63% of life science companies believe the high cost of new drug development is among the emerging themes that will have the greatest negative impact on the sector in the next 3-5 years, according to Global life science risk report 2024 published today by WTW (NASDAQ: WTW), a leading global advisory, broking, and solutions company. This is leading to an increased focus on finding novel use cases for existing drugs, named by 66% as having a positive impact, as firms seek to launch new products and expand their international footprint.
The 2nd life science global survey asked 400 senior decision makers belonging to pharmaceutical, biotech and other life science sector companies how they manage emerging risks and how they are preparing for the future.
The survey also revealed that regulation and reputation risk have risen to the top of the life science agenda as companies feel pressure on a range of issues such as increasing regulatory activity post-Covid, U.S. drug price controls, rising data privacy concerns, ESG reporting requirements and product contamination. Changing or increasing regulation was named by 53% among their top external risks, up from 39% since the 2022 survey, while reputation was cited as a top risk both internally (47%) and externally (41%).
Other key findings include:
- Smart manufacturing (increased technology/automation in production) is seen as the sector’s leading digital transformation opportunity, with 47% of respondents including it among their top 5.
- Stockpiling and panic buying named biggest supply chain risk by 61% as more firms seek to bring operations in house.
- Difficulties attracting and retaining talent and aligning internal culture with strategic goals ranked as top obstacles to success.
- Intellectual property is the weakest area for risk management, with 44% declaring they have ineffective, inconsistent or non-existent processes.
Life science companies are also increasingly concerned about physical climate risks. Almost half of respondents (48%) said natural disasters were among their biggest supply chain risks, while 58% named lack of natural resources as main environmental concern. As well as water scarcity, this result may reflect the difficulty of sourcing water that is free of per- and polyfluoroalkyl substances, commonly known as PFAS.
Manufacturers are having to test for new contaminants to comply with a changing regulatory environment, including in active ingredients supplied by third countries, which adds a layer of complexity to risk management. A rise in litigation and claims related to contaminants adds to this concern, with 41% naming product contamination as a top internal risk factor.
“After the turbulence of the last few years, the sector is returning to traditional business priorities with companies looking to launch products and expand into new markets,” said Edward Hunter, Life Science Broking Leader (part of the Direct and Facultative GLoB), WTW
John Connolly, Life Sciences Leader for North America at WTW added: “But, as they do so, the risk profile of the sector is changing. New smart technologies, while increasing production efficiency, are creating more exposure to risks like data breaches and intellectual property infringements. Global instability and supply chain changes, coupled with increasing regulatory and reporting requirements, are adding to the complex risk landscape. Firms need to be aware of weak points in their risk management processes and remember that these new risks and liabilities might require bespoke cover.”
The complete report can be downloaded here.