Pharma Contract Services: Turning Challenges Into Advantages

The challenges faced by our pharma services clients are, for the most part, opportunities. Recently, both manufacturing and people capacity have been constrained within the industry. In addition, biopharma supply chain security is a major area of focus for governments and drug developers.

Although highly innovative, pharma in many ways can be a reactive sector — events like the pandemic help it to advance. Just look at how COVID-19 propelled the vaccine and RNA value chains forward. Cell and gene therapy are also growing rapidly, and opportunities exist for manufacturers in all these areas, particularly in Europe. The uncertainty for market participants lies in when and how to address them.

The cost of talent is rising, and there are people shortages in many industries. This is particularly challenging in life sciences where employees tend to be more highly educated than in other industries — often to doctorate level and beyond — and there is therefore a smaller pool of talent. This means that businesses with a compelling employee value proposition — offering access to the latest technology and equipment, clear career progression, access to conferences, etc., as well as the softer but important factors such as flexible working — will have the upper hand.

“The industry is highly regulated and has to place ‘big bets’ on innovation — this makes it inherently focused on risk management and, as a result, it has been slow to embrace digital transformation. Deploying digital workflows and go-to-market strategies can help get patients the drugs they need when they need them.” 

— Ben Faircloth, Partner, London

The year ahead

Regionalisation is another overarching topic. There is a strong desire throughout the more economically developed markets to be more self-sufficient either nationally or regionally. This is driven by supply chain security and geopolitical concerns, and this means that some work that might traditionally have gone to places such as China is going to stay closer to home.

There is also a good opportunity for some European pharma services businesses to sell services into the US market, where the strong dollar and generally higher labour costs put them at a competitive advantage.

Healthcare in general is less price-sensitive than many other industries, and pharma contract services is one of the more resilient areas. All manufacturing businesses need to be cognizant of input material and energy cost rises and look for ways to pass these on — this also applies to pharma contract manufacturing.

Additionally, we see real opportunities to create value-added benefits for our clients through digital transformation, where there is scope for data to be collected and used intelligently and profitably.

The sustainability agenda is being adopted, but it can be slow-moving in such a heavily regulated industry, as any changes need to be compliant. There is also generally less pressure to demonstrate sustainability in the life sciences sector — as the saying goes, “Nobody wants to die green”. However, the sector is being nudged towards greater sustainability by outside factors, notably emissions reduction targets set by the largest companies and pushed ‘back’ along the supply chain.

How we are helping clients

The pharma industry is conservative and, relative to many other industries, has been slow to embrace digital transformation. Regulatory and compliance needs place heavy demands on businesses in the sector and underpin conservative behaviours.

That said, the more digital organisations are, the better the data they can capture and the more they can do with it. This in turn allows companies to be quicker and more agile than their competitors. In life sciences, to the extent digital transformation helps get new drugs to market safely, quickly and cost effectively, then the industry wins, but more importantly, so do patients. Digitisation of workflows and go-to-market strategies are areas of increasing interest across the sector as a result.

In pharma manufacturing, we do a lot of work predicting the nature of demand — Which diseases? Which patients? Where in the world? This means that clients can understand what they need to develop, create and provide. We help them project supply and demand and make better investment decisions to drive their growth.

Of course, inflation is an issue, and we are working with our clients to mitigate its effects.

But it is important to remember just how resilient this sector is. It is not a space where price typically is key to driving the selection of innovative products.

Why L.E.K.?

We are focused on helping our clients grow and leverage our insights to that end. We are a global team working across the life sciences activity chain, so we take insights from one area or geography and apply them elsewhere. Being such a joined-up team really helps with this — the US is often marginally ahead of Europe in contract pharma services and our work there offers real insights for our European clients. And here in Europe we work seamlessly across markets, just like our pharma services clients.