Work to further improve supply chains and increase digitalisation continues as key focus areas
If you’d have to choose any industry that was likely to be well prepared for a pandemic, the pharma and life sciences industry would probably have been a prime candidate. And the results of Aon’s COVID-19 Risk Management and Insurance Survey would agree. Nearly half (45%) of those interviewed had a pandemic plan in place prior to the outbreak – compared to a benchmark of 31% across all sectors. This high level of preparedness has been reflected in a good level of resilience throughout the pandemic, with 55% saying that while they have been impacted their business has remained resilient.
Unlike some other industries, however, the pharma and life sciences industry has had clear winners and losers as a consequence of the COVID-19 outbreak. Indeed Aon’s COVID-19 Crisis Management Model outlines three timeframes of response to a crisis; ‘react and respond’, ‘recover’, and ‘reshape’, and more respondents in the pharma and life sciences industry (34%) indicated they remained in the initial ‘react and respond’ phase compared to the overall industry benchmark.
The winners…and the losers
The winners have been those companies at the forefront of the effort against COVID-19. Organisations involved in vaccine manufacturing, coronavirus therapeutics as well as virus testing have performed well during this period. Also, manufacturers of ventilators and PPE have seen growth in sales.
However, on the other side of the coin, the pandemic has led to a reduction in elective surgeries while organisations have had to delay clinical trials.
This differential in fortunes might explain the relatively high level of life sciences businesses who have been unable to move on from the ‘react and respond’ phase of their pandemic response to ‘recover’ and then to ‘reshape’.
Disrupted supply chains
Supply chain issues have also impacted life sciences harder (27%) than the all-industry benchmark (16%) reported in Aon’s COVID-19 Risk Management and Insurance Survey. This is an industry with a complex and heavily regulated supply chain and lots of companies are involved in getting a drug or a vaccine to a patient. Research and development and production, for example, are not always with the same company, while filling and labelling of drugs can also be outsourced.
With such a sudden and rapid increase in demand, it was perhaps inevitable that supply chains would be disrupted, particularly for those companies who have had to pivot and change their product mix so quickly. Despite these issues, there is a backbone of supply chain resilience in the sector with 43% reporting that their supply chains have been unaffected by the pandemic.
As well as dealing with supply chain issues, cost management has also been a significant concern. Some companies have suffered reduced margins compared to previous years, so they are revisiting how they can manage their costs. Redeploying and reorganising workforces as well as digitalisation will play a key role here. We have already seen that many of the businesses who have come out as winners over the pandemic have developed great digital platforms to, for example, interact with patients and physicians.
Recognising the need to manage costs will see more companies take another look at their business model in the ‘reshape’ phase of their pandemic response. If they are not doing well post-COVID-19, they may be thinking about accelerating digitalisation; how can they drive innovative treatments/services/products and focus on their core assets? In general, there has been a long-term trend in life sciences that has seen companies specialise while divesting their non-core assets. Technology acquisitions are likely to play a greater role as companies buy up tech businesses and strengthen tech partnerships. We’ve seen that before but it’s now an accelerating trend.
To find out more about the impact of the pandemic on the life sciences sector and how future decision making will be shaped, explore the full results from Aon’s COVID-19 Risk Management and Insurance Survey here.