In 2014, the pharmaceutical industry had sales of $790 Billion in non-cold-chain (77.8%) and $225 Billion in Cold-chain or controlled room temperature (22.2%) products. That totals $1.015 Trillion. If we estimate a 5% CAGR (compound annual growth rate) then by 2019, that number will be $1.36 Trillion.
The losses associated with temperature excursions in healthcare come to $35 Billion. That is broken down as follows:
- $15.2B in Lost product cost
- $8.6B in root cause analysis
- $5.65B in clinical trial loss
- $3.65B in replacement costs
- $1B in wasted logistics costs
Within Clinical trials, the total loss of $5.65B is broken down further as follows*:
- $1.3B in Opportunity labor costs
- $2B in Direct labor costs
- $2.34B in Trial product loss
Loss is present across the industry in high numbers, for example:
- 25% of vaccines reach their destination degraded because of incorrect shipping.
- 30% of scrapped pharmaceuticals can be attributed to logistics issues alone
- 20% of temp-sensitive products are damaged during transport due to a broken cold chain.
A pallet of unprotected product on an airport tarmac with an ambient temperature of ~70°F (21°C) can quickly reach temperatures above ~130°F (55°C). At that temperature, you can fry an egg in 20 minutes.
So, what is a billion worth?
$16 Billion, which is the approximate costs incurred by the top ten pharma firms due to temperature excursions, is 20 times the average price to earnings ratio of big pharmaceutical firms.
$320 Billion, which is the total corporate value wasted due to temperature, is larger than the 2015 total market capitalization of Johnson & Johnson ($274 Billion).
Get the infographic here