BrazilLaunching a new pharma product in Europe: 6 supply chain cost factors to consider
Successfully launching a pharmaceutical product in Europe requires navigating a complex array of commercial, regulatory, and operational considerations. While strategic and regulatory topics are often well-covered, a new report from AIM zeroes in on a narrower, yet critical aspect: the cost of setting up and operationalizing a European supply chain.
For specialty products, supply chain costs will not be the core driver when deciding whether to bring a product to Europe. Nevertheless, keeping cost at an acceptable level is important for a successful market entry. For more traditional products, supply chain costs are likely to represent a significant portion of the Cost of Goods Sold (COGS) and Sales and Distribution (S&D) expenses, affecting launch viability and long-term margins.
Based on its in-depth experience in the life sciences supply chain, experts from AIM outline six core cost drivers that are recommended for biopharma companies to anticipate early in their planning.
1) Launch Sequencing
Most companies phase their country launches across Europe due to regulatory, access, and resource constraints. Phasing considerations include:
- More up-front investment in supply chain development for faster launch sequencing
- Choices for and timing of staffing (organizational buildout vs. contractors/consultants)
- Ability to scale up supply chain infrastructure as needed, enabling volume growth to bring down post-launch per-unit distribution costs
Strategic sequencing helps a company to understand revenue drivers and effectively control costs and risks.
2) Distribution Channels
Navigating between wholesale, hospital, retail pharmacy, or direct-to-patient channels affects:
- Cost structure
- Customer management needs and efforts
- Order size, ordering frequency, and service levels
Channel choice varies by market and by product. For example, Spain restricts wholesalers to the retail chain, meaning innovative products are more often directly distributed to Point of Dispense (PoD).
3) Distribution Network Model
Centralized distribution simplifies reporting but will lead to longer transit times and reduced flexibility. Localized models may:
- Improve service
- Reduce risk for sensitive products
- Be more cost-efficient for certain geographies
Companies must balance transport cost, complexity, and service performance.
4) Product Configuration
Using multi-market Stock Keeping Unit (SKUs) can:
- Increase batch efficiency
- Smoothen inventory management
- Reduce expiry risk
However, broader-use SKUs raise parallel trade exposure, which may erode margins.
5) Internal versus Outsourced Operations
A company’s choice to take on more burden in-house versus to rely more heavily on outsourcing can have major implications on supply chain cost and risk, as well as other factors. An overview of some key factors and the relative impact.
6) Service Levels
Premium service (for example: 'white glove' delivery) can differentiate products from competition- especially for accelerating uptake. However, this also drives costs upward and may not be sustainable post-launch.
To help evaluate whether the added cost is justified, a company must consider the nature of the required service (e.g. urgency level, first use versus maintenance, availability needs, etc.). Such factors play a major role in determining the required fulfillment speed, transport solutions, and so on.
Conclusion
When pharma companies consider launching a new product in the European market, it is important that they begin considering the supply chain cost drivers and factors early. Too often, supply chain questions are left unaddressed until late in the process, unnecessarily putting companies a few steps behind when the initial launch dates start coming into sight.
