UPS, AmerisourceBergen plan drone drug and device delivery, replacing trucks

United Parcel Service, the Atlanta-based shipping giant, and AmerisourceBergen, the Conshohocken-based drug distributor, are working together to use UPS’ new Flight Forward “drone airline” to ship drugs, supplies and records to hospitals through unmanned aircraft across the U.S.

UPS said Monday that the Federal Aviation Administration has approved the drone service to fly beyond its operators’ direct line of vision. The company is speeding plans to start deliveries to hospitals and other service providers.

UPS also said Thursday it is consolidating its fast-growing medical-services units and brands into a new business group, UPS Premier, which will employ 5,000 of UPS’ 362,000 U.S. staff. The company also employs around 80,000 abroad.

UPS and Amerisource want to use “unmanned aviation” to replace ground courier trucks “to transport the majority of medical products” moving from Amerisource’s distribution centers like the one in West Deptford Township, N.J., across the Delaware River from South Philadelphia, to hospitals, doctors’ offices, pharmacies, nursing homes and other locations, the companies said in a statement.

Along with reducing reliance on UPS’ unionized delivery drivers, the companies hope UPS drones will avoid road traffic. Scott Price, UPS’ top strategist, said drone delivery will also be faster. AmerisourceBergen says it serves 95 percent of U.S. hospitals through the centers in Thoroughfare and 26 other cities.

Drones give UPS 'tremendous flexibilty" that will “improve efficiency,” cutting delivery costs, said Bob Mauch, a group president at AmerisouceBergen, in a statement.

UPS said it has started working with drone-maker Matternet to fly drugs to the Univesrity of Utah Health system hospital. The company already flies samples around the WakeMed Hospital campus in North Carolina.

It will also work with CVS Health, which runs one of the largest U.S. pharmacy and drug distribution networks, to develop drone delivery plans, including service to patients’ homes.

UPS moves drugs and medical devices through a specialized warehouse network, including facilities near Swedesboro and Pedricktown totalling half a million square feet, a short drive south of AmerisourceBergen’s West Deptford center.

At Swedesboro, manufacturers such as Medtronic stock many thousands of items for rapid dispatch. “Swedesboro is within 200 miles of 400 hospitals,” saind Dan Gagnon, UPS vice president for healthcare logistics and strategy.

Trucks are dispatched at all hours. A small force of nonunion workers, earning $13 to $15 an hour, spend their days maintaining inventory in towering storage stacks and re-checking surgical stent kits, replacement knees and other complex packages for delivery as needed in Philadelphia operating rooms, where Medtronic and other manufacturers station representatives who order additional parts from UPS as needed.

UPS officials said they are helping manufacturers force doctors and hospitals to accept standardized products and procedure kids, using methods that have driven down costs in other industries. “Problems we solved 20 years ago in high-tech, we are solving now in logistics,” said David O’Leary, UPS vice president for operations, on a visit to the Swedesboro center.

Healthcare costs have been rising faster than median incomes for more than 20 years. “It’s unsustainable,” said Gagnon. “And chronic diseases have been growing -- cancer, respiratory, cardiac, diabetes. Innovation in healthcare has extended these patients’ lives. If you get these diseases, you may live another 40 years."

But costs have exploded, due to a “fragmented” supply chain drawing doctors’ favored products from many sources, because “clinicians, not logisticians, have been running healthcare,” Gagnon said. That’s ripe to change: "Consumers now expect healthcare to be as convenient as other products,” and UPS says its flying delivery machines, backed by specialized warehouses, will make that happen.

The company is also planning new healthcare support locations. A UPS source and a construction source say the company has been in discussions over a Northeast Philadelphia property formerly used by Budd Co. and considered by drugmaker Teva for a warehouse compound close to many available workers (labor supply has become a more important issue for UPS and other warehouse operators). But UPS and the site’s owners say no decision has been reached.

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