Global Trends in the Pharmaceutical Industry

Pharmaceutical companies are facing unique challenges as a result of the rapid and unprecedented changes across the health and life sciences industries. Traditional pharma business models are being upended by the changes happening in global healthcare reimbursement and management. The key stakeholders and buyers are changing by expanding beyond the traditional government and commercial payers that have historically reimbursed drug treatments. They now include healthcare providers that have become more discriminating and patients who are better informed, connected, and cost-conscious.

The demise of the traditional “blockbuster” drug strategy has driven a sea-change in the industry as buyers are demanding proof of outcomes for drug products. Patients also have higher expectations for a more efficient and engaging customer experience, impacting how drugs are marketed and reimbursed. Instead of the historical method of differentiating a drug such as molecular design, pharma companies must now different differentiate on proven outcomes and cost effectiveness.

Both the pharma and medical device industries are facing new and unexpected sources of competition such as technology firms, wellness companies and other non-traditional players.

Although these new competitors may not fully appreciate the ins and outs (and risks) of biopharmaceutical R&D, they all have deep knowledge in understanding consumer behavior, short-cycle innovation, and IT, areas in which pharma typically lacks skills, but are significantly shaping healthcare. This combination of rapidly-evolving customer expectations, increased competition, and a focus on outcomes all threaten the profitability and sustainability of the current drug industry business models.

To complicate matters, these changes are also occurring against the backdrop of the stringent regulatory environment in which all pharmaceutical companies operate. Pharma’s business models and operations are impacted by recent laws such as The Drug Supply Chain Security Act (DSCSA) in the US, which is aimed at improving patient safety with new requirements for manufacturers, distributors, and logistics providers to track and trace drugs with the goal of eliminating counterfeit drug products.

But, regulatory agencies are also beginning to encourage more than a rules-based approach to compliance. The FDA’s “Case for Quality” initiative is an example of regulators promoting the importance of a company’s quality culture in achieving improved customer satisfaction and competitive advantage.

These transformations in the pharma business model and regulatory approach have resulted in increased globalization of the industry, driving significant changes in the drug supply chain. Supply chains are stretched out across the globe, making them susceptible to disruption from multiple factors or even a single event, such as a natural disaster or political turmoil.

The double-digit sales growth in emerging markets has significantly expanded global manufacturing, supply chain and distribution requirements. Products and brands must also be adapted to comply with various national regulations at the last steps in the supply chain, all of which complicates supply chain activities and planning.

Increasingly, governments and national regulations are directly or indirectly controlling buyers, pushing down prices and revenues. Payers are installing utilization controls which limit or dictate the circumstances around the specific use of drugs. The “all or nothing” nature of national drug tenders has a severe effect on supply chains, whether a tender is lost or won.

It’s clear that today’s pharmaceutical industry is changing due to rapidly transforming business models and increasing regulations, which will significantly impact their supply chains and operations. The challenge for the pharmaceutical industry is how effectively they will respond using approaches such as adapting their business processes and leveraging advances in technology.