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WORLD AIRLINE
PHARMA REPORT
Riding the
pharma wave
T
As carriers further their efforts to tap he high-yield pharmaceutical commodity
now forms half of what is best described
this high-yield sector, the landscape as the ‘dynamic duo’ which, alongside
continues to evolve as a result of e-commerce, has turned into a steadily
growing backbone for the air cargo sector,
market developments, customer helping to keep it aloft over the last few years at times
when traditional air cargo demand has been weak.
demands and regulatory changes, :KLOH ÀJXUHV RQ LWV JURZWK YDU\ ZLGHO\ WKHUH LV QR
reports Donald Urquhart disputing the lucrative nature of uplifting this valuable
and highly sensitive commodity. The International Air
Transport Association (IATA) says the global pharma
market is expected to be worth US$1.2 trillion by
2022, with around US$12 billion currently spent world-
wide on cold-chain biopharma logistics alone, forecast
to rise to US$16.7 billion by 2020.
With seemingly no end in sight for global pharma-
ceutical demand and, by extension, specialist cool-
chain logistics, it’s easy to see why companies are ea-
ger to get a piece of the pie. One need only look at the
plethora of speciality cool-chain products being rolled
out by air cargo companies and the rush to achieve rec-
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Good Distribution Practice (GDP) and the more recent
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Dehio: A number of cargo carriers have being the two key routes.
jumped on the pharma bandwagon 7KHÀJXUHVSUHVHQWHGE\VRPHDLUFDUULHUVRYHUWKH
last couple of years also tell a tale of fantastical growth
20 CARGO AIRPORTS AIRLINE SERVICES $XWXPQ
WORLD AIRLINE PHARMA REPORT
that can seem out of sync with the sector shipments,” he notes.
overall. While WorldACD data indicates Julian Sutch, manager for global cargo Tarvainen: Emergence of
pharma volumes (chargeable weight) by air DFFRXQWV DW (PLUDWHV 6N\&DUJR VD\V DLU pharma ‘sub-products’
grew by 12.8% in 2016 over 2015, it is not cargo analysts may only track shipments
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numbers reported by carriers. whereas “much of pharma still gets regis-
But there are a number of reasons for tered as general cargo”. But he agees that
this. As Lufthansa Cargo’s senior product as pharma shippers and their forwarders
manager for temperature-sensitive logis- have become more demanding in terms of
tics, Chris Dehio, points out, the last few quality assurance, there has been a huge
years have seen quite a number of cargo shift from pharma being shipped as gen-
carriers entering the cold-chain market eral cargo to temperature-controlled, with
and jumping on the proverbial bandwag- India seeing the largest shift.
on. While these carriers have seen sig-
QLÀFDQW JURZWK WKHLU WRQQDJH LV VWLOO ORZ Evolving pharma markets
compared to established players in this Behind these changes is a tightening within
sector, he notes. the regulatory environment for pharma
And Finnair Cargo’s managing director manufacturers and shippers, including from
Janne Tarvainen highlights a recent emer- organisations like the World Health Organi-
gence of “sub-products under the Pharma sation (WHO) and international and national
envelope”, which might also account for regulatory authorities, for more reliable
the large growth rates. Pharma is also
rather concentrated on a few origin points
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Tarvainen adds, and thus route openings
may make a bit difference to the volumes
of pharma carried.
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reasons for the discrepancies between
sector growth and individual carrier growth
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proaches to how these numbers are de-
rived. As Fedor Novikov, deputy general
director of pharma at AirBridgeCargo Air-
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to carry a lot of pharma shipments as gen-
eral cargo, but now with the rise of clients’
requirements for transportation services,
carriers won’t accept pharma shipments
as general cargo, but will accept them only
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temperature-sensitive goods.”
Another reason could be differing ap-
proaches to identifying goods as pharma-
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shipments, medical devices, chemical rea-
gents, etc., and different companies and
market intelligence agencies have different
ways of allocating them to pharmaceutical
$XWXPQ CARGO AIRPORTS AIRLINE SERVICES 
WORLD AIRLINE PHARMA REPORT
driven this change, he says.
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US, where the introduction of new stand-
ards is traditionally implemented earlier
than in other regions. As a result, most of
the recent changes in customers’ require-
ments are being felt in Asia, India, and
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for instance, has been adopted in Russia,
and other pharma emerging countries are
also on the way to changing their require-
ments. And India, previously raw-material
export oriented, is now well on the way
to entering the more technologically ad-
vanced pharma market, Novikov notes.
“As a result, the market in India is re-
viewing quality and risk management,
temperature control during transport, says Customers are also increasingly aware and shippers are demanding more and
(PLUDWHV·6XWFK of new guidelines and processes and often more services with constant temperature
And although ‘pharma’ transport has al- require the transporting carrier or supplier control. For a long period of time, Asia has
ways been a niche product requiring higher WRVLJQVHUYLFHOHYHODJUHHPHQWV 6/$V î been a more import-oriented market; but
levels of care, until relatively recently there XVXDOO\ GHULYHG IURP *'3 JXLGHOLQHV î WR lately, as more new production facilities
had not been any substantive benchmarks. manage compliance and service are being established in the region, the
´+RZHYHUDIWHUWKH(XURSHDQ8QLRQ·V*'3 levels. There is also an in- demand for air freight export of pharma
implementation, the principles pharma crease globally in pharma products is growing,” he says.
manufacturers use in their production compliance and capabilities /XIWKDQVD·V 'HKLR DGGV ´*HQHU
VWDUWHG LQÁXHQFLQJ WKH WUDQVSRUWDWLRQ LQ of ground handlers, helping ally, we see an increasing drive of the
dustry as well,” says ABC’s Novikov. to facilitate the seamless healthcare industry to close gaps in
&OLIIRUG.ZRN&DWKD\3DFLÀF·VPDQDJHU transport of temperature- temperature-controlled cool chain lo-
for cargo customer solutions and airline controlled pharmaceuticals. gistics. This makes it more important
SDUWQHUVKLSV VD\V ´0RUH UHJXODWLRQV DUH The major pharma manu- to have immediate and
being imposed on pharmaceutical ship- facturing destinations reliable access to infor-
ment releases to the market as customers LQFOXGLQJ ,QGLD (X mation such as posi-
are more concerned about the quality of rope and the US, are tion, temperature and
air transportation.” This means customers all markets where other transportation
have become more focused on airlines’ SkyCargo’s Sutch parameters.” This
quality management, which includes sup- sees customers’ has led to a “strong
plier management, with the expectation requirements evolv- motivation” to shift
that airlines will deliver a consistent ser- ing. There has been from being correc-
vice throughout the logistics chain. a certain amount WLYH î XVLQJ WKH
Adrian Goh, senior manager for key ac- of consolidation data to prevent
counts and verticals at Singapore Airlines in global product future disturbanc-
Cargo (SIA), makes a similar observation. manufacturing and HV î WR EHLQJ SUH
“Increasingly, customers are become guidelines from ventive, meaning
more exacting in their requirements for international and using the data to
processes to ensure product integrity,” national regulatory prevent disturbances
he says. They are also seeking easier and authorities have before they occur.
timelier access to shipment data, such as But Dehio says the
real-time temperature readings throughout 1RYLNRY 5LVLQJXVHRIVSHFLÀF pharmaceutical indus-
the transport process, he adds. ‘pharma products’ try is not homogeneous,
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WORLD AIRLINE PHARMA REPORT
and individual companies have particular pharmaceuticals and specialised tailored Satisfying shippers
needs that may vary considerably. This drugs are now on the rise, although devel- But such demanding markets, customers
also depends on the type of medication oping countries are also seeing demand and regulatory needs are obviously not eas-
and on local import and export require- grow as people’s awareness and ability to LO\VDWLVÀHG´$VVKLSSHUV·QHHGVFRQWLQXHWR
ments, for example. purchase medicine increase. evolve to match consumer standards, there
“While one company may have a strong China is an interesting example. “We will always be room for product improve-
focus on immediate access to data, anoth- are very enthusiastic about the evolving ment and capability enhancement,” says
er may have a strong focus on maintaining demand for pharma, medicines, vaccines SIA’s Goh. This, in the Singapore carrier’s
the required temperature, and another and other healthcare material to and case, has led to a continuous honing of
yet will want to have detailed information from China,” says Jan Krems, president of SIA’s capabilities to provide customers with
on infrastructure and capabilities at ori- United Cargo. For example, China recently EHQHÀWVVXFKDVUHDOWLPHWUDFNLQJDQGDF
JLQ DQG GHVWLQDWLRQ ² DQG DQ\ PL[ RI WKH approved a US drug manufacturer’s all-oral cess to temperature data of shipments.
above,” he says. WUHDWPHQWIRUKHSDWLWLV&WKHÀUVWWKHUDS\ This desire for visibility and transparency
of its kind to be sold in China to treat a con- has been a key demand of shippers, con-
Other factors GLWLRQWKDWDIÁLFWVQHDUO\PLOOLRQSHRSOH ÀUPV)LQQDLU·V7DUYDLQHQDOWKRXJKLWLVQRW
But other changes within the pharma sector in the country. Other Asian locations also one the air freight sector has traditionally
DUH DW SOD\ 0DQ\ GUXJV DUH IDFLQJ ¶SDWHQW seeing growth include Seoul, South Korea excelled at. For those that get it right, the
cliffs’, driving the value of the drugs down- and Singapore, for both imports and ex- potential payoff is substantial. “We believe
ward, observes Cathay’s Kwok. As a result, ports, Krems notes. that the future of the historically very con-
pharmaceutical companies are becoming On the production side, Lufthansa’s servative air cargo industry will see disrup-
more and more stringent in terms of logis- 'HKLRQRWHV ´2QDYHU\JHQHUDOOHYHORQH tion due to digitalisation and utilisation of
tics cost control and are sourcing cheaper might say that the markets where generic data,” says Tarvainen.
logistics solutions and packaging in the pharmaceuticals are produced (such as But for now, this is still an area with prob-
market. India and China) have stronger growth lems including a major gap between expec-
tations and reality over the issue of global
temperature tracking. Although there are
devices today which can be used to track
location, temperature, shock, light, and so
on, in most cases these devices cannot
remain switched on during the complete
GXUDWLRQ RI WKH ÁLJKW EHFDXVH RI SRVVLEOH
interference with on-board systems. And a
number of these devices also use lithium
batteries, raising other issues, cautions
SkyCargo’s Sutch.
At the same time, partially in response than countries that produce original phar- Gaps in the system
to the expiring patents, modern pharma- maceuticals. As patents run out and block- Another gap is the limited infrastructure in
ceuticals are also becoming increasingly buster medication becomes rarer, the terms of both ramp protection and cool fa-
VRSKLVWLFDWHG WR WUHDW VSHFLÀF PHGLFDO pharmaceutical industry is developing in cilities offered by ground handlers at many
conditions, increasing their sensitivity to countries with low labour costs.” airports. And customs inspections some-
temperature-related changes and requir- +H DGGV ´7KHUH LV DOVR D GHYHORSPHQW times take place in areas that are not tem-
ing more specialised handling procedures, towards personalized medication or preci- perature controlled and where the air cargo
notes SkyCargo’s Sutch. sion-medication (particularly in oncology), carrier has limited control, he adds.
but that area currently involves very small Indeed, temperature incursions are the
Global growth volumes and a high degree of monitor- bugbear of this sector, and while air carri-
Carriers report growth in almost all the ing. It remains to be seen if this is a trend ers generally have a good solution for every
trade lanes they serve, although some of that only involves ‘the last mile’ or if larger type of requirement, whether these are
the characteristics vary. On the consump- volumes will be produced in low-cost coun- used depends on the “balance between
tion side of the pharma equation, devel- tries that would then require fast, secure the level of protection and what it costs”,
oped countries continue to spend more on and safe transportation.” highlights Lufthansa’s Dehio. An active
24 CARGO AIRPORTS AIRLINE SERVICES $XWXPQ
WORLD AIRLINE PHARMA REPORT
container will be able to maintain a climate has become a more viable option for phar- products by ocean, there will always be a
within very tight limits, but the costs are maceutical companies which are seeking to demand for shipments by air, Kwok says.
high, whereas a cheap, foam insulated box lower their freight costs,” says SIA’s Goh. For example, products such as seasonal
will provide only rudimentary protection. If pharma shippers have suitable prod- vaccines or drugs needed in times of epi-
This dilemma is a big issue in the US air ucts and they are able to plan their produc- demics “will require air freight to deliver
freight market at the moment, notes ABC’s tion well, they are able to use sea freight the drugs in the shortest possible time
Novikov, where the industry has been fo- even with the longer transit times compared frame, in a proven and controlled manner”.
cused on the development of active solu- to air freight, says Finnair’s Tarvainen. This 6,$·V*RKDGGV ´6KRUWHUWUDQVSRUWDWLRQ
tions for temperature-sensitive goods, basically amounts to large-volume, low- time, including direct access to hinterland
using active cargo containers. But due to value, long-shelf-life pharma products. But points, continues to be of paramount im-
the generic drug volume increase and cost- this modal shift to sea has also resulted portance for time- and temperature-sen-
reduction programmes started by the big from issues with temperature excursions in sitive pharmaceutical shipments, and this
pharma players, passive solutions are in air cargo due to lack of compliance and pro- remains the unique value proposition of
greater demand in the US now. cesses, something that is being strenuously moving pharmaceutical shipments by air.”
The air freight industry is investing in the addressed across the industry. ABC’s Novikov says speed, safety and
development of passive solutions to be able There is also another factor that has reliability remain the main and decisive
to handle increasing temperature-sensitive precipitated the shift to either sea or land, factors for pharma shippers, in choosing
healthcare shipments and it is not only US according to SkyCargo’s Sutch. This occurs air freight over sea freight. “Air freight is
companies facing this issue; the rest of the when manufacturers look at the total time still essential for the pharma supply chain,
world is also still trying to achieve the re- GRRUWRGRRUDQGÀQGWKH\DUHDEOHWRFOHDU which is becoming more and more complex
quired level of services for passive packed their cargo quicker at the sea port or land when transporting high-value vaccines,
healthcare shipments, says Novikov. And border in certain countries. blockbuster drugs, clinical trial shipments
again, this is where transparency and data But ocean freight is not always an ideal and products that are extremely time- and
become critical issues. solution for the carriage of highly expen- temperature-sensitive.”
sive drugs that require proper handling, $QG8QLWHG·V.UHPVFRQFOXGHV ´2FHDQ
Ocean’s threat cold-chain management, and a fast transit and other transport modes have some
0HDQZKLOHDQRWKHULVVXHLVWKHORVVRIDLU time, adds Cathay’s Kwok. “Today’s ocean advantages from a cost perspective. For
cargo’s share of global pharma products to containers are very robust; however, if a the most part, however, our customers
ocean freight. This is driven largely by cost, container malfunctions, the large volume of DUH ORRNLQJ WR EHQHÀW IURP WKH JUHDWHU
along with improved service levels on the drugs contained within could all be affected, speed, safety, security and control that
ocean side. “With improvements in technol- causing a total loss of the entire shipment.” air freight provides for their very sensi-
ogy and packaging solutions, ocean freight Despite a rise in the carriage of pharma tive commodities.” QQQ
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