The COVID-19 pandemic will have profound and lasting impact on the life sciences sector: biopharma leaders need to review their strategic decisions in many areas from Supply Chain to Clinical Development to Market Access and Commercial, as well as rethink their Leadership and Organizational Model. Resilience, Agility and Transparency will become even more vital going forward, says François Meurgey, MCE Senior Associate.
Never have we been reminded so brutally that we live in a VUCA (volatile, uncertain, complex and ambiguous) world and that our usual contingency-planning and scenario-building does not resist a really serious shock. Barely 12 years after the financial crisis of 2007/2008 -and the ripple effect it had on government budgets well into the 2010’s- the world economy has been hit by an arguably more sudden and more violent shock that has not only already killed hundreds of thousands of people, but will most likely trigger a deep recession of unknown duration, and will also generate enormous amounts of public debt.
Virologists and epidemiologists (and enlightened laymen – see Bill Gates’ 2015 TED Talk) had warned us repeatedly that the next pandemic could have a devastating effect: maybe we got complacent since the previous viral epidemics such as SARS-CoV-1 (2002-2003), H5N1 (“Asian flu”, 2003-2006), H1N1 (“Swine flu”, 2009-2010), MERS-CoV (“Camel flu”, 2012-2015), Ebola (2014-2016, 2020-…) and Zika (2015-2017) however devastating to local populations, had not spread globally and the human and economic impact had been relatively contained.
The life sciences industry has been thrust to the front lines of the fight against COVID-19 by the provision of lifesaving drugs and medical supplies, as well as the rush to find curative treatments and develop a safe and effective vaccine against SARS-CoV-2. Beyond the immediate urgency to cope with the current crisis, COVID-19 will have lasting consequences for the biopharma industry, and should prompt leaders to rethink past assumptions and long-accepted premises in a number of domains.
It is estimated that about 80% of Active Pharmaceutical Ingredients (API), and practically all generics, are sourced globally, with China and India the main countries of origin: China accounts for at least 40 to 50% of all API production in the world, and together with India (itself extremely dependent on Chinese suppliers), they represent 75 to 80% of finished drugs shipped to Europe and the US. Asia also produces more than 50% of all N95 masks and PPE manufactured in the world.
Life sciences companies had made enormous efforts in the past decade to reduce excess capacity, build a cost-effective supplier network, shrink their stocks, and generally rely much more on contract manufacturers, especially for their small molecule production. In light of the disruption caused by the recent pandemic and lockdown (production shutdown of plants in China and elsewhere, significant rise in (air)freight, delays in shipment and customs processing) and pressure from local authorities to ensure robust supply of essential medicines and medical equipment, many companies will have to review the role of contract manufacturing and the architecture of their supplier network. Total landed cost may no longer be the key (or only) driver of supply chain decisions.
We can expect many companies to revisit earlier strategic decisions and create excess capacity, plan for dual sourcing (“second-source” API) and establish strategic inventory for their most sensitive products. The overall goal will certainly be to build more redundancy and resilience in their supply chain, meaning that classical efficiency mantras (lean manufacturing, just-in-time deliveries, maximum outsourcing, lower inventory levels, etc.) may be less fashionable in the short term. Increased risk mitigation will put a premium on more agile operating models.
Advanced data analytics, AI and digital inventory tools (automated warehouses, fully digitized stock management) will be critical capabilities to increase agility and transparency in flexible manufacturing and inventory management. The COVID-19 pandemic is also likely to accelerate the move from traditional, stepwise and time-consuming “batch manufacturing” to continuous manufacturing technologies, a move encouraged by regulators.
Finally, the recent pandemic and lockdown have seen a surge in drone delivery in remote areas, and significant investment by a number of start-ups (such as Flirtey, Matternet, Zipline) as well as major players -several of them with a clear eye on the direct-to-patient delivery of drugs (Walmart, DHL, Amazon with PrimeAir, Alphabet/FedEx/Walgreens with Wing, UPS/CVS Pharmacy with Flight Forward) as well as could drive a further revolution in healthcare product logistics.
The life sciences industry will need to ramp up dramatically its IT capabilities to address some of the needs highlighted above:
1. Create multi-channel digital platforms to support new modes of customer and employee engagement
2. Equip their plants and warehouses for real-time product tracking and inventory monitoring
3. Support their customers (hospitals and individual physicians) in remote monitoring and telemedicine consultations for their patients and clinical trial participants.
As the Financial Times’ innovation editor John Thornhill points out (week-end edition May 30-31st, 2020), smartwatches and other wearable sensors already monitor our “temperature, heart rate, (blood) glucose levels, menstrual cycles, blood pressure, sleeping patterns”, body motions and posture, as well as potentially detecting early warning signals of a pandemic recurrence… Rolls-Royce is generating more than 70 trillion (1012) data points per year from its fleet of installed aircraft engines. How much could we shift outcomes if we applied a similarly data-intensive approach to individual and population health monitoring?
This data revolution could have extraordinary effects on the efficiency of preventative and curative medicine, but the massive data protection and privacy challenges it implies can only be resolved (in democratic countries) through intensive cooperation between tech/healthcare industry, regulatory bodies and governments, and civil society to establish international standards and appropriate safeguards.
Operational agility had already been a buzzword in organizations years before the COVID-19 crisis, but the pandemic has further heightened the need for fast response to outside shocks and extreme flexibility in operational model and resource allocation.Strategic planning will also be reviewed dramatically, with extra emphasis on risk evaluation and mitigation, and in an industry driven by innovation, launch readiness will become even more critical, in particular generating options and risk-benefit analysis in areas such as timing, rollout plan and media mix. Customer-centric approaches and organizations will be essential in delivering true value-added services and content to audiences that in many cases are already under environmental and financial stress.
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