Demand for weight-loss drugs across the developed world is soaring. Two of the most successful and well known of these medications are produced by Danish pharmaceuticals company, Novo Nordisk: Wegovy, approved for weight management, and the diabetes drug, Ozempic, which manages blood sugar levels. The manufacturer is also responsible for Rybelsus which uses the same active ingredient but is taken orally rather than by injection. With over 110 million people estimated to be living with obesity in the USA alone, the popularity of the drug, and others like it, looks set to continue for many years. One forecast suggests that the weight loss drugs market could rise to $45 billion by 2032 with a compound annual growth rate (CAGR) of 44%. This brings with it enormous opportunities, but also many supply chain and logistical challenges.
The supply chain involved in getting the drug to the end-user is complex and global. The active pharmaceutical ingredient in all three of these drugs is called semaglutide, which according to the company, is manufactured wholly in Denmark. The ‘Fill-Finish’ stage of the process for Wegovy and Ozempic, involving the filling of injection pens, is out-sourced to contract drug manufacturer, Catalent, at its sites in Brussels, Belgium or Bloomington, Indiana and Thermo Fisher in Greenville, North Carolina. The process is so important to Novo Nordisk that it is presently buying three of Catalent’s plants (the two mentioned and a further facility in Anagni, Italy) – in effect ‘re-verticalising’ its supply chain. The final assembly of the filled pens and their packaging is either undertaken by Novo Nordisk itself or by PCI Pharma Services, a supplier based in the USA.
Demand for the drug has been very high and this has resulted in some supply chain bottlenecks especially related to shortages of auto-injector pens. The drug has some side effects, so dosage is restricted at the outset of the course of medication and then gradually increased. Consequently, pre-filled pens come in multiple sizes depending on the dosage and, as a result, shortages of any size can impact on courses of medication. One of the bottlenecks was due to the temporary closure of Catalent’s Brussels plant after an inspection by the Food and Drug Administration (FDA) in 2021. Disruption to supply lasted throughout much of 2022 and this may be one of the reasons why Novo Nordisk is keen to take over more control of the production stage.
Demonstrating the strong relationship between product design and supply chain, Novo Nordisk commented in it 2023 report, ‘We are also thinking strategically about ways to remove bottlenecks in the supply chain. For example, we are seeking to alleviate pressure on device supplies by introducing our medicines in once-weekly rather than daily formulations, and we are exploring ways to reduce the reliance on single-use injection devices.’
A further problem was the occurrence of what academic Professor Richard Wilding calls ‘supply chain parallel interactions’. In this case, celebrity endorsements of the weight-loss drug created demand for Wegovy which could not be fulfilled and consequently resulted in the so-called ‘off-label’ prescription of diabetes drug, Ozempic. Although similar, the drug is not licensed for this purpose. The result was demand amplification leading to shortages of medication for diabetes patients.
The shortages are also likely to result in so-called ‘squirreling behaviour’ by pharmacies. As it is probable that they will only receive part of their order, the usual response is to over-compensate, ordering multiples of what is actually needed. This results in an extreme version of the ‘bull-whip effect’, with all parties in the semaglutide supply chain overwhelmed by apparent demand. This can ultimately lead to market dysfunction leading to eventual surfeit of product and cost volatility.
A crucial requirement of the storage and transportation of both Wegovy and Ozempic is that they need to stay within a specific temperature range: 36°F and 46°F (2°C and 8°C). Degradation of the drug can occur if its environment deviates from this range, limiting its effectiveness. The specialist logistics needs of the drugs have meant that logistics costs are high, impacting on margins for its wholesalers, which, in the USA, include AmerisourceBergen, Cardinal Health and McKesson. Rybelsus is more stable and can be stored and moved at room temperature.
As in any market, high demand has led to the risk of counterfeits and trafficked goods. In the US, prescribed medication can cost consumers $1000 for a month’s supply (although it is much cheaper than that in Europe). The high price has driven many consumers to source the drugs on-line from non-licensed suppliers. The medication may be fake, diluted or contain unevaluated variants of the API which could be ineffective or even toxic – hospitalisations have resulted. It was reported in June 2024, that US authorities had seized shipments of Ozempic during its crack down on duty-free de minimis imports of e-commerce goods. According to the Customs and Border Protection (CBP) agency, ‘Most of the shipments held over 100 pre-filled injection pens. Had all 11 shipments been legitimate with FDA approval, they would have had a combined value of $887,000.’ Popular origins seem to be China and Colombia. Until supply steps up to reach demand or prices drop, this ‘parallel’ or even black market will persist.
For the supply chain and logistics industry, the weight-loss drugs market is a huge opportunity. It is highly logistics-intensive in nature, involving storage and transportation of high value, temperature-controlled products with all the associated environmental monitoring and security considerations. It is international in nature, involving multiple stages within a global value chain. Demand for the drug is high and supply limited making exceptional supply chain management an imperative to avoid what Professor Wilding has termed, ‘deterministic chaos’. No doubt artificial intelligence will play a part in the analysis of demand, capacity and shipping data to enhance supply chain decision-making.
Source: Ti Insight
Author: John Manners-Bell
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