The pharma industry, just like every other, will be taking a good look at itself and will want to be better prepared for future global crises.
One thing is sure (it’s not unique to the pharmaceutical industry but it is uniquely important to it) Pharma’s vulnerabilities and strengths have been laid bare by Covid-19.
Fierce competition, demanding payers and relentless shareholder pressure have led the industry to spend decades chasing marginal improvements, something it’s become very good at doing and from which many have benefited but this has not been a cost-free exercise. Industry leaders have adopted attitudes and behaviours that understandably led them to embed their companies with a set of priorities that enabled corporate performance to rise to these challenges. This was not always inspiring, agile or even creative, but it did achieve what was deemed to be necessary.
However, the result of this constant search for shareholder value has been the creation of highly vulnerable global supply networks, just-in-time delivery systems, long unprotected supply lines and relatively small numbers of factories in distant locations producing APIs that are shared with multiple and highly dependent producers.
Was all of this necessary or sensible? I believe not.
The pharmaceutical industry is not like bulk chemicals or the automotive industry, it does not rely on slim, single digit margins. “Cost of goods” are usually well below 10%. As Sir Paul Tucker, a former deputy governor of the Bank of England, told the BBC on 25th April, “a sector that runs close to the bone has no slack”.
After the financial crisis of 2008, the banking sector had to learn resilience and now the pharmaceutical sector must do the same. Sir Paul was right when he went on to explain that “economies will want to reduce their dependence on importing essential medicines”. I am not calling for us to abandon global trade, but it is time to reduce vulnerability by improving local stock-holding, shortening supply lines and building in more fail-safes. Bring the medicines closer to the patients!
Now is the opportunity for leaders to create essential change
I’m often asked: “How are the best leaders behaving?” I observe that quicker decision-making, simplicity of purpose, goal-setting, honest review of performance and clear communication are the order of the day. Agile, creative and inspirational leadership is needed in times of crisis and we already see it in the drive to create new vaccines, treatments and diagnostics, with new collaborations between companies, universities, not-for-profits and governments.
More than ever, the pharmaceutical industry and the health systems it serves are going to be both under scrutiny and more highly valued. Now is the time of opportunity and change. Industry leaders must rise to the occasion.
What do you think? Do get in touch if you’d like to discuss any of this.
The RSA Group