How to navigate your healthcare supply chain through an unpredictable flu season

“The flu? Did you mean Covid-19?”

This might be the first reaction coming to mind when reading the title of this blog. Many Western countries are making progress to manage the covid-19 pandemic and the Delta variant with double-digit vaccination rates. The situation for many Eastern hemisphere countries is different. The Delta variant pushes them into new containments.

The COVID-19 pandemic had many effects on many fronts, one effect was recently brought up during a client interaction and was particularly interesting and not widely covered in the press. We need to get some basic understanding on Influenza before we dive deeper into recent observations and the supply chain effects.

Influenza – Typical seasonal disease

The flu or influenza season is for countries with a mild climate a typical seasonal disease during colder winter months. In West-Europe the influenza season typically starts in December and reaches its peak beginning mid-February and ends by the month of April. The amount of cases and the duration of the season varies from season to season.

Influenza season in different regions

The above picture highlights the three distinct regions. The northern hemisphere with seasonal influenza from November to April, the southern regions with season from April to November, and the tropic or subtropic countries where infections happen throughout the year.

Seasonal risk areas for influenza: November–April (blue), April–November (red), and year-round (yellow)

Influenza season 20-21: unprecedented times

Let’s zoom in on the interactions between the COVID-19 pandemic and the recent Influenza seasons. We will discuss two Influenza seasons from the perspective of West Europe. We make it quantitative using the data from , a joint initiative by the ECDC (European center for disease control) and the WHO.

The below graph highlights the European seasonal Influenza outbreak from 2016 to 2020 across seasons. The graph clearly highlights that the moment of peak influenza cases varies year over year. With 2016 demonstrating an early outbreak compared to the following years.

When the pandemic outbreak reached West-Europe the Influenza season of 19-20 had already reached its peak. The Influenza season started according to normal seasonal behaviors. As we all know, the pandemic impacted healthcare consultation behavior, healthcare provision, and testing practices and capacities across Europe. Therefore the collection of data at the end of the season 19-20 is incomplete. We see that the data suggests that the influenza season 19-20 stopped 4 to 6 weeks earlier than previous seasons. This might have been the case due to containments or just a data collection issue.

When we create a new graph covering reference season 16-17, 19-20 & 20-21 we get the following:

Yes, the chart is correct. There is no formatting or scaling error.

Influenza season 20-21 had a 99% decrease of influenza cases compared to normal Influenza seasons. The Influenza outbreak 20-21 was inexistent.

Of course very logical due to the unseen containment measures. Wearing mouth masks, keeping social distance, working from home, school from home, and closed bars & restaurants.

Very logical but quite striking when you see it in a quantitative way. Now let’s consider what the effect of the pandemic outbreak and influenza season 20-21 has been on OTC medicine supply chains.

The impact of the pandemic on over-the-counter (OTC) medicines supply chains

During March and April 2020, consumers rushed to their local pharmacies and drug stores to buy painkillers. You might remember the stock-outs for paracetamol medicines. Or the confusing advice across European countries about the effects of ibuprofen on a COVID-19 infection. The March 2020 rush for painkillers was – ironically – nothing different than the widely spread rush to toilet paper reserves in the early days of the Covid pandemic. Behavior called panic buying anticipating for future (imaginary) scarcity.

People familiar with the dynamics of end-to-end supply chains of course know the bullwhip effect. Any significant level shift in end-consumer demand creates increasing swings in inventory in response as one moves further up the supply chain.

Illustration bullwhip effect

OTC buying behavior in March-April 2020 was the perfect storm to start a bullwhip effect in the end-to-end OTC medicine supply chains. Upstream echelons where we expect the largest swings in this supply chain deal e.g. with the production of active ingredients or specific pharma packaging materials like blisters and packaging of raw materials. Many of these companies have seen sudden increases in demand in the few months following the pandemic outbreak.

The second half of 2020 demonstrated a very different behavior. Allow me to exclude COVID-19 for a moment. People weren’t getting sick anymore. Local pharmacies and drug stores have seen very low demand for OTC products. As supported by the 20-21 Influenza season data, the general public had very few infections and as such keeping OTC sales low.

The below indicator quantifies the volatilities in the production of pharmaceutical products on top of the long-term growth in the pharma markets due to globally wider access to healthcare.

Graph of manufacture of basic pharmaceutical products and pharmaceutical preparations

What’s up next? Uncertain Influenza season 21-22

The pharmaceutical industry now faces additional uncertainty with regard to the upcoming flu season.

Historically, scientists used the evolution of the flu pandemic in the southern hemisphere to detect which virus variants are circulating and determine their contagiousness. However, due to local COVID containment measures, there is not much flu circulating in the southern hemisphere. This results in unknown viruses circulating (used to create flu vaccine), with unknown contagiousness (will there be many people catching the flu?).

This leaves us guessing how the season will progress, but it will be one of the following scenarios:

  1. Little to no flu season: people continue practicing COVID containment measures (government-imposed or not). The measures will limit the spread of the flu and result in a very weak flu season.
  2. Regular flu season: the variants occurring are not strongly contagious and/or the right variants are in the vaccine mix.
  3. Large flu pandemic: not having been in contact with flu viruses might have reduced the overall immunity against the virus. This might especially be the case if highly contagious variants are circulating. Additionally, the vaccine could protect against the wrong variants.

Define Business Scenarios and Monitor Early Warning Signals

Knowing up front which Influenza scenario will occur for season 21-22 is impossible. Epidemiologists hold different perspectives and have little to no earlier observations to learn from.

We recommend quantifying the above scenarios on your business segment sales. What is your upside, most likely, and downside demand scenario, given the above Influenza scenarios? Do you have the numbers quantified and the possible business decisions lined up?

When significant bullwhip effects are racing through end-to-end supply chains, reacting to upswing effects from the next echelon is not the way to go. We still see too many customers being focused solely on the status of their order book and intel from talking to customers.

Businesses need to ensure a close eye is kept on the end market or consumer demand. It starts with understanding the different downstream echelons and identifying downstream signals that can be monitored or correlated to own sales. Macro-economic or aggregated industry-specific indicators can have a leading effect on your sales.

In addition to downstream industry-specific indicators, we recommend monitoring how the flu is evolving week-by-week and what historically has been the impact on healthcare. Follow up on the number of people getting infected and which variants are occurring.

Doing this right will lead to earlier insights on the scenario occurring, assessing what the impact will be for you, and making the right decisions to steer the business.

  • Will you build up inventories and to what level?
  • Will you expand, maintain or reduce capacities?
  • What contractual commitments will you take with key suppliers?

Let’s get in touch to discuss this or other recent effects on end-to-end supply chains further!

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