Elevating Pharma: Strategies for Success Amidst Global Industry Shifts
Prathyusha Pitta. Ph.D., MBA
Senior Manager at EY- Parthenon | Pharma Strategy & Transformation | AI & Digitalization | IIM
The pharmaceutical industry, a critical player in global healthcare, is experiencing a transformative period with far-reaching implications. Six major trends are shaping the landscape for pharmaceutical companies, presenting both challenges and opportunities. Let's delve into each of these trends, supported by economic data and statistics, to gain a comprehensive understanding.
1.Advances in AI and Digital Technology:
The integration of artificial intelligence (AI) and digital technology is a game-changer for the pharmaceutical sector. According to a report by Accenture, AI applications in drug development can potentially save the industry $150 billion annually by 2025. The willingness of users to adopt these technologies is evident in the increasing use of telehealth services. The global telehealth market is projected to reach $559.52 billion by 2027, reflecting a CAGR of 25.2%.
2. New Work Expectations:
As the world adapts to new work expectations, the pharmaceutical industry is no exception. Remote work has become a prominent feature, influencing employee expectations and work culture. According to a survey conducted by one of the big 4's, 83% of pharmaceutical executives plan to make remote work a permanent option. This shift poses challenges but also opens avenues for global talent acquisition, potentially diversifying skill sets within the industry.
3.Rising Inflations:
Inflationary pressures impact all industries, and pharmaceuticals are no exception. The rising cost of raw materials, labor, and transportation contributes to increased operational costs. According to the World Bank, global inflation is projected as 3.3% in 2023. Pharmaceutical companies must adapt strategies to manage these inflationary pressures, emphasizing efficiency and cost-effectiveness.
4.Supply Chain Disruption:
Supply chain disruptions have become a recurrent challenge, affecting the pharmaceutical industry's operational resilience. The COVID-19 pandemic exposed vulnerabilities, prompting a reevaluation of supply chain strategies. According to the Global Institute, pharmaceutical companies could reduce supply chain costs by 35% through digital transformations, mitigating risks associated with disruptions.
5.Pressure to Innovate:
Innovation is the lifeblood of the pharmaceutical industry, and there is a growing pressure to innovate at an accelerated pace. Research and development expenditure in the industry reached $186 billion in 2020, according to Statista. Companies that successfully navigate this pressure to innovate are likely to gain a competitive edge, contributing to the industry's overall growth.
6.Diffusion of Individual Players' Power:
The pharmaceutical landscape is witnessing a shift in power dynamics. With the rise of biotech startups and increased collaboration across the industry, individual players' power is diffusing. According to a report by one of big 4's, pharmaceutical companies are increasingly engaging in partnerships and collaborations to access specialized capabilities and resources.
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7.New Modalities:
The emergence of new modalities, such as mRNA technology, is reshaping the pharmaceutical landscape. The global mRNA vaccines market is projected to reach $17.2 billion by 2027, according to a report by Grand View Research. Pharmaceutical companies need to adapt to these innovative modalities to stay competitive and address evolving healthcare needs.
8.Labor Market Challenges:
The pharmaceutical industry is facing challenges in attracting and retaining talent. 2023 estimates suggest that the total annual attrition rate varied between 3 and 44% while the voluntary annual attrition rate varied between 0.3 to 28. The pharma sector also has a low average annual turnover rate of 10% and a low absenteeism rate of 1.8 days per year2. The demand for skilled professionals is growing, and companies need to address labor market challenges to ensure a robust workforce. The industry's ability to attract talent is crucial for driving innovation and sustaining growth.
Conclusion:
As pharmaceutical companies navigate these global trends, strategic adaptation becomes imperative. The convergence of advancing technologies, changing work dynamics, economic factors, and industry-specific challenges demands a holistic approach. By embracing innovation, optimizing operations, and fostering collaboration, the pharmaceutical industry can not only overcome challenges but also thrive in an era of unprecedented change.
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-- PP (Prathyusha Pitta)
References
Doctor (Retired) | EX- Chief of Govt Pharmacy Pondicherry | Ex - Director of Pondicherry Indian System of Medicine
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