UPS (UPS) will have doubled the footprint of its healthcare facilities by 2023, due to unprecedented demand for mRNA vaccines, and the company is betting long term that the demand for chain storage of the cold in medicine will only increase in the years to come.
The logistics giant began building millions of square feet of space through its partnership with Pfizer (PFE)/BioNTech (BNTX), according to Wes Wheeler, president of UPS Healthcare and Life Sciences, but that only accelerated a strategy that the company was pursuing before the pandemic.
“Healthcare at UPS was part of its matrix organization. It wasn’t a business unit like it is today. It wasn’t given the kind of priorities we’ve been given since I started. ‘took the role,” Wheeler told Yahoo Finance in a recent interview.
Aside from the pandemic, the healthcare logistics market has grown in recent years as more targeted treatments, known as biologics, take hold.
Cold chain storage, in particular, has become increasingly important as a result, with some projections the market is estimated to exceed $225 billion by 2026. UPS is among the major players, and its market share is only growing as it targets new global hubs.
The company was already on track to expand by about 1 million square feet per year, but over the past two years UPS has added about 4 million square feet, Wheeler said.
This will put the business at around 15 million square feet by the end of 2023, up from around 7.5 million square feet when Wheeler started in 2020.
And with companies like Pfizer and Moderna (MRNA) focusing on mRNA as the backbone technology for future vaccines, which requires transportation at minus 80 or minus 70 degrees Celsius, there is potential to capture a new market.
“I think it’s here to stay, and I think we plan for that,” Wheeler said of mRNA, at the company’s June Innovation Summit.
“Which means we now need to secure these cold chain supply routes all over the world,” he added.
A timely move
The company has appointed Wheeler to lead a more structured healthcare unit end of 2019 – just before the start of the pandemic.
The company had seen its healthcare segment lead the quarter-over-quarter growth, due to growth in the healthcare sector increased use of time and temperature sensitive treatmentsamong other critical patient needs, and had just launched a more high-tech solution in October 2019.
Shortly after arriving on board, Wheeler was tasked with the sudden increase in the need to build cold chain facilities and routes in partnership with Pfizer, to prepare to deliver hundreds of millions of doses of a vaccine. COVID-19 in Kalamazoo, Michigan.
Although this was far from where UPS had identified a need for new space and routes, the company invested in Michigan and Louisville, Ken., to build freezer farms, warehouses and routes to ensure distribution in right time.
“Because of the pandemic, we shifted gears from what would have been a more long-term, very specific strategy of building our capacity. So we built a lot of capacity… We built roads of sourcing from places that we wouldn’t normally prioritize. Like, Michigan wouldn’t have been our first choice. But we moved, we pivoted, and we started building our capabilities,” said Wheeler at Yahoo Finance.
The same is true for Louisville, where the company created a dry ice plant to help transport new vaccines requiring ultra-cold, and built storage for PPE and test kits.
After becoming a private partner in Operation Warp Speed (OWS), the operation launched by the Trump administration to ensure rapid distribution of COVID-19 vaccines once they become available, UPS has continued to play a pivotal role in vaccine deliveries – with weekly calls still ongoing between all partners, including Pfizer and Moderna.
They started under OWS when General Gustave Perna, who co-led the effort“immediately turned to UPS for help. He realized the US military was not capable of doing what we did,” Wheeler said.
All partners coordinated regularly to make sure everything was running smoothly.
“These kinds of meetings are still happening with the government every week,” Wheeler said.
He wishes that a similar level of coordination could have been achieved globally, particularly in Africa.
“The African Union, Ministries of Health, UNICEF, Gav i… all those people who got involved made the stew a little too complicated. That’s why Africa has been slow to get vaccinated,” Wheeler said.
Equity and Global Networks
To that end, a key lesson from the pandemic has been the need for fairer and faster global distribution of medicines. Nowhere is this more clearly visible than in sub-Saharan Africa, where a majority of countries are still trying to administer the first doses of COVID-19 vaccines.
The reasons behind this are many, but partly a lack of national infrastructure, as well as overreliance on a limited number of global playersall lead to the current situation, Wheeler noted.
At the macro level, many starting ingredients for pharmaceuticals are made in China, but the recent lockdown in Shanghai and, in general, disruptions throughout the pandemic, have led to discussion about nearshoring, Wheeler explained.
“Which means, ideally, putting more manufacturing sites in the United States. It’s not economically feasible,” he said.
That’s why UPS sees an opportunity in India.
“We believe that India will be the next very large exporter of sterile drugs and biologic drugs to the United States and Europe,” Wheeler said.
South Korea is another target, as it pushes more into the manufacture of organic products. Currently, sterile manufacturing is largely done in Europe. But UPS is focused on expanding into South Korea which will also provide similar capacity and transit routes.
In Africa, some countries have been the focus of vaccine makers in recent months as commitments to expand manufacturing have been announced. South Africa, in particular, serves as the mRNA hub for the continent.
But going further upstream in the process beyond the final fill/finish process will require more emphasis on technology transfer.
In the past, the process could take up to two years, Wheeler said. But the pandemic has helped reduce that time.
Wheeler noted that South Africa is already a big pharmaceutical market and UPS has done a lot of business in the past. But some key hurdles must be overcome to truly succeed.
Last mile
Getting shipments transferred safely, securely, and with quality intact was only part of the problem during the pandemic.
The last mile in some parts of the world remains an obstacle.
“The biggest challenge we’ve had is really understanding how long a passive package can last at room temperature, when you’re trying to deliver something from a location in Michigan to a remote village in Africa. That transit time is such an important element,” Wheeler said.
Complexities include very technical issues, such as different regulations and customer requirements in each port.
“If you ship across country borders without proper customs, brokerage and claims, it can be stuck in the air…or even on the ground at the airport for days. In that case, everything expires,” a Wheeler said.
And there are protocols and notifications to various regulatory agencies for disposing of expired doses.
That’s why partners and suppliers like Zipline, who has flown drone deliveries mRNA vaccines, matter.
“It’s little technicalities that we worry about all day,” Wheeler said.
Still, the experience of the pandemic has given the company confidence in its growth in cold chain healthcare, especially in new markets.
“I think as long as we can get airlift capability out of some of these remote countries, and as long as we can continue to build our (manufacturing) facilities around the world where we need them, I think that there will be a bright future for biologics in the future,” Wheeler said.
Follow Anjalee on Twitter @AnjKhem
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