As we eagerly begin 2021 and prepare this year’s cold chain industry predictions, we reflect on the events of 2020. Nowhere leading into the year did we predict a global pandemic. Yet its impact crosses all facets of business, causing companies to pivot and adapt. Some were able to harness new opportunities to serve our ever-changing way of life and others struggle to stay the course.
The pharmaceutical and cold chain industries were pushed this previous year to innovate through vaccine development, temperature-controlled packages that met the needs of new deep frozen vaccine storage and increased demand for existing products. The air cargo industry experienced its own challenges, further impacting the pharmaceutical and cold chain industries’ ability to transport pharmaceutical products. All three industries rose to the challenge of 2020, working in unprecedented ways to make 2021 a brighter year.
Though there is hope for more normalcy in 2021, COVID-19 will continue to drive business operations. This is certainly true in the pharmaceutical, cold chain and air cargo industries. Our predictions below all show how COVID-19’s influence persists, and in some instances, may have a long-term ripple effect.
Growth in Direct-to-Patient and Direct-from-Patient Brings Cold Chain to the Last Mile
Over the past several years, clinical trials have become increasingly complex. They require extensive data collection, utilize complicated drug regimens and enroll global patient populations. Frequent travel to a clinical site for routine drug administration, sample collection and simple tests can deter patients from participating. This is especially true when patients do not live close to a medical facility.
Currently, 24 percent of clinical trials offer home-based solutions that allow patients to receive medical care in their homes or ship study samples from their homes to a medical facility. We expect to see this number increase out of necessity, but also out of a desire for continued convenience.
COVID-19 also increases the chances home-based offerings will grow outside of clinical trials. Over the past year, healthcare companies and consumers learned that it is possible to receive healthcare at home. We expect that a subset of the population will continue to prefer home-based healthcare for its convenience, driving more companies to offer this service.
Services like phlebotomy, drug administration and sample collection that require refrigeration will require cold chain solutions. We anticipate a drive toward solutions that require little training and are easy for home healthcare professionals and patients to operate. We should also see more assessment and evaluation of the cold chain for home-based care in 2021.
Outsourcing the Cold Chain
Pharmaceutical supply chains continue to reach new levels of complexity that challenge even the most seasoned logistics and supply chain professionals. Contract Manufacturing Organizations (CMOs) and Contract Development and Manufacturing Organizations (CDMOs) offer expertise in manufacturing and development of therapies, allowing pharmaceutical companies to focus on their areas of expertise.
This year we expect to see even more pharmaceutical companies outsource these capabilities to CMOs and CDMOs, which will help them reduce overall costs. We also believe CMOs and CDMOs will expand to include more services. This will include cold chain, working with partners like us. Offering end-to-end expertise will help reduce complexity by standardizing as many pieces of the supply chain as possible.
Return to Refrigerated Temperatures for COVID-19 Vaccines
As of February 10, 2021, 94 different COVID-19 vaccines are in clinical trials, under regulatory review for approval or approved for use. Four vaccines are approved for full use, and we expect the number of viable, approved COVID-19 vaccines will continue to grow throughout 2021.
All else equal, it is likely the market will favor vaccines that require refrigerated temperatures of 2-8 degrees Celsius. Existing infrastructure exists to transport and store these vaccines around the world more easily. Additionally, refrigerated temperatures eliminate concerns around shortages of dry ice and concerns about how it reduces the amount of available cargo space on aircraft.
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This preference for refrigerated vaccines could push pharmaceutical companies with deep frozen vaccines to determine how to maintain efficacy of the vaccine at a refrigerated temperature. If this happens, we will gain knowledge that moves pharmaceuticals’ current storage and distribution temperature from minus 80 degrees Celsius to easier-to-distribute ranges of minus 50 or minus 20 degrees Celsius, or even refrigerated temperatures.
Increase in Preighters and Move to Smaller Aircraft to Transport Pharmaceutical Payloads
It is impossible to talk about COVID-19 and now vaccine distribution without a look at the air cargo industry. Over the past 20 years, airline passenger traffic grew. The available cargo space on passenger planes plus dedicated cargo aircraft offered ample space to transport pharmaceutical payloads across the world. That all changed in 2020. As the pandemic took off, passenger flights plummeted creating scarcity in air cargo space and less room to use aircraft to transport pharmaceuticals.
Pioneering Portuguese charter Hi Fly led the trend to convert passenger planes to freighters, or preighters, by removing passenger seats and using the space for cargo. Other airlines quickly followed suit, further increasing capacity, yet not enough to meet demand.
Boeing projects the global freighter fleet will grow 60 percent over the next two decades, resulting in 3,260 operational aircraft by 2039.1 But this fleet growth takes time and will not immediately replace lost capacity in passenger aircraft. Preighters will continue to fill an important role in 2021 and beyond, and we suspect airlines will convert newer 747 aircraft to fill an immediate need for capacity.
Similarly, experts predicted pre-pandemic that airlines would ground and retire large, widebody aircraft and move toward smaller and more efficient aircraft. With fewer passengers flying now, we see airlines accelerating their timelines to park these planes - some permanently.
Airbus previously announced it would stop deliveries of its A380 aircraft in 2021, and we already see airlines retiring these jets in favor of more modern, smaller aircraft. We expect to see more interest in leaner aircraft, like the Airbus A220 designed by Bombardier Aerospace. This move to smaller jets will further impact dwindling global air freight capacity throughout 2021.
Continued Build Up in Sea Freight
While many pharmaceutical products move by air, sea freight remains an important shipping method. Put into perspective, six million containers routinely turn and carry freight - an estimated 17 million twenty-foot equivalent units (TEUs).
Delays in shipping result in a buildup of sea containers, which leads to availability issues and rate increases. At the onset of COVID-19, China stopped producing goods for global export and moving sea containers out of its ports. When China returned to 98 percent of its output in April 2020, other countries around the world went on lockdown. As sea containers piled up in ports and shipping lines were cut from sailing schedules, sea freight prices spiked by up to 50 percent. Regardless, uncertainty in sea and air freight availability prompted pharmaceutical companies to ship everything they could by any mode of transport available.
We again saw a buildup of sea containers following the 2020 holiday retail demands. China’s availability issues and reduced sailings will continue to cause this until at least March 2021. Lockdowns that spread beyond the United Kingdom could further exacerbate the buildup and push availability issues through the first half of 2021. This will cause pharmaceutical companies to use air freight and pay a premium for scarce space.
Shifting Modes of Transportation
Like flu vaccines, it appears COVID-19 vaccines will require boosters. This creates a recurring step up in the volume of vaccines shipped alongside seasonal flu vaccines and other pharmaceutical payloads every year. Since temperature specifications for these vaccines only allow for air transportation, we will see COVID-19 pharmaceutical payloads, including therapeutics, take up dwindling air cargo space throughout this year. Companies will continue to pay a premium of up to $23 a kilo for this space, with potential cost reduction as the year progresses. This means pharmaceutical payloads with temperature requirements of 2-8 degrees Celsius or 15-25 degrees Celsius must ship by sea. This remains challenging until capacity opens up mid-2021.
Overall, the pharmaceutical, cold chain and air cargo industries will spend 2021 learning how to operate in a new normal. It will take flexible planning, as well as adjusting capacities and operations around the spike in demand and gradually improving capacity picture. If all goes well, next year might bring improvements and efficiencies.