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What pharma can learn from general manufacturing in a recession


While pharma is not synchronized with the boom and bust of the general economy, lessons from the business cycle facing manufacturers can enable the pharmaceutical industry to tackle the problems it faces, writes Chris Hart of McKinney Rogers.

Having recently conducted research on the views of senior executives in the US and UK on whether major manufacturers are ready for the recovery, it struck me how their experiences and dilemmas mirrored the successes and failures we have seen in the pharmaceutical world in recent years, and how senior leaders in the pharma world could benefit greatly from the lessons being learned the hard way in industry.

For instance, the vast majority of senior manufacturers are bullish about their company's ability to recover from the recession, and over 70% are planning to develop new products in the coming months. Yet this is coupled with little change in the way boards view skills, where the desire to be innovative trails the traditional finance, management, sales, strategic and marketing skills they feel are required to beat the recession. Too often the same problems occur in pharma, where the innovative spirit is remanded to R&D.

It is a shame to say that I have worked with many companies who are more than ready to talk about their "innovative, groundbreaking" new product, service or delivery mechanism, yet behind closed doors revert to a "that's not how we do things here" attitude. Innovation must be at the heart of organisational practice as well as products in the coming years. The manufacturers that coped best with the drying-up of demand during the recession were mainly those able to adapt their product, price or delivery to hold onto business. Pharma has the advantage of a forewarning of similar problems, and needs to put the same flexibility into its planning and approaches now to weather their forthcoming problems best.

The global perspective
Similarly, the recession will change the make-up of drug demand, with 'pharmemerging markets' such as Brazil, China, Russia, Turkey, India, South Korea and Mexico sustaining or boosting 'necessity' drug demand, while demand for other drugs may be comparatively lacklustre.

In these markets appropriate delivery and distribution can be even more of a challenge than price. For some field or mass applications, drugs delivery systems designed for needle-free, micro needle injection or MEMS syringes could easily win over equally effective but harder to administer equivalents.

It remains to be seen just how much of a setback the recession will prove to manufacturers' attempts to improve and replace products. Our research has found that British manufacturers typically made fewer cuts into R&D and other core areas than their US counterparts, but it remains to be seen how efficient both manufacturers and pharma will become at bringing innovations to market quickly and fully. For instance, how many times have we seen 'the car of the future' snapped at a motor show, only to see a watered down version with basically the last-model technology underneath arrive in showrooms a year later? Pharma may not have to worry about aesthetics, but it is true to say that the year the car maker took to unpick its bold design also allowed everybody else to catch up and react. It is also adds a year before income is generated from a seemingly near-complete product.

Keeping this process as short, fast-paced and streamlined as possible is the only sure-fire way to maximise impact. It also enables pharma to reap the maximum benefit from the patent life cycle, timing the coverage to 20 years of selling the drug, not 19 plus one of further trials. We have worked with large pharma companies in the past on streamlining this process and found there is huge room for improvement.

The buyout buffet can cause indigestion
A great many manufacturing companies are rubbing their hands with glee over the potential to acquire competitors in the coming months — over half in the UK and more than 80% in the US are actively considering doing so right now. Similarly, Big Pharma has an opportunity to go shopping for biotech companies at the moment at reduced prices. As with manufacturers, they may be rubbing their hands with glee at the prospect of snapping up bargains, but we caution manufacturing and pharma companies alike against rash purchases.

Manufacturing firms need to be clear what the buyout will achieve — ownership of a product, of the people or of the pipeline? If it is either of the latter, achieving the best business result requires great effort to integrate their abilities and enthusiasm into your organisation adequately, or else the gains you expected may dry up. No matter how innovative a biotech company's products seem to be, it cannot be a guarantee that their structure or people would integrate into your own easily.

The coming ten years will provide many challenges and opportunities for pharma companies. Executives looking to navigate this field successfully would do well to watch the actions of their counterparts in manufacturing closely to get an idea of what they will face. As other sectors look to change gear from a 'surviving the recession' plan to one of 'winning the recovery,' it is the seamless switch and maintenance of momentum that will prove to be the recession's final challenge. Pharma may be running a different race to many, but the rules remain the same.

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