Merck KGaA plans to use analytics and machine learning to predict and
prevent drug shortages, a move that could also save it money.
Currently, the Germany-based pharmaceuticals company needs to
stockpile medications to make sure it has enough on hand, meaning some
of them expire before they can be used. Merck said its supply-and-demand
forecasts are about 85% accurate today.
To sharpen its predictions, the company’s health-care division plans
to start testing a cloud-based software platform later this year. The
platform, made by North Reading, Mass.-based TraceLink Inc., can analyze
in real time data points from various organizations within Merck’s
supply chain, including pharmacies, hospitals and wholesale
distributors.
TraceLink is now developing machine-learning algorithms that will be
used in the pilot, which will begin with immuno-oncology drugs, designed
to boost the body’s immune system to fight cancer. “We want to start it
in an area where the product is a lifesaving product,” said Alessandro
DeLuca, chief information officer for Merck’s health-care division.
“The value is going to be that every single patient will receive the
drug that he or she needs at the right moment,” Mr. DeLuca said, adding
that the move could significantly cut drug shortages.
The U.S. had roughly 150 to 300 drug shortages every quarter between
2014 and 2019, according to the University of Utah. Shortages can happen
due to issues with manufacturing, supply-and-demand forecasts and
natural disasters, according to the American Society of Health-System
Pharmacists. Common classes of drugs in short supply include
antibiotics, chemotherapy and cardiovascular treatments.
Analysts say more precise supply-and-demand forecasts mean
pharmaceutical companies could save hundreds of millions of dollars
annually, a benefit of not having excess drugs on hand and avoiding
costs related to expedited shipments.
On average, pharmaceutical companies carry 156 days of inventory,
according to research and advisory firm Gartner Inc. For retailers
selling consumer products, it is 78 days. For IT equipment such as
printers, servers and PC components, it is 57 days.
Pharmaceutical companies traditionally have predicted demand for
drugs based on historical data and input from sales teams. Over the past
few years, they have had access to more data about drugs in their
supply chain because of a 2013 U.S. regulation that forced manufacturers
to add serial numbers to medications, in part to reduce counterfeit
drugs.
Drugmakers can use TraceLink’s software to generate such serial
numbers, but the platform also acts as a central hub for information
about the status of drugs at every phase in the supply chain. As many as
10 entities handle a drug before it gets to a patient, including
manufacturers, pharmacies and wholesale distributors, said Shabbir
Dahod, TraceLink’s chief executive. “It’s a highly complex supply
chain,” he said.
The TraceLink network includes data from more than 275,000
organizations world-wide, including hospitals, retail pharmacies,
wholesale distributors and drugmakers. Data about more than six billion
serial-numbered drugs runs through the system. Besides Merck, TraceLink
customers include Amerigen Pharmaceuticals Inc., Stirling Anglian
Pharmaceuticals Ltd. and Morningside Pharmaceuticals Ltd.
TraceLink, founded in 2009, has raised about $167 million in
venture-capital funding from investors such as Vulcan Capital, FirstMark
Capital, Goldman Sachs Group Inc. and Volition Capital.
To give clients more accurate information about supply and demand,
TraceLink is developing machine-learning-based algorithms to analyze the
information in its network without violating data-privacy laws.
For example, algorithms could give Merck signals about the days of
inventory for a specific drug and how long it will take for a drug to
get to a particular phase in the supply chain, Mr. Dahod said. More of
that data could also help predict the demand for a particular drug.
Over the past decade, pharmaceutical companies have been facing steep
competition from rival brands, generics and biosimilars, said Stephen
Meyer, a senior director and supply-chain analyst at Gartner
specializing in the life-sciences industry. Investors are pressuring
them to become more profitable and free up cash flow to fund product
development and mergers and acquisitions, Mr. Meyer said. To that end,
many are exploring ways to cut costs in their supply chains.
A better supply-and-demand forecast also makes it easier for Merck to
expand into locations without a reliable supply-chain infrastructure,
such as parts of Africa and Southeast Asia, said Pepe Rodriguez,
managing director and partner at Boston Consulting Group who specializes
in operations and supply chains in pharmaceutical companies.
“A lot of growth from pharma companies is coming from emerging
markets…and some of the logistics there are challenging,” Mr. Rodriguez
said.
https://www.marketscreener.com/MERCK-KGAA-436395/news/Merck-Drugmaker-to-Test-Machine-Learning-to-Prevent-Drug-Shortages-29374412/
