Seven Major Risks Pharmaceutical Companies Will Face Soon

An epidemiologist might tell you that a modern global pandemic like Covid-19 was inevitable (and that, of all the world’s industries, healthcare and pharma should have seen it coming and been long since prepared).

But pandemics, like all natural disasters, are hard to predict. Pharmaceutical boards can (perhaps) be forgiven for not having had contingency plans in place for a global pandemic of the scale and duration of Coronavirus.

But the fact of the matter is that Covid caught everybody quite off guard, exposing weaknesses in supply chains and shaking the public’s confidence in pharmaceutical and related businesses (despite the industry’s admittedly pharaonic efforts in rapidly producing Covid-19 testers and then vaccines). Like many other sectors, pharma was forced to digitise rapidly, while everyday operations underwent important transformations.

The healthcare industry may not be able to accurately predict when the next pandemic will occur, but there are other significant risk factors on the horizon that pharmaceutical companies can and should prepare for.

Reduced demand for prescription medicine

In the short-term, the pharma industry is likely to feel the effects of Covid-19 for several more years yet. The pandemic, and the shocking amount of misinformation that spread rapidly through social media and was even touted by government officials, has weakened the public’s trust in the pharmaceutical industry and its products.

Compounding the financial effects of the pandemic, Russia’s occupation of Ukraine and the subsequent global disruptions in essentials like grain and oil have additionally led to significantly reduced customer purchasing power.

There may be little the pharmaceutical industry can do to hasten recovery from these global events, but there are longer-term trends pharma boards should be planning for already. These have to do with the advent and rapid adoption of “personal diagnostic” tools in the form of wearables like the Apple Watch. Such technologies have the potential to dramatically reduce the number of individuals afflicted by chronic illnesses like diabetes, cardiovascular disease and chronic respiratory disease, and lead to earlier diagnosis of diseases like cancer.

At a time when the above illnesses make up a significant portion of pharma’s activity worldwide, evolutions here are likely to have a big impact on the pharma industry.

Increased competition

Here again, there are a number of short and long-term risks to consider.

A number of important patents are reaching their end, which means generics will start eating into the sale of proprietary molecules. Not only will these mean lost profits for incumbents, it’s likely to have a destabilising effect on the industry as a whole. Those in a position and with the forethought to benefit from it may well come out on top.

The entrance of Big Tech players like Google and Amazon into the health space are also likely to radically change the pharma game. Since 2013, Google alone has launched two major drug discovery and development companies: Calico and Verily. In 2021, Amazon launched its own pharmacy and, with its historically aggressive expansion into new sectors, is unlikely to stop there. These tech giants have deep pockets and control of the most sophisticated artificial intelligence and machine learning on the market, which we know from Covid-19 are capable of developing new molecules in weeks, rather than months or years.

Finally, digital therapeutics (DTx) are already changing the way we treat disease, targeting lifestyle changes that can be just as effective as medication, without the side-effects. Future technologies, like nanobots, will have a significant impact on how we treat disease, and lead to a greater number of cures. Traditional molecules are on the way out; pharma boards must plan for this important shift.

 Customer expectations are evolving

Pharma has been slow to move on personalisation, but customers have come to expect personalised, immediate interactions and information in all aspects of life. One of the primary complaints among physicians and payers is that many of the systems they rely on to interact with pharmaceutical companies have failed to modernise or digitally transform alongside other industries.

And yet, the potential benefit for practitioners, payers, and especially patients with personalised marketing, personalised medical information, and even personalised treatments, is enormous. Pharma companies need to tap into this growing demand and expectation for immediate, personalised customer experiences, or risk losing their customer base to those who are already experts in it, like Amazon.

 Supply chain and logistics disruptions

Covid-19 exposed significant weaknesses in the pharma supply chain. Some manufacturers have responded appropriately. Merck and Novartis, for example, have already started exploring blockchain solutions for a more robust and transparent supply chain, but experience and studies have shown that such efforts are best made collaboratively, with multiple and diverse stakeholders participating in the final product.

It’s important that pharma boards know that there are real financial impacts to investing early in solutions like blockchain. Packaging and insert issues account for 13% of all pharma recalls, and can be avoided with the right technology in place.

In addition, pharma companies are well-positioned in the healthcare industry to lead the call on implementing such technologies, and have the budget and, for ambitious and well-informed boards, the impetus to do so.

Counterfeit molecules

Many people are surprised to learn that counterfeit medications can be found in many pharmacies across the country. In fact, my own research has shown that as much as 5% of the drugs in some pharmacies may be counterfeit. The negative impacts of counterfeit medications is hard to quantify, but there’s no doubt that it has a serious and significant impact on the industry and, most importantly, on patients.

There are some frightening statistics out there: According to one study, a horrifying 96% of online pharmacies do not comply with legal and pharmaceutical standards, while 32% of all counterfeit medication seizures occurred in the United States.

It’s a difficult problem to tackle, though, given the sophistication of counterfeit packaging and the existence of widespread yet highly elusive counterfeiting rings. But here again, pharmaceutical companies are well-placed to tackle the problem, and certainly should be incentivized to do so. The problem relates directly to the outdated and insecure methods used in specific points along the supply chain, which a variety of new technologies, including blockchain mentioned above, could effectively eliminate.

Counterfeit medication impacts pharma companies’ bottom line and puts patients at significant risk. Pharma boards that aren’t addressing the issue should do so post-haste.

Data breaches and cybersecurity threats

The threats here are two-fold.

First, as more of R&D and internal operations become highly digitised, the risks for corporate cyber espionage, ransomware attacks, and theft or loss of mission-critical digital assets increases too. The growing use of digital twins, for example, means that the real-world, real-time data relating to more and more operational processes is being encoded in a format that’s relatively easy to interpret if leaked or stolen.

Second, as pharma moves towards being more customer-centric and personalised, a greater quantity of customer data is being stored and manipulated both in the cloud and on-site. Entrusted with this data, pharma boards must take steps to ensure it is highly secure and have robust, practical contingency plans in place for what to do in the case of a leak or ransomware attack.

Antiquated, unfit business models

In a recent whitepaper entitled Pharma’s tough pill to swallow: the pressing need for next-gen business models and transformation using AI, I highlighted the need for pharmaceutical companies to explore new, more modern business models that are already transforming—and causing significant disruption in—other sectors.

The movement towards pay-for-performance and away from pay-for-pill means that pharma’s traditional and existing business models are unlikely to carry the industry much longer.

Alternatives abound: subscription (e.g. Netflix, Forward), freemium (e.g. Dropbox, LinkedIn), marketplace (e.g. eBay, Airbnb), hypermarket (e.g. Amazon), on-demand (e.g. Uber) and ecosystem (e.g. Google, Apple), and while few of these main map directly onto pharma and the complexities of the industry (including particularly tight regulations), pharma boards would do well to draw inspiration from any number of them.

Pharma board should be particularly aware that the areas most likely to benefit from shifts towards novel business models like “owning a disease” or “subscribe to thrive” are those which fund much of its activity, namely oncology, diabetes, chronic conditions, and rare diseases. Indeed, this is one elegant solution to the risk mentioned at the start of this article.