Pharmaceutical industry challenges - part 1
Over the past decade, pharmaceutical and life sciences companies have entered a difficult period where shareholders, the market and regulators have all created significant pressures for change within the industry. From thinning pipelines and skyrocketing operating costs to calls for lower prices and a greater regulatory burden, the industry is confronting unprecedented challenges that are expected to radically transform the business. Biotechnology companies also face increasingly tougher choices about product development strategy, funding sources, collaboration arrangements and the competition for talent. To overcome these challenges, the industry will require a bold vision and leaders who have the willingness to embrace a fundamentally new approach to their business. By 2020 the pharmaceutical market is anticipated to more than double to US$1.3 trillion, with the E7 countries — Brazil, China, India, Indonesia, Mexico, Russia and Turkey — accounting around for one fifth of global pharmaceutical sales. Pharmaceutical industry faces lot of challenges in order to attain further development and growth. In this blog I would like to emphasize on some of the challenges faced by the industry at present and in the future.
Pharmaceutical industry challenges
• Attracting and retaining a skilled workforce
The pharma business is a knowledge and experience business and people have always been one of the most important resources for any pharma or biotech company.We can talk about brand but the people in a company, in particular in their behaviour, represent a living brand. We can focus on intellectual property but that is the creation of the people, and people joining or leaving a company will add to or reduce the sustainable intellectual property. We can talk about markets, but to access any market you need people with a good understanding of that market and the culture and values of customers and suppliers. Increasingly we talk about regulation and compliance as thought they are some abstract function of a company. In practice we are describing the collective values and integrity of the individual members of staff, and the way they are motivated to behave in particular situations. So people are key but how any organisation ensure that it can attract, recruit, develop, and motivate those individuals with the competencies that will set that business apart from those of competitors. The first challenge is that there are increasing signs that the labour market is moving in favour of the employee rather than the employer. There is growing demand for skilled people but traditional labour markets are providing fewer new people with the right qualifications and experience; and companies are still trying to recruit people with ever-more-specialised knowledge. It is possible to recruit from new markets, but this is a new competence for many companies.
• Controlling operating costs
It is accepted knowledge that the pressure to control and reduce costs is one of the next major challenges to be faced by the pharmaceutical industry. But how is this done and what is the best approach? Understanding and controlling operating costs is a critical first step to developing or sustaining competitive advantage. Increasing generic competition, imminent patent expiries (revenue can decrease by up to 60% at patent expiry), shorter pipelines and the emergence of China as a low cost manufacturing base all contribute to constantly eroding margins. To maintain or increase margins in the future, leading pharmaceutical companies have to start taking a proactive approach immediately to understanding costs. As the pharmaceutical industry embraces these new challenges, the companies that emerge at the forefront will be those who address the issues now and are able to account for all the costs throughout their organisation. To achieve this advantage, companies have to start recognising and targeting costs today. Research & Development (R&D) costs are spiralling as companies race to discover the next blockbuster, but where is the money to fund this research going to come from? These questions are important as the cost of operations are concerned. • How are costs distributed throughout your company?
• Where should you focus your cost reduction efforts for greatest benefit?
• How are you going to use to tackle these costs?
• Have you identified all the hidden costs?
• How do you compare to the best-in-class?
• What is your baseline and what can you achieve?
• Where are you going to start?
Cost is complicated, ranging from back office through manufacturing and quality to sales. To gain real benefits a structured programme of cost identification and improvement has to be in place.