The pharmaceutical industry has not been in the pink of its economic health since the outbreak of the novel coronavirus. Most of the leading drug-makers across the globe are staggering to close the gap in their supply chains and are exploring the option to manufacture the raw materials within their geography. Against this backdrop, SpendEdge’s Tridib Bora offers a holistic analysis of the current pharmaceutical industry, the possible risks faced, and the best practices from a procurement point of view that every stakeholder must consider in the current state of the health sector.
Among the key geographies, who do you think will be the worst hit owing to the uncertainties in the pharmaceutical industry caused by the coronavirus outbreak?
It is too early to issue this predicament. However, I will take the liberty to say that for countries where the pharmaceutical industry serves to be one of the highest revenue-generating sectors, the impact will be more prominent. Regular phases of drug development drive the demand growth in the pharmaceutical industry. However, to do so, drug manufacturers from certain geographies are highly dependent on the low-cost imports of raw materials. To optimize the manufacturing cost and to harness the potential of the skilled workforce in low-cost countries, most of the developed nations tend to outsource the manufacturing functions to APAC countries such as China and India. The recent turn of events has put a lid on the manufacturing process as well as the supply of the drug intermediates and APIs in China. This is resulting in immense supply chain complexities which will exert a negative impact on the pharmaceutical industries in developed nations like North America and Europe.
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Will this impact on the pharmaceutical industries across the leading economies hurt the growth prospects of the global pharmaceutical industry?
Not entirely. Complexity does not necessarily cull the prospects of growth in any sector. There is no denying the fact that the outbreak of coronavirus will herald procurement and category management complexities in the pharmaceutical industry but it will not block the funnel of investments in this industry. With the number of contaminations increasing, the drug makers are on a war footing to develop an antidote to treat coronavirus. This will lead to steady demand growth for clinical research and pharmaceutical drug development service providers. Government authorities across regions are holding meetings to counter the impact of the supply shortage of drug intermediates and APIs from China. Countries in Europe are resorting to stockpiling drug raw materials in bulk to avert a sudden supply shortage. These factors will continue to drive procurement in the pharmaceutical industry. Sales of wearable medical devices such as face masks are skyrocketing with days in areas that are vulnerable to the outbreak of coronavirus. Medical tests are becoming an essential part of the daily regimen for individuals travelling across geographies which is driving demand in the lab consumables market. It is safe to say that despite the procurement complexities, it will take more for the growth prospects in the pharmaceutical industry to hit the dire straits.
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What are the procurement best practices you suggest to deal with the perceived complexities in the pharmaceutical industry against the backdrop of the outbreak of coronavirus?
One of the immediate complexities that I see will trouble the players in the pharmaceutical industry is a disruptive supply chain. Ineffective sourcing will worsen its impact on the growth prospects. However, while sourcing from countries like China that are the manufacturing hubs for bulk drug raw materials, it is imperative for buyers to involve the suppliers in their inventory planning. It is a recommended procurement best practice for buyers to seek suppliers’ assistance in demand forecasting to decide the quantity to be pre-ordered and preserved which will play an important role in addressing supply shortage as well as control storage costs.
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Bulk drug raw materials procured from countries that have experienced the outbreak of coronavirus have high chances of contamination. To detect the same at an early stage, it is imperative for buyers to incorporate GDP throughout the supply chain. This enables traceability and assurance in the quality of products.
It is worthwhile to mention that SpendEdge’s recently done procurement intelligence reports on a range of products and services in the pharmaceutical sector have identified the main procurement pain points and other risk factors faced in the global pharmaceutical industry and enlisted the procurement best practices to be adopted in this industry.