Despite inflationary pressures and ongoing challenges in the geopolitical landscape, expectations are high regarding the biopharmaceutical industry’s growth prospects. A survey conducted by third-party logistics company ICS revealed that 93% of respondents predict growth in the sector, with the highest levels of optimism recorded amongst respondents in Asia-Pacific and North America. According to GlobalData, biotech funding is showing signs of recovery, and supply chain disruptions are decreasing in their intensity. After a difficult few years, is the industry poised to transition from a state of recovery to one of prosperity once more?
Of course, significant challenges remain. According to ICS’s research, biopharmaceutical professionals identified regulations, cybersecurity, and pricing pressures as the top three risks facing the sector over the next three to five years. Indeed, 50% of manufacturers identified stringent regulatory and compliance requirements as one of the biggest drivers of change, with 17% ranking it as the number one driver. There are numerous examples of regulatory agencies tightening the rules in recent years, from increased scrutiny over drug approvals to the FDA’s recent enforcement of The Drug Supply Chain Security Act (DSCSA), which requires prescription drug products to be serialized with a unique product identifier.
Cybersecurity threats are another rising issue due to the potential they bring for major operational disruptions and data breaches, which come with severe reputational damage. Numerous high-profile cyberattacks have hit the industry over the years – the most notorious being the NotPetya ransomware attack on Merck in 2017, causing large-scale disruption to the company’s sales, manufacturing, and R&D. In the survey, 50% of respondents ranked cybersecurity as a top five risk for the pharma/biopharma manufacturing sector in the coming years.
Meanwhile, pricing pressures are a persistent challenge for biopharmaceutical companies, who spend an average of $172.7 million on bringing a new drug to market, according to a recent study[1]. When cost of failures was included, this increased to $515.8 million, and to $879.3 million when including both drug development failure and capital costs. With the study also revealing the ratio of R&D spending to total sales to have increased from 11.9% to 17.7% from 2008 to 2019, it is unsurprising that 13% of respondents in the ICS survey identified drug pricing as their biggest concern over the coming years. The industry’s reaction to the Inflation Reduction Act (IRA), which was introduced in 2022 in the US, has magnified these pressures due to concerns over its potential to lower revenue from Medicare sales for pharmaceutical companies.
The growing importance of third-party logistics
Another key finding of the survey was the industry’s reliance on third-party logistics (3PL) providers. By outsourcing logistics operations to expert companies, pharmaceutical manufacturers can enhance supply chain efficiencies and reduce costs, all while focusing on their core operations. The reliance on 3PL providers is expected to grow in the near future, with 91% of the surveyed manufacturers foreseeing an increase in their volume of business with 3PL partners.
In addition to the key advantages around efficiency, cost reduction, and quality, the growing need for 3PL services makes even more sense when considered alongside several of the major industry opportunities highlighted in the survey. For example, advancements in supply chain management were identified as a top priority and opportunity for pharmaceutical manufacturers, and this is an area that 3PL providers are perfectly positioned to support. To this end, sophisticated data analytics tools are expected to play a big role in improving forecasting accuracy and optimising inventory management, and many 3PL providers have made significant investments into these technologies in recent years.
Another example is the importance of market expansion, which was identified by 45% of the surveyed manufacturers as a key opportunity in the next three to five years. With their global reach, 3PL providers can help to facilitate seamless entry into new markets. A good 3PL partner will also provide the local expertise needed to navigate country-specific regulations.
With increasing need for 3PL providers, there is a growing number of companies offering these outsourced logistics services. So, how can pharmaceutical and biopharmaceutical companies evaluate these potential suppliers, and what are the important things to look for when selecting a new partner? This question was explored in the ICS survey, which revealed technology innovations, adaptability to market trends, and performance standardisation to be the three most important areas when sourcing 3PL suppliers.
Part of the Cencora group, ICS is a leader in the North American 3PL landscape, providing proven, innovative solutions that deliver results for its pharmaceutical and biopharmaceutical customers. The company starts with a consultative approach and then builds a tailored, scalable solution that drives efficiency and enhances compliance throughout the supply chain. Adhering to the highest quality and compliance standards and leveraging cutting-edge technologies such as real-time data tracking, ICS constantly adapts to technological advancements, regulatory changes, and shifting customer demands. In an industry where 38% of respondents prioritise adaptability in a 3PL partner and 43% emphasise the importance of technology innovation, these are just a few reasons of many why ICS is set up to help your business excel in this dynamic era of pharmaceutical manufacturing.
To access the full research report with detailed survey findings, please download below.
[1] https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2820562
