February 2020
There is an ever-increasing rate of change in the macro environment which has a direct or in-direct impact on the life sciences sector. The following article is a top line view of what we believe are key areas of risk for companies within the life-sciences sector in 2020 and beyond.
1. Continued downward price pressure
The global healthcare spend is projected to exceed 10 trillion USD by 2022, which will further increase the downward price pressures and the drive toward more pricing transparency. As the economic instability increases globally the payors ability to pay will be increasingly stretched. Some bad actors in the space have also caused an overall increase in scrutiny of the sector as a whole.
2. Rate of regulatory change
Given the rise in both populism and nationalism and the associated changes in governments, Life Sciences is facing an unprecedented level of uncertainty regarding regulatory changes. All of these changes could significantly impact time to market and the ability to supply products to patients in an un-disrupted fashion. For example, the 2017 US governmental changes, initiated by the Trump administration, led to high uncertainty around drug prices, deregulation, impact on the Affordable Care Act (ACA) and much more, all of which meant that Life Sciences companies must refocus their efforts to mitigate the related impacts.
The continued unpredictability regarding the United Kingdom’s “Brexit” from the European single market is resulting in companies managing huge levels of uncertainty and obliging them to develop contingencies to deal with what could be a very disruptive situation regarding the robustness of supply chains and technical expertise in the short and mid-term.
3. Rate of innovation
The era of “me-too drugs” (otherwise known as “follow on drugs”) has truly passed. There is an increasing imperative to demonstrate significant improvements over current treatments.
Companies are having to shift their focus from purely product innovation to increasingly more holistic solutions and customer experience-based innovation, leading to more value adding offerings.
With the shifting demographics, the treatment of non-communicable diseases (NCDs) has become increasingly important and will warrant increasing investment. There is a rise in the prevalence of superbugs, a major concern for the overall healthcare system. Additionally, vaccine hesitancy is growing, with the potential increase in contagious diseases, now considered by the UN as one of the top 10 global health threats.
4. Payor / patient relationship squeeze
As new solutions approach the market access hurdles (incl. regulatory, pricing and reimbursement), life sciences companies are having to develop a much deeper understanding of payers and patient’s needs. The power of the patient has increased in the era of both instant and transparent information. Patients are increasingly influencing the prescribing decisions, as the patient bears the burden of a much larger out-of-pocket cost than before. Governmental and insurance payors are squeezed between the need to offer the best solutions and complying with ever decreasing budgets.
5. Talent attraction and retention
Attracting and retaining the right talent has become increasingly difficult and critical to success. It is one of the top concerns that CEOs in Life Sciences have today. Given the generational shifts, the approach used to date will also need to be refocused on the needs of the newer generations joining the ranks. The newer generations exhibit different aspirations in life and have different expectations of their employers, not least in terms of social consciousness and trust. Given the current trust deficit that exists, CEOs will need to rethink their talent attraction and retention strategies to remain competitive.
6. Data stewardship
Like all other sectors there is an increased cyber threat. It can be said that there are two categories of companies with respect to cyber-attacks “those who have been attacked and know it” and “those who have been attacked and don’t know it”. Whilst cyber threat is a risk across all sectors, it is of heightened importance in the Life Sciences sector given the sensitivities pertaining to the privacy of patient’s data. The protection of intellectual property, particularly, needs to develop both a strong offense and defense to patent trolls.
There is an increasing focus amongst regulators regarding data integrity. Strong data stewardship and governance as a whole has become imperative which calls for a clear and robust data management strategy / data stewardship.
7. Partnerships
Compounding all the above challenges is the fact that companies increasingly need to partner to compete, albeit it in terms of open innovation or the outsourcing of operations to reduce fixed costs. Managing the risk associated with partnering is critically important to ensure that the actions of the partner do not impact the on-time delivery, quality and increasingly the organisation’s reputation. Early and thorough diligence as well as continuous governance is a must to safeguard the organisation’s reputation going forward.
Conclusion
Given the rapidly changing global and Life Sciences context, it is imperative the sector is not only aware of the impact that macro-changes can have but is also sufficiently agile to navigate a changing landscape and possess the foresight to create leverage and new value.
Fully integrated, enterprise-wide risk management can provide the method through which culturally entrenched risk management becomes an enabler and decision-making tool for organisations. Never before have life sciences been more important. The 7.7Bn people on earth are dependent on the expected advancements. The Life Sciences sector needs to be prepared to take advantage of these opportunities whilst managing its threats to continue to meet the needs of our global community.