Obstacles Facing Biologics Preservation

PC: What challenges surround the preservation of biologics, and what role have transparency & visibility played in this effort?

Gagnon: A lot has changed. A while back, we didn't even what was in a box, or what was on a pallet, or whether it had temperature requirements. There was complete ignorance to what was being moved from point A to point B. The evolution that has happened is that transparency and visibility of what's in the box, what the temperatures are, when things have to be delivered, if something has experienced an excursion or not, all of that data is now available. The equipment and the processes are absolutely there—they've evolved today.

I think the struggle that many logistics companies and transportation companies are working on now is cost management, because I think all the pieces are in place, but now it's trying to drive down cost to deliver on time and within temperature. This is going to be a very logistics thing to say, but most people don't recognize trade flow imbalances, which is a nightmare for a transportation company. What I mean by that is there are pockets of pharmaceutical manufacturing, so airplanes and cold chain ground equipment, refrigerated trailers or reefers, they're all leaving a town full of vaccines or biologics. The problem is that those assets are really defined to manage and carry pharmaceuticals, so bringing them back generally ends up bringing them back empty.

Of course, the challenge is to figure out how to optimize a network in which every time you move an aircraft, a pallet, or a refrigerated trailer, you're trying to keep it as full as possible for every leg. A lot of companies manage milk runs from town to town to make sure that there is some consistency, but I would say that that's one of the bigger focuses. I'm not suggesting that managing excursions and cold chain overall has been completely solved. I will say that it's being solved enough that now we're saying, okay, let's continue the improvement, but let's start to do it at a more effective and efficient cost. This is where you're going to see data. You'll see AI, you'll see the applications of some of the technology designed to optimize and help providers do that.

PC: What are the keys to maintaining stability in the healthcare space?

Gagnon: UPS loves healthcare because there is some stability in it. Unlike a lot of our other business, especially in the small package network, there's not this major peak during Christmas, or during the end of the year (during the holiday season). There is some stability year-round with healthcare. Now, it's not recession proof, but it is recession resistant. That’s one of the reasons we like it. There's a balance throughout the year.

Having said that, in the recession and economic downturn, there are still some impacts to healthcare. Elective surgeries come down. Also, in consumer health—things that may not be as necessary—you'll see a slowdown in some of that. For the most part, acute healthcare, trauma—the things that are big healthcare expenses—those major illnesses that require treatment continue. They continue regardless of the economy. There are bits and pieces of healthcare that really stay stable throughout a recession. An interesting dynamic (sticking with cold chain) regarding biologics and vaccines is that if you look at the drug pipeline, over 55% of the drug pipeline, especially in stage I, is a biologic or a vaccine. We're going to continue to see more output out of pharmaceutical manufacturers for these temperature-sensitive materials, which is a great thing. You're going to see the need for cold chain expand. Usually, this innovation, whether it's a vaccine or a biologic, is designed for some of the fastest growing illnesses out there: diabetes, respiratory illness, cardiac issues. Cancer is a one of the fastest growing disease categories, and a lot of these solutions, vaccines, and biologics are designed to treat those fast growing chronic diseases. Where I'm going with all of this is that I do think we're going to continue to see growth, especially within pharma and very specific subsegments of pharma, regardless of whether the economy is declining or not.