How New 3PL Pharma Services and Title Models Can Benefit Drug Manufacturers

The highly complex pharma life sciences industry seems to be constantly changing.  To keep up with the pace of change, ensure regulatory compliance and meet the needs of patients and drug manufacturers, pharma manufacturers have ramped up outsourcing to 3PLs and other third party service providers.

Why Has Outsourcing to Third Party Service Providers Including 3PLs Increased?

1. Expansion in the development and commercialization of specialty pharmaceuticals, which typically require specialized handling, storage, transportation and logistics. By their nature, specialty pharmaceuticals are fragile, costly products, often requiring temperature controlled, refrigerated storage and transportation.

2. Changing nature and growth of alternative sites of dispensation. This includes specialty pharmacies (SPs), infusion centers, outpatient clinics, doctors’ offices. Many specialty prescription drug products require administration by infusion, leading to the need for differing dispensation site types.

3. The increasingly complex relationship between pharma manufactures, payers and healthcare providers. With the rise in the cost of drug development, commercialization, regulatory compliance and other factors, prescription drugs have become more expensive.  In an effort to control drug prices, payers have developed new strategies to streamline operations, potentially provide more opportunity for market access to drug manufacturers while facilitating cost savings.  These strategies often lead drug manufacturers to enlist the assistance of outside vendors including third party logistics providers.

4. Use of new strategy: direct distribution of pharmaceuticals from the manufacturer to healthcare practitioner offices or even directly to the patient.  This has increased the development of limited or exclusive distribution networks that serve local, regional or national markets.  Typically, third party logistics providers (3PLs) act as the agent for the product owner.  The 3PL arranges the storage and transportation of the specialty pharmaceutical product.  This includes providing services such as receiving inventory, fulfilling orders, managing payments.

5. Need for specialty logistics and distribution often leads to the services of a 3PL pharma operation. Almost every major American wholesaler-distributor in the pharma industry has a 3PL pharma service business.  The 3PL pharma arm of the business operates synergistically alongside the national distribution, storage and transportation services.  Often 3PLs have dedicated shipping lanes with generous national coverage across the United States, enabling the 3PL to consolidate and combine shipments from multiple pharma manufacturers transiting to the same destinations.  This helps to reduce transportation and logistics costs and aids in reducing the amount of damaged pharma and life sciences goods that need to be returned for credit due to damage that occurs during shipment and transit.

6. Need for a variety of new service offerings to aid in the commercialization of pharmaceuticals. The time, labor and cost involved with drug development is only part of the cost of prescription drugs.  Drug manufacturers need to harness the expertise and economies of scale available by third party logistics providers to have a winning strategy for commercializing drug products.

7. Huge volume of returned pharmaceutical products and need for reverse logistics

What are 3PL Title Model Services for Pharma Manufacturers?

In this model, the 3PL effectively purchases the drug products from the pharma manufacturer, in effect “taking title”:

• The drug manufacturer receives dedicated specialty services such as for handling, storage and delivery but does not have to have all the required licensing in place for national distribution.
• The third party logistics provider holds the appropriate licenses and makes compliant deliveries including to alternative sites for pharmaceutical distribution.
• The 3PL Title Model is particularly useful for emerging companies dealing with specialty pharmaceuticals including biopharma products as it aids in shortening pharmaceutical product launch time.

What are 3PL Flash Title Model Services for Pharma Manufacturers?

• The 3PL provider is responsible for handling the invoicing, payment collection for the product from the sites of care (dispensation sites).
• This model leverages the considerable expertise and experience of the 3PL in dealing with credit profiles and payment practices used by varying types of dispensation sites.

3PL Title Model or Flash Title Model

• Eliminates the potential of delayed orders
• Helps to reduce accounts receivable risk
• Mitigates risks involved with the pharmaceutical distribution process
• Liberates manufacturer’s cash flow for use in other aspects of the business

Ensures manufacturer remains at the center of the customer interaction

Summary

In dealing with the complex world of pharmaceuticals 3PL providers can provide services that help to shorten the time to market of new drug products, keep warehousing, shipping, delivery and labor costs under control and reduce the time and expense in obtaining required licensing.