Economic pressures force rethink from life sciences

Life sciences companies are facing unprecedented pressure from governments and insurance companies to demonstrate value for the products they develop, according to the 2009 Ernst & Young business risk report, Life Sciences.

And this pressure is likely to continue in the years ahead, as governments and insurers confront mounting healthcare costs, a shrinking tax base, ageing populations, and a mandate to provide care for a larger pool of citizens.

The need to meet increasingly stringent demands for reimbursement has been exacerbated by the global economic downturn, with companies both large and small having to sharpen their focus on how they manage scarce capital, boost r&d productivity and build long-term shareholder value.

"Pharmaceutical companies need to demonstrate they are not innovating in a black box but show a direct link to both the eventual commercial value to the shareholders and the clinical value to the customer, such as taking detailed health outcomes data to the heart of the early stage r&d decision making process," said Pamela Spence, UK pharmaceutical sector leader at Ernst & Young.

The report also highlighted the importance of maintaining integrity in the global supply chain. With alliances and outsourcing becoming more common, pharma companies are being exposed to new risks to their reputation and brand.

"To gain competitive edge, companies need to be more collaborative with third parties," added Spence. "In this environment, third party supplier health should be regularly discussed at senior levels. Boards need to be comfortable with the control, assurance and compliance environment of the companies they are ultimately responsible for and constantly evaluate the risk profile in this area."