Future proofing in pharma
What’s next for pharmaceutical companies in an increasingly complex industry? Peter Sheppard, Europe life sciences leader, Genpact asks.
As I look back at the last decade, I’m struck by how the pace of change in the pharmaceutical industry has accelerated, but also, looking forward by how the industry’s winners will be defined by an ability to rapidly re-allocate resources to take advantage of new opportunities.
A decade ago the combination of a steep decline in R&D productivity coupled with a wave of patent expiries provided the initial impetus to seek new market opportunities and to challenge cost structure. The ‘coming of age’ of large molecule therapies and the push into emerging markets then drove a significant refocus of resources taking the pace of change up another gear. Today, a fundamental change in market opportunity, driven by the need to impact patient outcomes, is causing pharmaceutical companies to reconsider their core mission and the capabilities required to succeed.
Recently, we have seen health outcomes benefit from new therapeutic options and greater collaboration between payers, providers and pharmaceutical companies. The result is that healthcare practitioners expect to reduce total costs by providing more customised care with the ability to closely measure patient outcomes. Pharmaceutical companies are reconsidering their value proposition in this context, based on a better understanding of patient needs and sharing responsibility for overall patient outcomes.
As companies look to respond to this situation, I believe that the answer lies in the adoption of new business models that are sufficiently flexible and adapted to meet the ‘new normal’.
There are a number of major areas that pharmaceutical companies need to focus on in 2015.
Flexible operating models
Companies that evolve their business architecture in order to innovate and execute with speed and at scale will out-compete the rest. Many organisations have outsourced capabilities in whole or in part for cost advantage, but have not considered how these services need to integrate to enable business agility. In fact, this approach may inhibit competitive advantage. The need to drive operational effectiveness is already top of mind for many company executives who declared in a recent Genpact survey that operational initiatives are a key current priority.
In response to this, pharmaceutical companies are beginning to adopt advanced operating models, drawing on experiences of other industries. Much of the recent growth in advanced operating models, such as integrated business services, has been focused on finance and accounting, human resources, and IT. As these operating models mature across other industries, pharmaceutical companies are now accelerating their adoption to free-up resources and to deliver agility.
In particular, pharmaceutical companies need to rapidly evolve their business architecture and be able to deliver change without compromising on execution. In addition to back-office opportunities, advanced operating models are increasingly relevant to core business processes. Change must be driven across marketing and sales, medical, and supply chain operations in order to compete in an environment where patient outcomes are the priority. This comes with a number of challenges such as breaking down barriers between internal functions. To achieve this will require tighter internal integration and an overhaul of existing processes.
Partnership and control
Effective market access is a crucial area which requires integration of business processes and data across the value chain, while simultaneously driving the need to be flexible in delivering a market-specific effect. Companies need to leverage external partners for capability, cost and flexibility. For instance, the time and investment risk in installing the infrastructure, staffing and local capabilities often cannot meet commercial time-lines. In this way, partners can bring local presence and knowledge while minimising overheads. Building the capability to establish and integrate services across a network of such partnerships is the key to remaining flexible and scalable, especially where they help bring global reach with locally relevant capability.
Partners are increasingly capable of delivering core capabilities on a flexible basis, however, maintaining transparency and control while managing integration are key to delivering the required business outcomes.
In addition, the co-ordination of enterprise-wide data management and process orchestration are required to handle a larger numbers of products, tracking regulatory licencing and supporting a highly complex distribution network.
The path forward
The pharmaceutical sector can gain significantly by continuing to seek knowledge accumulated in other industries where operational transformation has been in practice for many years.
This experience can help define a business strategy that uses agility as a source of competitive advantage and allocates resources to where they can deliver maximum impact on patient outcomes. This is a business critical issue and one that must be at the top of pharmaceutical business leader’s agenda as they look to next year and beyond.