For decades, live sports have been the backbone of media giants, commanding prime-time audiences and premium ad dollars. As more live sports content becomes available via streaming — both from traditional broadcasters repurposing it to differentiate their digital platforms and from streamers aggressively entering the space — viewers are increasingly cutting the pay TV cord.  

This shift is accelerating the decline of pay TV subscriptions and prompting media companies to double down on streaming investments. In 2025, these companies are expected to spend approximately $33 billion on national sports rights, with streamers nearly doubling their stake to $7.1 billion since 2023.

Advertisers are following, reallocating budgets from linear TV to YouTube and connected TV, where targeting and engagement drive superior returns. Live sports represent a substantial advertising opportunity for streamers positioning themselves as the next hub for premium sports content.

As streaming giants ramp up their investment in live sports, the battle for media rights is transforming how games are distributed, monetized and consumed — redrawing the sports broadcasting landscape.

The streaming playbook for dominating live sports

Live sports have long been the backbone of TV advertising, accounting for 30%-40% of all linear TV national ad spend — a figure that is increasingly shifting toward streaming. At the same time, ad-supported streaming tiers are transforming content monetization, with the share of U.S. premium subscription video on demand (SVOD) subscriptions on ad-supported plans surging from 31% to 45% since 2022 (see Figure 1).

The convergence of these trends creates a powerful monetization opportunity. Live sports tend to drive viewership that’s incremental to scripted TV and film content, helping platforms capture attention that might otherwise go to YouTube, TikTok or other nonstreaming activities. When live sports are unavailable, 62% of fans shift their attention outside streaming platforms entirely, with that number climbing to 79% among younger viewers (see Figure 2). 

Live sports became a key driver of subscriber growth in 2024, as streaming networks saw record sign-ups from marquee events. Massive moments like the Super Bowl, Jake Paul vs. Mike Tyson and the Paris 2024 Olympics brought in millions of new streaming subscribers, reinforcing the unmatched acquisition power of live sports (see Figure 3). 

This unique audience behavior makes sports content a strategic powerhouse for streaming platforms — driving incremental viewing hours, attracting premium advertising dollars, improving retention among churn-prone demographics and driving new subscriber acquisition.

The high-stakes battle for media rights

With these incentives in play, media negotiations are heating up as several major sports rights deals near expiration. This next rights cycle will redefine the economics of sports broadcasting for years to come (see Figure 4). 

For properties like UFC and Formula One, which have seen significant audience growth, these negotiations represent an opportunity to substantially increase their valuations while potentially exploring new distribution models that span both traditional and streaming platforms.

UFC’s current media rights deal with ESPN, valued at about $500 million annually, is set to expire in 2025. UFC is reportedly seeking a $1 billion annual contract — more than double what Disney-owned ESPN is currently paying. ESPN holds exclusive negotiating rights until April 2025 and remains the front-runner, but it could face pressure from other bidders as UFC’s viewership and pay-per-view (PPV) sales continue to grow. If ESPN fails to renew, it risks losing one of its most valuable retention-driving properties on its streaming service, ESPN+.

The NFL’s upcoming media rights negotiations, while still several years away, will be among the most consequential in sports. When the league secured its current deal, it was celebrated as a landmark agreement. Now, after the NBA locked in a $7.5 billion-per-year deal despite ratings challenges, the NFL — still the undisputed ratings leader — is poised to command even higher fees. The league hasn’t ruled out the possibility of revisiting its CBS deal in light of Skydance’s pending merger with Paramount, which could unlock additional value.

Case studies in sports media value: UFC vs. MLB

UFC and MLB illustrate contrasting fates in the streaming era — one is thriving as a retention driver while the other struggles to justify its value.

UFC: The premium retention driver

UFC’s unique model — combining weekly fight cards with exclusive PPV events — makes it both a subscriber acquisition engine and a powerful churn mitigation tool. L.E.K. Consulting’s 2025 Sports Survey reveals UFC content is critically important to ESPN+ subscribers, with avid MMA fans 2.8x more likely to cancel their subscriptions if UFC content disappeared (see Figure 5). 

Avid MMA fans — who represent 21% of ESPN+ subscribers — stated they purchase an average of 3.5 UFC PPV events annually, according to our 2025 Sports Survey. Another 17% of subscribers are casual MMA fans, purchasing around 1.5 events per year, compared to just 0.8 events for nonfans. While ESPN remains the front-runner for UFC’s domestic rights, other potential bidders are in the mix. Warner Bros. Discovery’s B/R Sports is often cited as a contender, though its existing relationship with All Elite Wrestling could complicate a deal with TKO-owned UFC.

Netflix has also been mentioned as a potential partner for UFC, especially given its recent World Wrestling Entertainment agreement. However, in our estimation, the high price tag and PPV distribution model make it unlikely that Netflix will be a serious contender for UFC’s domestic rights. UFC’s international rights, however, are a more natural fit — Netflix’s global footprint makes it an ideal partner to consolidate fragmented rights, improve international monetization and accelerate UFC’s overseas audience growth.

MLB: The declining value proposition

ESPN’s decision to opt out of MLB’s national rights underscores the sport’s challenges at the national level in the streaming era. While interest in local teams and regional broadcasts remains relatively strong, national ratings have declined approximately 3% annually since 2013. At the same time, the ESPN/MLB rights deal was relatively expensive — with an estimated cost per viewer hour of $2.74 — materially higher than other recent agreements.

Meanwhile, newer entrants like Apple TV and Roku are paying significantly less in total for meaningful regular season content. Apple holds rights to Friday Night Baseball, while Roku airs Sunday Leadoff Baseball — both featuring one game per week over roughly 18 weeks from May through early September. These pricing disparities highlight the sport’s uncertain value at a national level, especially as platforms prioritize content that drives engagement and retention.

With the national rights picture in flux and the regional sports network (RSN) model continuing to erode, MLB teams are increasingly exploring alternative distribution strategies, including direct-to-consumer and over-the-air options. These models may improve access and exposure but currently generate far less revenue than legacy RSN deals do.

(Stay tuned for part two of this series, where we’ll explore the collapse of RSNs and the shifting dynamics of the local sports media ecosystem.)

A fragmented sports media landscape ahead

As the sports media ecosystem continues to fragment, several critical implications are emerging for both platforms and leagues:

• Live sports are foundational. Streaming platforms that lack marquee sports content risk losing audience share to competitors that invest in tentpole events and use them to anchor subscriber growth and retention.
• Leagues hold near-term leverage — but it may not last. Fast-growing, globally appealing leagues like UFC and Formula One are well positioned to drive meaningful increases in average annual value during this rights cycle. But as the market shifts fully to streaming, that pricing power may fade — especially with slowing subscriber growth or platform consolidation.
• For fans, fragmentation is a mixed bag. As sports content splits across multiple platforms, access becomes more complicated, and subscription costs may rise. Yet fans also benefit from more flexible viewing options and the potential for richer, more personalized experiences.

These shifts signal a new era in sports broadcasting — one defined not by a single dominant platform, but by a dynamic, multichannel marketplace shaped by shifting economics, evolving fan behavior and high-stakes content decisions.

Coming next

The fragmentation of national rights is only part of the story. The collapse of RSNs presents an even greater challenge, as leagues and teams work to replace billions in lost revenue. In our next article, we’ll examine how the decline of pay TV is reshaping local sports broadcasting — and what it means for the future of regional media rights.

For deeper insights into sports media rights, platform strategy and content monetization, reach out to L.E.K.’s Media & Entertainment practice. Our team specializes in sports and live entertainment, direct-to-consumer models and media rights negotiations — helping clients navigate the evolving sports landscape with data-driven strategies.

For more information, please contact us.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2025 L.E.K. Consulting LLC 

Introduction

While first-to-market biopharma products in a new therapeutic class are often seen as having a clear competitive advantage, recent trends tell a more nuanced story.

Over the past decade, around half of all innovative branded biopharma launches have been second or later entrants within their therapeutic class (late entrants). Some have successfully reshaped the standard of care — offering superior efficacy, safety and/or convenience — and have achieved strong commercial performance. Others, however, have struggled to gain traction, falling short of expectations with disappointing sales and minimal market impact.

As competition within therapeutic classes intensifies, critical questions emerge: When does it make strategic sense to develop a late entrant — and when is it simply too late? More importantly, what factors determine success for those entering an already-crowded field?

Followers fare better within two years of first launch

In the first two years following the launch of a new therapeutic class, the treatment landscape remains fluid, with physician adoption still evolving. This period offers fast followers — those entering the market within two years after the first-in-class entrant — a strategic window to capitalize on market dynamics and shape prescribing habits. With a stronger clinical profile, fast followers can capture substantial market share and, in some cases, even outperform the first-in- class entrant.

As time passes, physician and patient familiarity and comfort with early entrants tend to deepen, leading to entrenched prescribing habits and growing loyalty to established brands. This creates a high barrier to entry for later competitors, which must offer a clearly differentiated value proposition to displace existing treatments. As a result, fast followers outperform late followers significantly, achieving nearly three times the average sales (see Figure 1). This performance gap underscores the importance of timing, strategic positioning and rapid execution in competitive therapeutic classes. 

Differentiation can drive success for late entrants

Despite the well-known challenges of entering the market behind a first-in-class agent, there are notable success stories. Among the 189 late entrants analyzed, 18 achieved over $1 billion in U.S. sales within five years of launch and 22 outperformed order-of-entry-based sales expectations relative to the first-in-class product.^1,2 

Most of the high-performing followers shared a common trait: a clearly superior efficacy and/or safety profile compared to the first entrant, highlighting the critical role of meaningful clinical differentiation in overcoming the disadvantages of later entry (see Figure 2). 

Nearly half of the followers that outperformed did so primarily through superior efficacy, often demonstrated in head-to-head trials against the earlier entrants. For example, the anaplastic lymphoma kinase (ALK) inhibitor Alecensa reduced the risk of progression or death by nearly 50% compared to Xalkori in ALK-positive non-small cell lung cancer, while the integrase strand transfer inhibitor Tivicay showed a higher barrier to resistance than Isentress in the treatment of HIV.

About a quarter of outperformers differentiated on safety rather than efficacy. In these cases, the improvements were often significant — such as eliminating a black box warning present on the first entrant (e.g., Farxiga, which lacked the amputation risk warning seen with earlier sodium-glucose transport protein 2 inhibitors) or markedly reducing serious adverse events such as hematologic or cardiovascular complications.

While follower outperformance based solely on convenience is less common, it is possible — particularly in chronic, non-life-threatening conditions such as asthma, migraine or psoriasis. In these cases, enhancements such as longer dosing intervals or transitioning from injectable to oral formulations played a role, often alongside other success factors such as rapid indication expansion.

Large biopharma companies have an advantage

Large biopharma companies (with market capitalizations over $40 billion) hold a distinct advantage when launching a later entrant. Their robust commercial infrastructure, deep industry experience, extensive customer networks and strong life cycle management capabilities enable them to drive significant market impact — even without a first-mover advantage. These companies can invest in differentiated clinical trials and large-scale marketing efforts, helping them stand out in competitive spaces. As a result, they account for a disproportionate share of products that ultimately outperform first-to-market competitors (see Figure 3).

In contrast, smaller companies face significantly greater challenges. Of the more than 40 late entrants they commercialized, none outperformed the first entrant. 

When is it too late to launch a late entrant?

The answer is nuanced, but timing, differentiation and company scale are the critical drivers of success.

For products with strong differentiation — particularly in efficacy and/or safety — it may never be too late to enter. A compelling clinical value proposition can persuade physicians to switch, even for latecomers. However, the bar is high: Differentiation must translate into meaningful patient benefits and outcomes, not just statistically significant improvements on clinical end points.

For products that are more than two years behind the first-in-class product and lack clear differentiation, executives should carefully reassess further investment. If return-on-investment (ROI) projections are weak, it may be prudent to redirect development efforts toward targeted patient subgroups or alternative indications where there is unmet need or competitive intensity is lower. This consideration is especially important for smaller companies, which rarely succeed with undifferentiated late entrants.

In more challenging scenarios, partnering or out-licensing may offer a strategic path to unlock value while reallocating resources toward assets with higher potential in the portfolio.

To increase the likelihood of success, executives managing late entrants should consider the following six strategic actions:

1. Assess differentiation and ROI early: Rigorously evaluate the product’s potential for clinical differentiation and expected ROI — especially if launch is more than two years behind a first-in-class competitor.
2. Scale investment strategically: Right-size investment levels to reflect the increased difficulty of gaining market share.
3. Prioritize efficacy differentiation: Focus development efforts on demonstrating superior efficacy, which remains the most compelling driver of prescriber adoption.
4. Highlight safety advantages: Evaluate whether the product offers a more favorable safety profile — particularly in therapeutic areas where safety concerns heavily influence prescribing behavior.
5. Don’t overweight convenience: Avoid relying solely on convenience-based features (e.g., dosing, administration route) to drive differentiation; while occasionally successful, this strategy rarely leads to market outperformance on its own.
6. Consider strategic partnerships: Smaller biotech firms should explore partnerships or licensing opportunities with larger, more experienced companies to improve launch execution and long-term success potential.  

A well-timed and clearly differentiated product can still perform strongly as a late entrant. But without meaningful advantages and adequate resources, the opportunity for success may quickly close.  

Methodology

Definition of therapeutic class: A mechanism of action within a disease or group of diseases.

Definition of outperformance: Generating more U.S. sales in year five post-Food and Drug Administration approval, relative to the first entrant, than would be expected by industry-standard order-of-entry share expectations. In all analyses, products were only considered outperformers if they also generated at least $300 million in year-five U.S. sales.

Definition of differentiation: A clinically meaningful improvement from the first entrant in the class based on (1) head-to-head trials directly comparing efficacy or safety, (2) indirect comparisons of clinical data, or (3) broader attributes not requiring published comparisons, such as label enhancements (e.g., removal of black box warnings) or convenience benefits. 

The authors would like to thank Katherine Taylor and Katharina Novikov for their important contributions.  

For more information, please contact us.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2025 L.E.K. Consulting LLC 

Endnotes
¹See methodology box for definition of outperformance. Some of the products were not assessed for outperformance due to missing first-entrant sales data from Evaluate Pharma.
²With 30 unique products across these two groups. 

While some SaaS businesses embed AI directly into their platforms, others sell it as a premium add-on or adopt a hybrid model that blends embedded AI with usage-based monetization. With no standard pricing approach, vendors are experimenting — introducing per-interaction pricing, bundling AI into subscriptions and offering flexible, usage-based plans to meet evolving enterprise demand.

This is the second installment of our series on AI-driven pricing models, following our examination of how AI is reshaping the SaaS industry in Part 1. Now, we turn to how companies structure and package AI-powered features within their products. Choosing the right strategy is key to driving adoption while optimizing revenue.

Three core approaches to AI integration

The three approaches described below influence how businesses monetize AI, differentiate their offerings and drive long-term customer value.

The add-on approach

This model offers AI as a premium add-on, with companies charging 30%-110% above base pricing, according to research by Tom Tunguz. This model enables businesses to put commercial focus on the AI feature, accurately test demand and drive upsells without affecting the core packages. However, it also limits the immediate user base to which the AI feature is pushed, and fundamentally positions AI outside the core packages in a manner that may not be appropriate as these features become more standard across platforms.

Notion and Slack follow this model, offering AI-powered tools — such as AI-assisted writing and summarization (Notion AI) and smart recaps and automated message threading (Slack AI) — only as separate add-ons for an additional cost per user, per month.

The embedded approach

In this model, AI capabilities are integrated directly into core packages, providing immediate access to all users who have access to the relevant tier(s). The tier system can take one of two forms:

• Base tier embedding: AI features are included in basic plans to drive widespread adoption.
• Premium tier embedding: AI capabilities are reserved for higher-priced tiers, encouraging upsells.

HubSpot’s integration of AI across its CRM, marketing and sales tools led to a 21% year-over-year sales increase, demonstrating how embedding AI can drive both adoption and revenue growth. Making AI a core feature, even at the base tier, enhances engagement and retention but requires careful margin management.

The hybrid approach

This strategy blends embedded AI with premium AI upgrades, offering multiple monetization paths:

• Embedding basic AI in base tiers while offering advanced features as add-ons
• Distributing stratified AI capabilities across product tiers or as add-ons to align with different customer needs

Zendesk recently expanded access to its AI agent feature across all tiers while keeping advanced chatbot automation and workflow optimizations as premium add-ons. A recent analysis by Dave Kellogg suggests this approach is gaining traction as companies balance accessibility with premium positioning.

As AI pricing models evolve, vendors are making real-time adjustments to meet enterprise demand. Google bundled Gemini AI into its standard $14 Business plan — previously this required an additional $20 add-on — signaling a shift toward embedded AI at lower price points to drive adoption. These shifts show an evolving industry where AI pricing remains in flux (and may also be a recognition of declining costs associated with AI usage). 

AI packaging strategies across industries

AI pricing models vary based on how the technology integrates into specific industries or workflows (see Table A). Some categories, like productivity software and cybersecurity, favor embedded AI, making AI-powered features standard within core products. Others — such as healthcare and sales automation — are more likely to rely on hybrid or add-on models, balancing regulatory constraints, specialized functionality and value-based pricing. 

Many industries have successfully balanced embedded AI and premium upgrades, but healthcare AI presents unique challenges.

Healthcare AI: A deeper look

Healthcare AI pricing is shaped by regulatory, operational and reimbursement constraints, requiring a balance of compliance, accessibility and ROI. Unlike market-driven adoption in ecommerce or DevOps, healthcare AI must integrate with clinical workflows, align with reimbursement models and demonstrate patient impact.

Table B (below) outlines how some healthcare AI prices are packaged, from outcome-based pricing that ties costs to clinical results to hybrid models that blend embedded AI with premium analytics upgrades.

By structuring pricing around regulatory and operational realities, healthcare AI companies can drive adoption while ensuring compliance and financial sustainability.

The rise of AI-embedded platforms

AI is no longer just an add-on — leading SaaS companies now embed it across their platforms to boost engagement, automation and scalable monetization. This industry shift integrates AI into core workflows, making it essential to the user experience.

Rather than charging separately, companies increasingly package AI within existing ecosystems, reserving premium features for higher-tier plans or usage-based pricing. This approach maximizes adoption while managing AI-driven costs.

At the enterprise level, Microsoft and Salesforce embed AI throughout their entire platforms while refining pricing in bespoke ways to drive adoption and profitability.

Microsoft Copilot

Integrated across Word, Excel, Teams and Outlook, Copilot automates document drafting, data analysis and email responses within familiar workflows. The free Copilot Chat provides GPT-4o-powered assistance, while enterprises can access AI agents via metered pricing. For deeper integration into Microsoft 365, Copilot Pro is available as an add-on for $30 per user, per month (see Figure 1).

Source: Microsoft

Salesforce Einstein

AI is embedded throughout the Salesforce ecosystem, providing predictive insights, automated recommendations and workflow automation. While some Einstein features are included in standard editions, Einstein GPT and advanced AI tools require separate licenses, starting at $50 per user, per month (see Figure 2).

Source: Salesforce 

This platformwide, embedded AI approach represents a fundamental shift in SaaS pricing — ensuring AI is accessible while monetizing its most advanced capabilities. As AI adoption accelerates, companies will continue refining platformwide integration strategies to balance value, cost and competitive differentiation.

AI pricing remains fluid as vendors balance accessibility with profitability. A key challenge is managing inference costs, or variable AI-related costs — an ongoing expense that scales with usage. To maintain margins, companies are shifting toward hybrid and consumption-based pricing models.

AI usage costs in your packaging strategy

AI introduces variable costs not typically associated with traditional SaaS features, primarily due to ongoing expenses from real-time model operations. While AI development involves substantial up-front investments, the primary recurring financial concern stems from unpredictable customer usage, making cost management crucial.

While computer-driven pricing models (similar to cloud-based billing) align costs directly with resource usage, ensuring sustainable margins as adoption scales, they often increase customer budgeting complexity and anxiety.

Ultimately, vendors must balance accessibility with financial sustainability, structuring AI pricing to reflect actual usage costs. Striking this balance — keeping AI adoption straightforward for customers while realistically managing the financial demands of large-scale AI deployments — is essential.

Charting the path forward

Generative AI is transforming SaaS packaging and pricing, demanding a balance among value creation, adoption and profitability. As companies weigh adoption friction, cost recovery and monetization potential, success depends on managing variable AI costs, setting clear usage limits and responding to market shifts. The winning approach aligns with your market position and customer needs — those balancing financial sustainability with customer expectations will gain competitive advantage.

In our next article in this series, “Pricing Models for AI Features,” we’ll explore pricing structures that complement these packaging strategies — from consumption-based to value-based models — helping you both package and price your AI offerings for maximum success.

L.E.K. Consulting helps SaaS businesses navigate AI pricing and packaging strategies. To explore the right approach for your business, please contact us.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2025 L.E.K. Consulting LLC

Success in indirect procurement demands both expertise and execution, delivering immediate value while building lasting capabilities. Unlike direct procurement, which is a core capability for manufacturers, indirect procurement spans diverse categories with unique stakeholders, cost drivers and complexities. Without dedicated resources and strategy, companies across industries often overspend and miss opportunities for value creation.

A leading global manufacturer faced this challenge firsthand. After successfully implementing a global sourcing function for direct materials, the company sought to replicate that success in indirect services and materials — an entirely different challenge.

Though the company had a strong leader in place, unlocking the full potential of indirect procurement required specialized expertise, a clear strategy and hands-on execution. To drive this transformation, the company leveraged L.E.K. Consulting’s experience in navigating complex procurement challenges to build a structured, scalable indirect procurement function — equipping the organization with the processes, tools and expertise to drive ongoing efficiency and cost savings.

Building a foundation for indirect procurement

While the manufacturer excelled in direct procurement, indirect spend was left to functional leaders, driving up costs, increasing risk and consuming valuable time for their teams.

L.E.K. took a structured approach to building the company’s indirect procurement capability from the ground up. Using a comprehensive strategic sourcing process (see Figure 1), the team ensured consistent execution across categories while building the client’s capabilities. 

Executing for impact

With a structured approach in place, the focus shifted to execution. To drive immediate results while strengthening long-term sourcing capabilities, we embedded a senior procurement leader to work alongside the internal team. This working group tackled eight projects across logistics, packaging, facilities services and corporate services, leveraging a range of strategic sourcing techniques:

• Competitive RFPs to introduce new suppliers and optimize costs
• Incumbent negotiations informed by benchmarking and should-cost modeling
• Global sourcing to expand supplier options and drive efficiency
• Group purchasing strategies to unlock volume discounts and improve terms 
• Demand management to identify services that could be discontinued or have service levels reduced to meet the need from the business
• Cost modelling to develop a perspective on cost drivers and cost savings potential in support of a key supplier relationship

These efforts delivered significant results, including 15% annual cost savings across freight, packaging, maintenance, repair and HR services. Additionally, the team developed a roadmap for 17 future projects, expected to generate 5%-8% savings on addressable indirect spending over the next two years.

In addition to cost savings, this structured approach resulted in category strategies, improved supply resiliency, supplier diversity, fit-for-purpose service levels and a path to value across key indirect categories.

Indirect procurement touches every layer of an organization, from corporate services to manufacturing, distribution and logistics — as illustrated below. 

Creating an engine for value

Beyond immediate cost savings, we built a procurement function designed for long-term success. The capability roadmap developed helps establish key infrastructure, processes and expertise that will support the manufacturer’s objectives to drive ongoing efficiency and strategic sourcing excellence.

• Tools and templates: A tailored set of resources standardized RFPs, supplier evaluations and contract negotiations, making best practices repeatable.
• Master data integration: Collaboration with finance and IT to create spend visibility across disparate systems where indirect category spend was managed.  
• KPI dashboard: A performance tracking system provided real-time visibility into procurement efficiency, supplier performance and cost savings.
• Contract portfolio review: Evaluation of 50+ agreements uncovered renegotiation opportunities, risk areas and cost-saving adjustments.
• Integrated procurement processes: Workflows mapped across 15 systems uncovered disparate systems, data flows and decision points that provided the foundation for the indirect team to take on management of indirect categories.

Our experts embedded experts within the team, guiding them through live sourcing projects, supplier negotiations and category strategy workshops. This hands-on approach built confidence, strengthened procurement skills and ensured long-term process ownership.

Essential insights for manufacturing leaders

This transformation highlights critical strategies for organizations looking to elevate their indirect procurement capabilities across industries:

• Reframe assumptions: Excellence in direct procurement doesn’t ensure success in indirect categories. Indirect procurement spans a broad range of services and materials, requiring specialized strategies to manage complexity, mitigate risk and drive efficiency.
• Prioritize actionable expertise: Effective transformation combines strategic guidance with hands-on leadership. Partners who work alongside teams to deliver immediate results while building long-term capabilities are essential.
• Focus on enduring value: Sustainable impact comes from embedding new capabilities, improving transparency and aligning procurement strategies with broader business goals.

Regardless of industry, indirect procurement is often considered a tactical cost reduction activity. Organizations that take a strategic approach to indirect spend can unlock hidden efficiencies and gain a lasting competitive advantage.

To learn how L.E.K. can help transform your indirect procurement function and capture significant value, contact us today. 

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2025 L.E.K. Consulting LLC

Creating an engine for value

Beyond immediate cost savings, we built a procurement function designed for long-term success. The capability roadmap developed helps establish key infrastructure, processes and expertise that will support the manufacturer’s objectives to drive ongoing efficiency and strategic sourcing excellence.

• Tools and templates: A tailored set of resources standardized RFPs, supplier evaluations and contract negotiations, making best practices repeatable.
• Master data integration: Collaboration with finance and IT to create spend visibility across disparate systems where indirect category spend was managed.  
• KPI dashboard: A performance tracking system provided real-time visibility into procurement efficiency, supplier performance and cost savings.
• Contract portfolio review: Evaluation of 50+ agreements uncovered renegotiation opportunities, risk areas and cost-saving adjustments.
• Integrated procurement processes: Workflows mapped across 15 systems uncovered disparate systems, data flows and decision points that provided the foundation for the indirect team to take on management of indirect categories.

Our experts embedded experts within the team, guiding them through live sourcing projects, supplier negotiations and category strategy workshops. This hands-on approach built confidence, strengthened procurement skills and ensured long-term process ownership.

Essential insights for manufacturing leaders

This transformation highlights critical strategies for organizations looking to elevate their indirect procurement capabilities across industries:

• Reframe assumptions: Excellence in direct procurement doesn’t ensure success in indirect categories. Indirect procurement spans a broad range of services and materials, requiring specialized strategies to manage complexity, mitigate risk and drive efficiency.
• Prioritize actionable expertise: Effective transformation combines strategic guidance with hands-on leadership. Partners who work alongside teams to deliver immediate results while building long-term capabilities are essential.
• Focus on enduring value: Sustainable impact comes from embedding new capabilities, improving transparency and aligning procurement strategies with broader business goals.

Regardless of industry, indirect procurement is often considered a tactical cost reduction activity. Organizations that take a strategic approach to indirect spend can unlock hidden efficiencies and gain a lasting competitive advantage.

To learn how L.E.K. can help transform your indirect procurement function and capture significant value, contact us today. 

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2025 L.E.K. Consulting LLC

Early genetic screening, targeted therapies and other precision medicine (PM) offerings in recent years have transformed care and significantly improved outcomes for oncology patients while delivering substantial value creation that drives increased pharma investment. PM leverages biomarker (BM) strategies to successfully develop, commercialize and differentiate therapeutics by improving R&D efficiency and optionality, supporting regulatory filings, and enabling smaller and more productive clinical trials. 

To achieve commercial success for an oncology PM therapeutic, however, biopharma companies must also accomplish the effective launch of a companion diagnostic (CDx) that identifies eligible patients and informs ongoing treatment decisions.

Over the past decade, the proportion of oncology trials using BMs has steadily tracked overall trial growth except for a slight post-pandemic decline amid tough U.S. and Chinese macroeconomic conditions. In 2024, three-fourths of all oncology clinical trials included the use of a BM (see Figure 1).

Rising BM use in trials has predictably had an impact on product launches, with the U.S. Food and Drug Administration (FDA) approving seven to 10 oncology therapeutics with CDx annually since 2020 — and with an increasing focus on novel biomarkers rather than traditional ones (see Figure 2). 

Given the advantages of launching a diagnostic (Dx) — and the many complexities involved — preparing to launch novel CDx in concert with the therapy itself is imperative. In working with biopharma companies to launch novel CDx for oncology therapeutics, L.E.K. Consulting has uncovered seven critical strategies to share.

1. Adopt an ‘opt out’ mentality.

Leaders in PM follow an opt-out approach: All new oncology programs start with a Dx component, consistently assessing needs and planning for them across the development life cycle. This mindset leads PM leaders to integrate Dx and therapeutic development through established Dx resources and capabilities. All-comers therapeutics can still be pursued, but this requires an active decision by leadership supported by clinical evidence.

The alternative “opt in” mindset — the assumption that an all-comers approach will work and BM development will follow — limits a company’s ability to build Dx capabilities and processes, and disadvantages PM programs that require early and frequent collaboration between Dx and therapeutic teams. For example, in 2009 (after five years on the market), the FDA restricted Lilly’s EGFR inhibitor Erbitux to KRAS wild-type patients (who comprise approximately 60% of colorectal cancers) based on data from a competitor’s product. U.S. market adoption stagnated after the decision, and the cumulative revenue impact over the next decade reached hundreds of millions of dollars (see Figure 3).

Indeed, historical averages suggest a one-year delay in launching a BM-directed drug could reduce the initial five-year cumulative revenues by 30%-35%, owing to the typical adoption ramp curve (Figure 4). 

Dx leaders codify the opt-out mentality in their processes, requiring teams to consider Dx needs early and to continually reassess those needs throughout development — whether by adopting a proactive approach to BM discovery through comprehensive patient profiling, banking multiple bio samples and so forth; focusing on post hoc analysis to identify predictors of response; or continually optimizing by, for example, tracking molecular origins of resistance.

Furthermore, they tend to organize personnel in ways that encourage dedicated focus on individual programs while maintaining centralized leadership and integrating functions and programs at the therapeutic area and enterprise levels. Embedding strategic Dx planning throughout the program drives preemptive discussion and collaboration and ensures organization wide sharing of lessons and resources, thus increasing efficiency and institutional knowledge.

2. Start planning for CDx launch in preclinical development.

A successful Dx launch requires multifunctional support across the value chain, and companies should start planning as early as the preclinical stage. Dx development occurs parallel to therapeutic development, with key Dx launch readiness activities stage-gated by both therapeutic and Dx milestones (see Figure 5).

To drive efficiencies, R&D must incorporate cross-functional input from commercial and medical functions during preclinical development. This approach ensures that Dx addresses patient needs and that clinical endpoints support its commercialization. Commercial and medical readiness activities should focus on understanding and educating the market, developing a Dx-specific strategy and preparing the organization for Dx launch.

3. Address the unique operational challenges of adding CDx.

Companies must consider how the specific complexities of a Dx test should inform the commercial and go-to-market strategy. During development, an individual Dx faces specific commercial obstacles that differ from challenges with therapeutics — surrounding the analyte, such as protein or DNA; the testing technology, e.g., PCR or NGS; validated instrumentation such as 510(k) clearance; and the testing format, whether an in vitro diagnostic (IVD) or a laboratory-developed test (LDT) (see Figure 6). Pharma companies looking to develop a therapeutic with CDx should first understand the BM requirements for their indication. Next steps include determining whether they can support a decentralized testing model and building a robust payer strategy.

For example, LDTs may face reimbursement issues and require extensive lab validation, yet in the U.S. they often are faster to market and support more numerous and complex BMs because regulatory clearance is not required. Alternatively, IVD kits are FDA regulated, do not support all analytes and face greater competition from other diagnostics, but any CLIA laboratory with the correct instrumentation can run them — and typically enjoy a higher rate of reimbursement. 

For some companies, launching and supporting, for example, both LDT and IVD versions of the same Dx adds further complexity and requires additional readiness planning and resources.

4. Build a separate Dx launch strategy.

PM leaders treat Dx launch and therapeutic launch as interconnected yet distinct processes, with different stakeholders and challenges. Because key CDx stakeholders are a diverse group that shares little overlap with therapeutics stakeholders — think pathologists versus prescribing oncologists — targeted outreach is the best way to build awareness and willingness to prescribe. Given the intricacy involved in effective testing (particularly with novel CDx), a launch strategy needs to address the necessary instrumentation or other technology; consider laboratory needs, such as LDT support and sample prep guidance; and take market access into account.

Ideally, companies should consider the interplay between Dx and therapeutic launch strategies when planning for launch. For instance, typical sales incentive structures based on the number of patients on a therapy may be unsuitable in a PM setting, where the number of patients screened for a therapy is potentially a more meaningful measure. Developing a Dx-specific launch strategy can enable widespread adoption and enhance the overall PM opportunity.

5. Leverage partner capabilities purposefully while developing internal expertise.

When empowering critical partners (internal and external) for their expertise in developing, filing and manufacturing Dx tests, biopharma companies should be intentional about expanding specific activities and achieving sufficient oversight. Depending on the organization’s size and capabilities, tasks such as BM selection, test development, study result interpretation or Dx sales may be beyond internal capacity. On the other hand, activities that require close interaction with the therapeutic team (e.g., sample collection and banking) or that are strategic in nature (e.g., market access) may be better managed in-house.

Even when leveraging a partner, launching a Dx requires dedicated internal resources with Dx-specific expertise across the value chain. Specialists who understand both Dx and PM therapeutics are rare and in high demand, requiring early planning and strong retention efforts. Finding the right balance between external expertise and internal foundational knowledge will be crucial to overseeing Dx partners, who may lack the broader in-house context or may not be incentivized to optimize tests or fully invest in launch activities (see Figure 7).  

Scaling a Dx ecosystem appropriately can prevent delays in Dx launch planning and execution. Overall, costs incurred when empowering an external partner or developing in-house talent should be viewed as imperative for product success — a strategic investment into that asset franchise rather than just a necessary evil to be minimized.

6. Infuse dedicated Dx expertise throughout the organization.

Successful Dx launch planning requires an environment where Dx needs are supported, integrated across functions, scaled appropriately and prioritized across the value chain. Essential strategies such as adopting an opt-out Dx mindset and investing in early Dx development and launch planning (as discussed earlier) can be up against an inertial mindset around an all-comers approach. 

Overcoming pushback from various levels of the company and other headwinds — such as the high costs associated with Dx development and the relatively low direct revenue from Dx versus therapeutic investment — will require unequivocal and sustained support from leadership. In prioritizing Dx investment, savvy PM leaders must also expedite alignment of activities and incentives across Dx and therapeutic teams to generate the cross-functional collaboration needed for a successful launch.

7. Incorporate a thoughtful LCM strategy.

To become leaders in the PM space, companies must adopt a dedicated life cycle management (LCM) strategy that supports continuous evolution and improvement. Early and proactive planning is crucial for a biopharma company’s ability to create sustained impact of BM oncology therapies, but Dx strategy does not end at launch. A meaningful LCM strategy will empower the organization to anticipate next-generation technologies, expanding indications, real-world evidence planning and continuous engagement with key stakeholders — all of which advances the ultimate goal of maximizing therapeutic potential.

L.E.K. continuously monitors pressing issues throughout the biopharma industry landscape in order to deliver innovative lessons, cutting-edge insights and actionable support and strategies that enhance our clients’ ability to achieve their goals.

For more information, or to explore strategies that can unlock new possibilities for your biopharma business, please contact us.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2025 L.E.K. Consulting LLC 

Consumer Duty is reshaping wealth management. With full AI deployment offering substantial value gains, firms can no longer rely on legacy pricing models, one-size-fits-all services or opaque customer engagement strategies. The new regulations raise the bar, requiring evidence that clients receive fair value, transparent pricing and appropriate financial products.  

By leveraging data and AI, firms can create tailored, efficient and scalable service models that meet both regulatory demands and client expectations. This L.E.K. Executive Insights explores how wealth managers can integrate these changes into their business models to create value and sustain competitive advantage.  

The rising bar for wealth managers

Regulators are taking a tougher stance. The days of opaque fee structures and one-size-fits-all service models are fading. Consumer Duty mandates that wealth managers justify their pricing, ensure products meet customer needs and communicate in a way that builds confidence rather than confusion. The implications are profound. Firms must re-evaluate their client segmentation strategies, refine their propositions and invest in data-driven decision-making to stay ahead.

At the heart of compliance is the ability to collect, analyse and act on high-quality client data. Firms that rely on outdated, fragmented data systems will struggle to meet regulatory expectations. L.E.K.’s three-pillar framework — comprising GDPR compliance, a robust data engine, and a structured data dictionary and management approach — provides a foundation for Consumer Duty readiness (see Figure 1).  

Ensuring adherence to GDPR establishes a compliant baseline, while a well-integrated data engine enables firms to generate actionable insights in real time. Meanwhile, a structured data dictionary and management system ensures consistency and accessibility, reducing the risk of misinterpretation or regulatory lapses.  

By embedding this framework, firms can not only meet compliance standards but also unlock commercial growth opportunities through deeper insights into customer behaviour, preferences and risk profiles.

Data-driven compliance and commercial growth

Regulatory adherence and commercial success are not mutually exclusive. Leading firms are already proving that a robust data strategy not only satisfies compliance but also unlocks tangible financial benefits (see Figure 2).  

The ability to analyse real-time client data allows firms to adjust pricing dynamically, identify underserved segments and offer more relevant products. AI-driven analytics provide deeper insights into client behaviour, enabling firms to personalise engagement strategies and preempt potential compliance risks. In practical terms, this means:

• Smarter pricing models that optimise revenue without eroding client trust
• Proactive client management, ensuring clients receive appropriate support
• Enhanced service delivery, aligning product offerings with actual customer needs

For comparison, as part of L.E.K.’s ongoing AI Delta work, we provided an exploratory discussion of the potential size-of-the-prize for AI, which aims to help our clients catalyse analysis on the magnitude of the opportunity for their specific businesses (see Figure 3). 

Transforming compliance into competitive advantage

Firms that embed AI and predictive analytics into their operating models will not only meet regulatory expectations but redefine their commercial trajectory. Take, for example, the challenge of pricing. Traditional models rely on broad assumptions, but AI-driven segmentation allows firms to fine-tune their value proposition, ensuring each client receives a service level and product package that reflects their immediate needs and value contribution at the right price point.

Similarly, customer engagement can no longer be reactive. Sentiment analytics can help wealth managers detect when clients are confused or dissatisfied, allowing firms to intervene early. Data-driven decision-making, once a differentiator, is rapidly becoming the minimum standard (see Figure 4). Firms that are slow to evolve will struggle to retain clients who expect personalised, transparent and responsive service. 

A three-phase strategy for sustainable growth

To translate Consumer Duty compliance into commercial success, wealth managers must adopt a structured roadmap in which they:

1. Accelerate: Assess current data capabilities, address compliance gaps and launch pilot initiatives that demonstrate quick wins.
2. Deliver: Deploy AI-driven segmentation, establish real-time monitoring for regulatory adherence and embed compliance tracking into day-to-day decision-making.
3. Scale: Expand AI- and data-driven insights across the organisation, integrating compliance seamlessly into business strategy and long-term growth plans.

Firms that follow this trajectory will not only meet the regulatory bar but will also create more resilient, agile and client-centric businesses. 

Embracing the future of wealth management

The message from regulators is clear: wealth management must evolve. But firms that see Consumer Duty as a mere compliance hurdle will miss the bigger picture to drive profitable growth and enhanced client relationships. Those that embrace a data-driven, AI-enabled approach will be better positioned to serve their clients, grow their businesses and maintain regulatory confidence.

At L.E.K., we work with firms to navigate these complexities, ensuring compliance while unlocking new commercial opportunities. If you’re considering how to turn Consumer Duty into an advantage, please contact the team.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting. All other products and brands mentioned in this document are properties of their respective owners. © 2025 L.E.K. Consulting

Join L.E.K. Consulting’s Education Practice as we explore the defining trends that shaped the U.S. education sector in 2024 and examine the emerging investment opportunities for 2025. In this insightful webinar, Jitin Sethi, Managing Director and Head of L.E.K.’s U.S. Education Practice, and Laura Brookhiser, Managing Director at L.E.K.'s U.S. Education Practice, offer an in-depth look at the evolving U.S. education investment landscape and what lies ahead for investors and operators.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2025 L.E.K. Consulting LLC

Supply chain resilience is a critical challenge in the life sciences industry, where manufacturing disruptions can take years to resolve and directly impact patient care. The complexity of regulatory compliance, combined with long lead times for scaling production, makes proactive planning and risk management essential.  

Success requires deep operational expertise to build resilient supply chains that can consistently deliver critical treatments to patients. A pharmaceutical company engaged L.E.K. Consulting’s Operations and Supply Chain team to help address these challenges.

Tackling the resilience challenge

While all pharmaceutical companies must navigate complex manufacturing and regulatory requirements, the company’s siloed structure — managing drug substance, product and packaging independently — further complicated its situation.

As pharmaceutical pipelines grow more complex, with increasingly specialized treatments and global regulatory requirements, managing supply chains will only become more challenging. Rising costs and shifting market dynamics further underscore the need for proactive resilience strategies. For this company, several structural constraints made it even more difficult to build the necessary resilience into its supply chain:

• Manufacturing complexity: Contract development and manufacturing organizations impose high minimum orders and limited production flexibility.
• Qualification time: Adding production lines or suppliers requires 12-18 months of validation.
• Inventory costs: Safety stock for specialized products can reach tens of thousands of dollars per unit.
• Regulatory burden: Process or facility changes need extensive documentation and approval.

L.E.K.’s approach began with forming cross-functional teams for each product, conducting baseline assessments to align understanding as well as training teams on how changes affect upstream and downstream operations.

Mapping and modeling the supply chain

Detailed supply chain mapping revealed hidden vulnerabilities in the company’s siloed operations. Working backward from finished goods, the L.E.K. team created a digital representation showing how demand translated into capacity requirements.

This process uncovered critical constraints — some active pharmaceutical ingredient (API) production suites could only produce certain country-specific SKUs, while certain sterile fill-finish lines were restricted to specific API materials. These limitations showed how overlooked details could compromise resilience during disruptions.

During the engagement, a major disruption at a critical facility provided a real-world test of the supply chain’s resilience. The event threatened to halt production of multiple products, demonstrating how a single point of failure could quickly cascade throughout the network.  

This concrete example helped reinforce executive buy-in for implementing more robust contingency measures and extended coverage across the portfolio (see Figure 1).

After mapping and verifying the supply chain — including parameters such as batch size, frequency, storage requirements, shelf life and bill of materials — the team built an end-to-end network model using a digital twin. This model replicated complex supply chain interactions over time, allowing L.E.K. to dynamically measure how inventory levels (both work-in-progress and finished goods) responded to shifting demand and potential disruptions.

The analysis revealed several critical vulnerabilities:

• Single-source dependencies: Key components relied on suppliers without scalable capacity.
• Site concentration: Redundant capacity often existed within single facilities, creating sitewide risks.
• Overlapping redundancies: Backup production lines serving multiple products created bottlenecks.
• Packaging vulnerabilities: Single-source bulk packaging threatened country-specific SKUs.
• Warehouse risks: Single storage sites created upstream production failure points.
• Limited contingency plans: Most products lacked emergency plans for alternative production.
• Demonstrated capacity gaps: Capacity levels used in production planning were overstated and did not represent the proven output, accounting for production inefficiencies and bottlenecks. 

Turning insights into action

Resilience planning often feels nebulous, with generic solutions such as adding backup plans that fail to provide the specificity executives need. As well as investing in modular equipment, the L.E.K. team implemented other specific solutions across different product lines:

• Diversified suppliers: One product team established dual sourcing for critical components.
• Expanded redundancy: Another team invested in a mobile production lab, adding six months of buffer capacity.
• Created an inventory strategy: Targeted strategies brought inventory coverage from partial to full.
• Accepted strategic risk: Teams accepted certain risks where mitigation costs outweighed potential benefits.

The team approached investment decisions by prioritizing the value of protection over the likelihood of disruption. For example, when evaluating a $3 million investment to protect a $20 million revenue drug, the emphasis on ensuring patients never missed a dose justified the cost, underscoring the critical human impact behind the decision.

Delivering impact

The executive team gained clarity and confidence in understanding trade-offs and implementing solutions. During the engagement, the client made structural improvements that allowed the company to take immediate action, such as increasing the months of coverage for its average product, which provided critical breathing room to address disruptions. These early improvements laid the groundwork for implementing key longer-term strategies developed during the engagement:

• Implementing backup production lines and enhanced inventory strategies for high-priority products
• Launching supplier diversification initiatives to minimize single-source vulnerabilities
• Improving network resilience for proactive disruption management

Beyond these immediate actions, the client now has an advanced supply chain resilience model that enables ongoing scenario planning and risk management, ensuring the company can proactively adapt to future challenges. This approach not only protected critical operations and ensured continuous patient access to lifesaving therapies but also created a foundation for long-term supply chain resilience.

L.E.K.’s expertise in pharmaceutical and life sciences supply chains enables clients to achieve:

• Reduced supply chain disruption risk
• Decreased critical drug shortages
• Optimized network costs
• Enhanced supply flexibility
• Accelerated time to market for therapies
• Sustainable competitive advantages through operational excellence

To learn how L.E.K. can help build resilience in your supply chain and protect your ability to deliver critical therapies to patients, contact us today. 

L.E.K. Consulting is a registered trademark of L.E.K. Consulting. All other products and brands mentioned in this document are properties of their respective owners. © 2025 L.E.K. Consulting