The Coronavirus disease (COVID-19) pandemic has done much to expose the vulnerabilities in our nation’s pharmaceutical supply chain. The rush to ship limited inventories of test kits, personal protection items, plasma and drugs has been challenging due to longstanding supply chain weaknesses in single sourcing and an over-reliance on extended offshore suppliers.
Estimates are that some 80% of active ingredients used in U.S. pharmaceutical production are sourced overseas, principally from China and India. The pandemic has been a painful wakeup call that the pharmaceutical supply chain - normally under the radar screen - is far too risky and far too reliant on distant nations.
As this reshoring trend back to the U.S. plays out – prompted by the pandemic and now being encouraged by new bipartisan carrot and stick legislation being crafted in Washington, D.C., the commercial real estate industry and service providers are positioning for a new wave of supply chain facilities designed to serve the pharmaceutical and biotechnology industries.
The cold chain
This new wave of logistics investment comes after hundreds of millions of square feet of distribution and fulfillment space have already been constructed along the densely populated U.S. East Coast fueled by the booming e-commerce industry. Geographically, the majority of this new pharma-related supply chain activity is also focusing on the East Coast, which houses most of the nation’s major pharmaceutical production hubs, such as Boston, New Jersey, Philadelphia, Raleigh/Durham and South Florida.
These new pharma supply chain projects are part of the nation’s cold chain – temperature-controlled, refrigerated facilities designed to keep products like drugs as well as food fresh and safe. Pharmaceutical and biotechnology firms are developing a wide range of new products that rely on cold storage throughout the entire supply chain. Biologics - drugs and medicines developed from living organisms, including vaccines, blood and viruses - are all driving new cold storage demands.
Also fueling expansion in the cold chain is the growing popularity of online pharmaceutical deliveries like those operated by Amazon’s pharma delivery service – PillPack – and similar drugs-by-mail programs of major insurance companies like Aetna, United Healthcare and Humana.
Not the least of drivers will be the unprecedented volume of doses associated with the much anticipated COVID-19 vaccine when that becomes available and hits the nation’s supply chain.
The Boyd Co. estimates that as much as 125 million square feet of cold chain supply space will be required to meet new demands, much coming from the pharmaceutical and biotechnology industries.
One takeaway of the COVID-19 crisis is that policymakers in Washington, D.C., are now viewing drug security much in the same light as our nation’s strategic petroleum reserve.
Some of the Top 25 cities named in Boyd’s Pharma Supply Chain Report, selected based on their proximity to regional pharmaceutical production hubs – generally 2 hours or less - transportation infrastructure, real estate inventories for new supply chain development, life science labor market access and logistics considerations.
Stoughton, Mass.; Boston, Mass.; Worcester, Mass.; Nashua, N.H.; Windsor, Conn.; Newburgh, N.Y.; Farmingdale, N.Y.; Staten Island, N.Y.; Edison, N.J.; Cranbury, N.J.; Florence Township, N.J.; King of Prussia, Pa.; Philadelphia, Pa.
The report details a range from a high of $27.5 million in Staten Island, N.Y., to a low of $18.1 million in Rocky Mount, N.C. Boyd’s cost analysis includes all major geographically variable factors critical to the supply chain site selection process such as labor, real estate, construction, taxes, utilities and shipping.