The FINANCIAL — Accountability/ For pharmaceutical companies, managing supply chains is a demanding task with many complexities. In a new partnership with Novo Nordisk, Maersk aims to make logistics simpler and safer by thinking end-to-end.
Even if distributing products around the world is never a trivial task, the challenge for pharmaceutical companies has added pressure. Why? The speed and accuracy of medical and pharmaceutical logistics can ultimately be the difference between life and death.
More than any other sector, the pharma industry is therefore heavily regulated with detailed requirements to the storing and transportation of medical supplies that are often sensitive to changing conditions. The traditional logistics setup, with several vendors and limited visibility of the global supply chain, is therefore a big challenge to many pharmaceutical companies, Maersk notes.
This was exactly the situation that Novo Nordisk, one of the world’s largest pharmaceutical companies, was facing when Maersk first approached them in November 2019.
“Transporting pharmaceuticals on a global level is a demanding task with various complexities that require flexible and resilient supply chains as well as digital solutions,” explains Christina Torp Jacobsen, Key Client Manager at Maersk.
“We therefore approached Novo Nordisk, because we really saw a chance to improve their logistics setup, and thereby also the safety for patients, by thinking end to end.”
After a year of conversations, a three-year agreement on cold chain logistics was signed in December 2020, covering ocean services and inland logistics.
According to Christina Torp Jacobsen, the agreement builds on the combination of Maersk’s advanced digital technologies, understanding of regulations, as well as thorough knowledge of how to handle the unique shipment. “Novo Nordisk and other pharmaceutical companies are producing lifesaving medicine, and they therefore need to be 100% sure they can rely on us transporting their products on time and under the right conditions,” she explains.
“Even small deviations on for example temperature can mean that an entire container of insulin needs to be discarded. This would of course mean big financial losses – but more importantly, Novo Nordisk needs to make absolutely sure that patients, who rely on their products, are not exposed to any risks.”
A sustainable solution
On top of the fully integrated logistics solution, Novo Nordisk has another important demand. The company is working towards becoming a fully circular company that leaves zero environmental impact, and in 2020 it became the first pharmaceutical company to achieve the target of having its entire global production running on 100% renewable power. Novo Nordisk’s high environmental targets are also applied to suppliers, making Maersk a perfect fit.
“Our ambition of achieving zero environmental impact is a cornerstone of our aspiration to be a truly sustainable business,” says Rune Sylow, Corporate Vice President for Strategic Sourcing in Novo Nordisk. “We consider A.P. Moller – Maersk to be the right global distribution partner to secure the steady, environmentally friendly delivery of our high-value shipments and we look forward to the collaboration.”
Novo Nordisk chose Maersk’s ECO Delivery to reduce its carbon footprint in the supply chain. The ocean product uses sustainable biofuel to power selected Maersk vessels and helps Novo Nordisk to make progress towards its ambitious sustainability goals.
“We see that environmental requirements are becoming more and more important to a lot of companies,” Christina Torp Jacobsen says. “Within the pharmaceutical sector, Novo Nordisk is seen as a frontrunner on this, and the fact that they choose this solution is definitely seen as a stamp of approval by other companies.”
The environmental aspect of the agreement is not the only part that is being noticed by other pharma companies.
“Within the sector, Novo Nordisk equals quality and we are therefore already seeing other pharmaceutical companies that are contacting us to learn more about the potential,” Christina Torp Jacobsen says.
She underlines that every pharmaceutical company has its own strict procedures and demands for logistics providers to live up to. She does, however, think that Maersk is making important learnings from the partnership that can benefit other customers in a sector that continues to grow.
The pharmaceutical industry is in the midst of enormous change. As the world’s population ages, providing people easy access to healthcare and medication has become a key responsibility, according to Hristo Marinov Petkov, Global Vertical Head of Pharma at Maersk.
Precision medicine, customised to the needs of a single patient, is gaining momentum. Big brands are fighting the problem of counterfeit drugs, compounded by the rise of online retailers. And companies around the world are riding the wave of consolidation with mergers and acquisitions, Maersk notes.
“These challenges add new layers of complexity to pharma supply chains. The ideal logistics partner is no longer the local provider, but a global player who can respond to demand, provide structural flexibility, ensure overall visibility, constantly improve results – and very importantly, build risk-based models,“ says Hristo Marinov Petkov.
Untapped growth opportunity
Maersk estimates the pharma industry as a USD 1300 billion market with a total logistics spend of around USD 30 billion. Today, Maersk has a total revenue in pharma of around USD 130 million, based on its ocean footprint, which is less than 1% of the total market spend.
A more dedicated and increasingly integrated pharma cold chain offering and further investment in Logistics & Services would allow Maersk to grow this vertical significantly.
“Every additional 1% market share of the pharma logistics industry will bring an additional USD 300 million to our top line in L&S and Ocean. It’s quite an exciting opportunity we have ahead of us,” adds Hristo Marinov Petkov.
The global agreement with Novo Nordisk will enter effect as of 1 April 2021.
About Novo Nordisk
Novo Nordisk is one of the largest pharmaceutical companies in the world with headquarters in Denmark. Novo Nordisk specialises in treatment within diabetes, obesity, rare bleeding disorders and growth hormone-related disorders, and the company markets its products in app. 180 countries.