An inside look at Valeant Pharmaceuticals' emergency shipment program

On the morning of Jan. 11, 2010, the California call center at specialty pharmaceutical manufacturer Valeant Pharmaceuticals International received an urgent request from the University of Wisconsin Medical Center in Madison.

Two infants had been hospitalized with severe lower respiratory tract infections caused by a virus known as the Respiratory Syncytial Virus, or RSV. Both were being treated with a drug called Virazole, which is the only treatment for infants and young children with that particular condition. However, the infants needed to complete their treatments by midnight Central time, and the hospital didn't have any more dosages available.

Upon receiving the alert—which came in shortly before noon Pacific time—Valeant contacted Kenco Logistic Services, its long-time logistics service provider. Kenco, which stores and distributes Valeant's products from its Chattanooga, Tenn., distribution center, then called one of its couriers to determine the chances of delivering the drug by midnight.

When told the delivery could be made no earlier than 2 a.m. the next day, James Levi, Kenco's warehouse supervisor, took control of the situation. Levi researched available flights out of Chattanooga and found a direct flight to Chicago arriving at 6: 50 p.m. local time. Levi booked the shipment and coordinated the picking and packing process at the DC. Once the plane landed in Chicago, a courier rushed the drug to the hospital in Madison, delivering it at 10: 30 p.m. in plenty of time for the infants' next treatment.

As harrowing as the experience was, this this was hardly an unprecedented situation for Valeant. Two weeks earlier, Valeant's customer service manager had received a call from the Hackensack (N.J.) Medical Center requesting an emergency shipment of Virazole for three infants already hospitalized with RSV and a fourth patient on the way. Kenco got the dispatch from Valeant just as it was closing for the day at 5 p.m. Eastern time. Kenco contacted a UPS driver who had just left the Chattanooga facility and requested that he return to accept the emergency shipment. In the meantime, Kenco's staff completed all the necessary paperwork. The shipment was delivered to the hospital at 8 a.m. the next day, in time for the patients' next treatment.

Urgent business
For Valeant and Kenco—which has been Valeant's exclusive domestic and international logistics partner since 2004—the dispatches were two more success stories in a sub-sector of supply chain management where failure is not an option. Depending on the patient's condition and the circumstances surrounding the treatment, getting a drug to its intended destination on time can spell the difference between life and death.

In the cases of the infants in Wisconsin and New Jersey, it is impossible to determine if their lives would have been at risk had the medication not arrived in time, according to Asha Soto, Valeant's vice president, supply chain operations. But Soto says she is aware of one case, an emergency shipment of Virazole bound for Sao Paulo, Brazil, where its delivery to the local hospital within 24 hours of the order saved the life of a one-year-old who had contracted RSV.

Although the details of each case vary, Valeant and Kenco follow essentially the same procedure whenever Valeant receives a call from a hospital requesting an emergency shipment. (In urgent cases, hospitals contact Valeant directly instead of going through Valeant's network of wholesalers.) As soon as Valeant processes the order, it contacts Kenco. The third party then makes transportation arrangements with its own network of delivery companies, which range from giants like FedEx Corp. and UPS to a highly regarded Chattanooga-based delivery company called Network Courier. Kenco handles all logistics issues that culminate in final delivery—almost always to a hospital—and the service operates on a 24/7 basis. In most cases, domestic shipments are delivered within eight hours of an order's being placed, regardless of where in the United States they're bound.

Although Valeant and Kenco have worked together for six years now, the current arrangement is a relatively new one. Until 2006, Valeant managed a nationwide emergency drop-shipping program from a facility located at its then-corporate headquarters in Costa Mesa, Calif.

When it moved to a new headquarters in nearby Aliso Viejo in 2006, however, Valeant had to make other arrangements. Part of the reason was its inability to obtain the necessary Food and Drug Administration permits to store products on site at the Aliso Viejo facility. But for Valeant, it was pretty much a moot point. The company had already determined the function would be better handled by a focused third-party logistics service provider (3PL). Not long afterward, Valeant asked its long-time partner Kenco to begin storing the drugmaker's products at Kenco's Chattanooga distribution center.

Among the advantages a major 3PL like Kenco brings to Valeant is the depth and breadth of its coverage, a key factor when lives may hang in the balance, says Soto. "They have more carrier options, and Kenco can react faster to manage the special requirements for these shipments," she adds.

The transition was seamless, with no service hiccups, according to Soto. "Kenco thoroughly planned and prepared for the switchover, and from our perspective, this challenging 24/7 responsibility has been handled very smoothly," she says.

Soto says service quality improved as a result of the transition. Valeant's costs rose as well, but the increases were not material, she adds.

Shared values
Valeant and Kenco wear their achievements with pride. The staffs at both companies track and document their accomplishments on a map showing "lives saved."

As for what has made the partnership a success, Soto says Kenco's operational abilities are just part of the story. Another part has to do with shared values. "Culturally, we have a great fit with Kenco," she explains. "Their people truly recognize the critical nature of the products we manufacture, and they take seriously the importance of their role in distributing these products. Beyond locations, facilities, and knowledge, it takes dedication to handle these types of shipments. A 3PL must share the same sense of urgency that we have."

Andy Smith, Kenco's president and CEO, says that although Kenco strives to deliver consistent, high-quality logistics service throughout Valeant's entire U.S. supply chain, the urgent distribution of drugs like Virazole is special.

"As human beings, how can we not sharpen our focus even more than usual when we know lives are at stake?" he asks. "I'm extremely proud of the way we handle each of these demanding and often unexpected shipments. This is one of the things about our people that makes me proud to be part of this great team."