on functionality, the global healthcare logistics market is divided into transportation, warehousing, and other services.
The transportation segment is responsible for the largest market share and is anticipated to exhibit a CAGR of 7.7% over the forecast period. The transportation sector comprises several industries: air freight and logistics, marine, road and rail, airlines, and transportation infrastructure. The performance of companies offering transportation services is susceptible to fluctuations in company earnings and the price of transportation services. The main factors affecting transportation company earnings include service demand, geopolitical events, fuel and labor costs, and government regulations. Also, many of these factors are interconnected. For instance, if the US government passes stringent rules that make it more difficult for people to obtain their commercial driver's licenses, there will be a marked decline in the supply of drivers. Therefore, the cost of hiring drivers will increase.
Warehousing mainly refers to storing goods that must be transported and is one of the significant segments of the significantly expanding logistics industry. The warehousing segment has progressed from providing custody for goods to offering value-added services such as sorting, blending, packaging, and processing. With the evolution of the organized retail sector, modern warehouses for storing perishable goods are required. The growing healthcare, retail, and e-commerce sectors drive the warehousing market. The ever-increasing e-commerce sector has accelerated the demand for warehouse space from 3PL worldwide. This demand will continue to grow faster in emerging economies such as India and China. In the coming years, the retail chain expansion and their dynamic growth are expected to push the demand for warehouses further.
Based on end-user, the global healthcare logistics market is segmented into pharmacies, healthcare facilities, R&D laboratories, and other establishments.
The pharmacies segment owns the highest market share and is estimated to exhibit a CAGR of 7.8% during the forecast period. A pharmacy or a drugstore is where medicines are dispensed or compounded. Usually, a pharmaceutical drug leaves a manufacturer's direct control to enter a complicated transfer system. The pharmaceutical product distribution systems require special handling based on conditions mentioned on the product label. In addition, pharmaceutical manufacturers are bound to include distribution in their overall quality system. They must be monitored continuously and updated frequently to adhere to the industry's best practices. The security risk management of the supply chain during transport is crucial to reduce the potential loss of revenue and reputation for logistics providers, distributors, and manufacturers.
Healthcare facilities include hospitals, urgent care units, doctor's offices, nursing homes, and ambulatory surgical centers. With the increasing complexities in the healthcare system, patients now have an incredible range of choices when receiving care or treatment, which often includes selecting the type of healthcare facility that the patients wish to utilize. Improving efficiency in healthcare is essential as healthcare providers are under growing pressure to manage their operations better and bring down costs while continuing to meet the healthcare needs of ever-growing populations. Hence, logistics play a crucial role in meeting the needs of these facilities by providing delivery, transportation, warehousing, and value-added services to them.
Based on region, the global healthcare logistics market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and Middle East & Africa.
North America is the most significant global healthcare logistics market shareholder and is anticipated to exhibit a CAGR of 7.75% during the forecast period. As the geriatric population in the region continues to rise, the incidence of chronic diseases has also increased, creating a demand for modern healthcare products and services and improved medical assistance to deal with the growing number of chronic disease patients more effectively. Consequently, this has propelled the need for safe and secure transportation of pharmaceutical products, medical equipment, and devices in this region. According to a WTO report published in 2017, the US is the second-largest supplier of medical goods worldwide, with reported exports of USD 116 billion. It also states that the US is the world's second-largest ventilators supplier and the third-largest PPE exporter.
In addition, the high acceptance and open-mindedness of people in the North American region have contributed to the development and adoption of many new innovative healthcare supply chain technologies by healthcare facilities. For instance, in 2018, FedEx emerged as the first big shipping giant to incorporate blockchain technology into its supply chain management. Such factors are contributing to the market's growth in the region.
Europe is estimated to exhibit a CAGR of 7.33% over the forecast period. Modern European healthcare operations include value-based healthcare, cost and margin pressures, and increasing regulatory and compliance requirements. These dynamics are compelling healthcare manufacturers to amend their supply chain operations to remain competitive in the healthcare logistics market and continue supporting healthcare providers by putting their patients first. The European medical device business can be categorized into two distinct markets: mature or Western Europe and emerging or Eastern Europe. Furthermore, manufacturers and logistics providers must provide low-cost logistics services to cater to the European medical device and pharmaceutical demand. As the COVID impact is profound, the European healthcare industry is working around the clock to ensure a continuous supply of critical pharmaceuticals and medical and protective equipment. These measures severely and immediately impact the globally integrated supply chains, driving the regional market growth.
Asia-Pacific accounted for a substantial share of the healthcare logistics market in 2022. Several government initiatives and high spending on R&D projects are driving the regional market's growth. The growing health awareness, mainly in emerging markets such as India and China, is also propelling the Asian-Pacific market growth. Since Asia-Pacific is the most significant API manufacturing region, many countries are importing pharmaceuticals, accelerating the demand for transportation and warehousing services. Thus, all these factors are contributing majorly to the market's growth.
LAMEA accounted for the most negligible share of the healthcare logistics market in 2022. However, rapid population growth, a steady increase in the elderly, and a high prevalence of chronic and non-communicable diseases propel the demand for healthcare products and logistics in these regions.
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