Supply chain challenges have emerged in a pronounced way globally and across industries during the past several years. For the biopharmaceutical industry, this can eventuate in multibillion-dollar losses if companies do not anticipate delays, changes and obstacles. To avoid this, the industry must seize the right moment and create opportunities rather than settle for being stymied by supply chain challenges. L.E.K. Consulting has developed important questions to consider within four key areas to help identify when to take action that mitigates potential missteps such as significant monetary and ownership losses.
The potential for multibillion-dollar value destruction and how to avoid it
An efficient and effective supply chain is critical to the success of biopharmaceutical companies, as it plays a vital role in ensuring that drugs and medical devices are delivered to the right place at the right time. The pharmaceutical industry has experienced tremendous growth over the past decade — not only in terms of the volume of products that need to be supported (approximately $950 billion of revenue in 2012 to around $1.5 trillion in 2020) but also in terms of product complexity and just-in-time manufacturing needs (due to the growth of advanced modalities such as cell and gene therapies).
Pharmaceutical supply chains are complex networks of manufacturers, analytical testing sites, distributors, pharmacies, logistics providers, input suppliers and other players. The efficient management of these various components can optimize production costs, increase efficiency, minimize waste and improve patient outcomes with timely product delivery.
In addition, it enables companies to respond quickly to market changes, such as competitor approvals, product recalls or natural disasters, and ensures that critical medicines and supplies are available when needed. The COVID-19 pandemic revealed the precarious nature of supply chains all around the world, with the pharma industry seeing a 350% increase in supply disruptions from 2019 to 2021 and a roughly 3x increase in lead times for some raw materials and consumables.
Beyond the impact of COVID-19, failures of pharma supply chains can carry significant consequences for pharmaceutical companies and patients. Product losses and drug shortages due to supply chain failures cost the industry tens of billions of dollars each year and can be catastrophic for individual biopharma companies (see Figure 1).