case study on pharmaceutical companies

You are using an outdated browser. Please upgrade your browser to improve your experience.

Please enable javascript to use our site

Inpharmation — Case Studies

Case studies.

• White Papers

Real-world evidence of delivering strategic insights to the pharmaceutical industry

Inpharmation runs global projects for the majority of top-50 pharmaceutical companies, across all major therapy areas., below you can browse a selection of projects showcasing examples of real-world strategic insights inpharmation delivers., to receive your full free copy of any case study:.

• Click on the business scenario that most interests you.
• Submit a request via the download instructions.

Delivering gene therapy pricing strategy where payer interviews had failed: The power of Behavior-Based Pricing

Our client had a novel “one and done” gene therapy for an ultra-orphan disease. Despite previous payer research, the client lacked direction in which patient segments to target, what list to net pricing strategy to take, and what net price they could achieve. They needed an efficient and quantitative solution to inform their key development […]

Informing pricing prospects for a gene therapy in-licensing deal

To in-license, or not to in-license? Our client wanted to evaluate the price potential of a promising new product. The indication had a high unmet need and there was potential for the product to be used in future combination therapies. A lack of analogues and tight timelines added further complexity to the project. Inpharmation’s combination […]

Second indication, a second chance?

Analogue-based pricing had previously failed our client. They now had just eight weeks to make a launch or no-launch decision for a second indication. An evidence-based approach was needed to prevent repeating past mistakes.

Where do you start with pricing when the future landscape is unknown?

Limited clinical trial data, multiple lines of treatment and a changing pricing landscape presented challenges for the pricing assessment of an innovative oncology asset. However, Inpharmation’s evidence-based techniques were able to provide a flexible solution within the customer’s tight timelines.

How a flexible approach to pricing research allowed a rapid change of direction when unexpected trial results emerged

A pharma company wanted to launch its asset into a second indication. However, just as Inpharmation’s research was coming to an end, unexpected clinical trial results were revealed. This required a rapid change in strategy.

One chronic illness, many unlicensed treatments and one pipeline asset: Where do you start with pricing?

A leading pharma company needed to understand the price potential of their novel first-in class asset. Without any direct comparators, they were unsure what price they could achieve and how payers were going to behave. Inpharmation’s evidence-based approaches provided the perfect solution…

A clinical advance with a novel mechanism of action: What will its uptake look like?

With no obvious analogues and mixed messages from previous demand and qualitative research, our client was unsure what their novel asset’s uptake would look like. Inpharmation had the ideal approach to provide validated insights and evidence-based results…

How preconceived ideas of sample size nearly soured a great project

Pharma Specific Conjoint offered an ideal solution for our client. However, the significantly smaller sample size, compared to that of discrete-choice conjoint, lead to the project being met with reservations. A solution was needed to demonstrate the accuracy of our methodology.

How a lack of analogues could have undervalued a promising in-licensing opportunity

High unmet need offered a promising environment for a new asset; however, with no obvious analogues to quantify price potential, an approach ideal for an indication with no current treatments was needed…

A promising cardiovascular treatment in a highly prevalent disease

A highly prevalent disease with existing inexpensive therapies presented a challenging pricing environment for our client’s cardiovascular treatment. To deliver the optimal pricing strategy, Inpharmation used a combination of primary and secondary pricing techniques.

How analogue-based pricing confused a team of pricing experts

Traditional analogue-based pricing and qualitative payer interviews left our client confused when pricing an asset in a previously untreated disease with an uncertain patient population. Behavior-Based Pricing provided much needed clarity by drawing upon thousands of real-world payer decisions.

• SUGGESTED TOPICS
• The Magazine
• Newsletters
• Managing Yourself
• Managing Teams
• Work-life Balance
• The Big Idea
• Data & Visuals
• Case Selections
• HBR Learning
• Topic Feeds
• Account Settings
• Email Preferences

Pharmaceutical industry

The CEO of Pfizer on Developing a Vaccine in Record Time

• Albert Bourla
• From the May–June 2021 Issue

Creating Breakthroughs at 3M

• Eric von Hippel
• Stefan Thomke
• Mary Sonnack
• From the September–October 1999 Issue

All the Wrong Moves (HBR Case Study)

• David A. Garvin
• January 01, 2006

White Coats, Black Scientists

• Dr. Kevin M. Ileka
• Courtney L. McCluney
• Dr. Renã A. S. Robinson
• September 23, 2020

The Marshmallow Test for Grownups

• September 15, 2014

Will Disruptive Innovations Cure Health Care?

• Clayton M. Christensen
• Richard M.J. Bohmer
• John Kenagy
• From the September–October 2000 Issue

Scientific Management at Merck: An Interview with CFO Judy Lewent

• Judy Lewent
• Nancy A. Nichols
• From the January–February 1994 Issue

Cane Mutiny: Managing a Graying Workforce (HBR Case Study and Commentary)

• Cornelia Geissler
• Norbert Herrmann
• Eileen A. Kamerick
• Dietmar Martina
• Barbara D. Bovbjerg
• From the October 2005 Issue

How Pharma Can Offer More than Pills

• Sachin H Jain
• July 23, 2015

Ending the War Between Sales and Marketing

• Philip Kotler
• Neil Rackham
• Suj Krishnaswamy
• From the July–August 2006 Issue

Why Good Projects Fail Anyway

• Nadim F. Matta
• Ronald N. Ashkenas
• September 01, 2003

The HBR List: Breakthrough Ideas for 2010

• Teresa M. Amabile
• Steven J. Kramer
• Ronald Dixon M.D.
• Lawrence M. Candell
• Eric Bonabeau
• Alpheus Bingham
• Aaron Schacht
• Jack D. Hidary
• Robert E. Litan
• Lesa Mitchell
• Bill Jensen
• Sendhil Mullainathan
• From the January–February 2010 Issue

Designing High-Performance Jobs

• Robert Simons
• From the July–August 2005 Issue

Designing Interactive Strategy

• Richard Normann
• Rafael Ramírez
• From the July–August 1993 Issue

3-D Negotiation: Playing the Whole Game

• David A. Lax
• James K. Sebenius
• November 01, 2003

Putting Customers in the “Wish Mode”

• Jason Magidson
• Gregg Brandyberry
• From the September 2001 Issue

All the Wrong Moves (Commentary for HBR Case Study)

• Christopher J. McCormick
• Ralph Biggadike
• Paul Domorski

A Blogger in Their Midst

• Halley Suitt
• From the September 2003 Issue

The Real Cost of "High-Priced" Drugs

• Michael Rosenblatt
• November 17, 2014

A New Approach to Safely Sharing Cancer Patients’ Data

• Kathy Giusti
• Richard G. Hamermesh
• June 21, 2017

Succession at Merck KGaA

• F. A. Neumann
• Josep Tapies
• October 10, 2006

Novartis Loses Patent Battle in India: Time to Realign the Business Model to Emerging Markets?

• Srinivas K. Reddy
• David Llewelyn
• Sarita Mathur
• October 13, 2015

Merck & Co., Inc.: Addressing Third-World Needs (D)

• Kirk O. Hanson
• Stephen Weiss
• January 01, 1991

Michael Ku and Global Clinical Supply at Pfizer Inc.: Bringing Hope to Patients (A)

• Linda A. Hill
• Allison J. Wigen
• Emily Tedards
• May 20, 2020

Merck: Managing Vioxx (D)

• Kathryn Rosenberg
• Natalie Kindred
• April 20, 2009

MannKind Corporation: Take a Deep Breath, This Time Afrezza Will Work

• August 04, 2017

Merck/Schering-Plough Merger (B)

• David F. Hawkins
• November 08, 2010

The "Wonder Drug" that Killed Babies

• Joshua Lev Krieger
• Tom Nicholas
• Matthew Preble
• November 13, 2017

Marketing Antidepressants: Prozac and Paxil

• Youngme Moon
• Kerry Herman
• May 14, 2002

The Coronavirus (COVID-19) Pandemic and the Global Economy (B)

• Alberto F. Cavallo
• Christian Godwin
• February 05, 2021

Dr. Reddy's Laboratories Ltd: Inventory Management Under Resource Constraints

• Milind Sohoni
• Sripad Devalkar
• Ravi Prakash Mathur
• Asrar Ahmed
• Mallika Priyadarshini
• Simerpreet Singh
• Shweta Singh
• November 10, 2020

Imprimis (C)

• Ramon Casadesus-Masanell
• Karen Elterman
• April 03, 2017

Health for All: Dr. Reddy's Laboratories and Rural India (B)

• Charles Dhanaraj
• Athanasios Kondis
• Chandrasekhar Sripada
• Padma Rajeswari Tata
• June 22, 2016

Richardson-Vicks--1985 (A)

• Kevin F. Rock
• March 21, 1988

The Purdue Pharma Bankruptcy: Settling the Opioid Crisis

• Kristin Mugford
• Carin-Isabel Knoop
• Susan Pinckney
• March 16, 2023

Eli Lilly: Developing Cymbalta

• November 27, 2006
• Kevin A Schulman
• Laura Little
• Samyukta Mullangi
• Stephen Schleicher
• May 05, 2016

CVS: The Web Strategy

• John Deighton
• Anjali Shah
• December 02, 1999

Targanta Therapeutics: Hitting a Moving Target

• Arthur A. Daemmrich
• January 13, 2009

The Wen Group

• John A. Davis
• Matthew G. Pillar
• September 13, 2011

The Opioid Crisis, CEO Pay, and Shareholder Activism

• June 06, 2023

Popular Topics

Partner center.

Reimagining medicine through data-led transformation

Novartis uses a multi-cloud data analytics platform to optimize operations and accelerate innovation.

5-MINUTE READ

Call for change

For pharmaceutical companies, data is in many ways the lifeblood of the industry. With New Science developments—such as genomics, molecular profiling, biomarkers and patient monitoring devices—more data sets are being generated than ever before. Additionally, new supply chain security, patient services and marketing capabilities are creating a treasure trove of operational, patient and healthcare practitioner data. All these advances will produce new data streams exponentially larger than what companies are currently dealing with. As they do so, the data’s value will exponentially grow. The data-thirsty personalized medicine market alone was valued at $493.1 billion in 2021 and is expected to grow at a 6.2% compound annual growth rate from 2021 to 2028.1

Elizabeth Theophille, Chief Technology Transformation Officer at Novartis and Dr. Petra Jantzer, Senior Managing Director, Global Accenture Partner for Novartis talk about Novartis’ Digital Transformation journey and how their Gartner award-winning, multi-cloud platform supports the big data and analytics strategy employed to ultimately Reimagine Medicine.

Novartis, an industry pioneer, has embarked on an ambitious transformation to become the leading medicines company powered by data science and digital technologies. It knows data are only as good as the tools used to analyze and exploit them. How could it make data from all the nooks and crannies of the business work to revolutionize operations, drug development and commercialization? How could it be ready for the data-rich demands of personalization and advances in new therapies like cell and gene therapies?

Accomplishing these goals was difficult with the company’s legacy IT system, data fragmentation and information silos. Novartis required the flexibility and scalability of cloud technology to consolidate data and support dynamic, future-ready technology that help improves collaboration, insights and innovation. An end-to-end data and analytics solution would offer a broader and deeper view of activities to make business and clinical decisions. The insights it yields would help reimagine medical innovation to get patients life-changing therapies, fast and at a lower cost.

1 Grand View Research, “Personalized Medicine Market Size, Share & Trends Analysis Report By Product (Personalized Medical Care, Personalized Nutrition & Wellness, DTC Diagnostics, Telemedicine, Complementary Medicine), And Segment Forecasts, 2021 – 2028,” May 2021, Grand View Research website , accessed October 4, 2021.

When tech meets human ingenuity

From tech giants to startups and academia, Novartis collaborated with a variety of entities including Accenture on a project with the potential to transform all aspects of the business. We first helped map the stakeholder business value for this journey then created the data and analytics operating model, governance, road map, architecture, centralized data catalogue and platform for a holistic solution that harnesses new technologies like artificial intelligence (AI) and machine learning (ML).

Working with Amazon Web Services (AWS) as the primary cloud provider, Novartis also engaged Microsoft Azure to create a multi-cloud platform, complying with the best clinical and pharmaceutical manufacturing practices and offering capabilities across functions. The powerful analytics capabilities enable Novartis to crunch large (and growing) data sets. At launch, approximately 35% of global company data was on the new platform, with the remaining data planned for migration.

Teams can also develop use cases for new analytics-related projects to explore and scale across the business. This helps teams experiment with potential analytics use cases to solve business challenges and profit from opportunities. In some cases, we help deliver the use case programs.

The platform ingests, unifies and refines more than 9TB of internal and external data from over 80 sources in Development, Commercial, Manufacturing and Quality, and Corporate Business Services at a rate 20% faster than legacy systems. The different types of data are put into a standardized format, which can then be used by teams from across the company to simplify reporting.

Novartis’ advanced analytics platform ingests, unifies and refines:

terabytes is the amount of internal and external data the platform ingests, unifies and refines.

sources in Development, Commercial, Manufacturing and Quality, and Corporate Business Services.

faster than legacy systems.

A valuable difference

Novartis is reinventing its business to drive faster decision-making and bold innovation. Teams now have a smorgasbord of analytics tools, supported by AI and ML, to simplify reporting, augment existing programs with data insights, or create new products and services.

“Data democratization” makes insights accessible to relevant users, efficiently balancing ethical, security and regulatory requirements without creating data bottlenecks. Easily interpretable data enable Novartis’ global workforce, partners and researchers to maximize collaboration, ingenuity and productivity. Novartis’ people and research partners use the new platform to cross-pollinate ideas and develop a library of innovative analytics use cases and data models to be applied across the business.

Previously, it took about two weeks to set up a new use case; now it can be done within one day. The use case development time has also accelerated from 10 days to three days. More than 200 use cases are in the pipeline and 36 are under development. Eleven use cases have been rolled out, including DESIRE, a tool for monitoring clinical trial site risk and performance. The benefits go beyond R&D to encompass all aspects of the business. A patient services use case, for instance, is helping Novartis mine call center feedback to improve marketing reach and campaigns.

Novartis has sparked a digital revolution within its business to support data-driven decision making, predict future trends, optimize operations and spur growth. As data from new sciences and medical technologies grow, Novartis has powerful tools to accelerate drug launches—and improve patient outcomes.

Use cases for new analytics-related projects that Novartis can explore and scale to solve business challenges and exploit opportunities:

from across Novartis in pipeline

up and running

days to development

day to set up

This solution has drastically transformed our business.

Loic Giraud / CoE Lead Business Analytics – Novartis

• Browse All Articles
• Newsletter Sign-Up

Pharmaceutical →

• 09 Feb 2024

Slim Chance: Drugs Will Reshape the Weight Loss Industry, But Habit Change Might Be Elusive

Medications such as Ozempic, Wegovy, and Mounjaro have upended a $76 billion industry that has long touted lifestyle shifts as a means to weight loss. Regina Herzlinger says these drugs might bring fast change, especially for busy professionals, but many questions remain unanswered.

• 01 Aug 2023
• Cold Call Podcast

Can Business Transform Primary Health Care Across Africa?

mPharma, headquartered in Ghana, is trying to create the largest pan-African health care company. Their mission is to provide primary care and a reliable and fairly priced supply of drugs in the nine African countries where they operate. Co-founder and CEO Gregory Rockson needs to decide which component of strategy to prioritize in the next three years. His options include launching a telemedicine program, expanding his pharmacies across the continent, and creating a new payment program to cover the cost of common medications. Rockson cares deeply about health equity, but his venture capital-financed company also must be profitable. Which option should he focus on expanding? Harvard Business School Professor Regina Herzlinger and case protagonist Gregory Rockson discuss the important role business plays in improving health care in the case, “mPharma: Scaling Access to Affordable Primary Care in Africa.”

• 25 Jul 2023
• Research & Ideas

Could a Business Model Help Big Pharma Save Lives and Profit?

Gilead Sciences used a novel approach to help Egypt address a public health crisis while sustaining profits from a key product. V. Kasturi Rangan and participants at a recent seminar hosted by the Institute for the Study of Business in Global Society discussed what it would take to apply the model more widely.

• 06 Jun 2023

The Opioid Crisis, CEO Pay, and Shareholder Activism

In 2020, AmerisourceBergen Corporation, a Fortune 50 company in the drug distribution industry, agreed to settle thousands of lawsuits filed nationwide against the company for its opioid distribution practices, which critics alleged had contributed to the opioid crisis in the US. The $6.6 billion global settlement caused a net loss larger than the cumulative net income earned during the tenure of the company’s CEO, which began in 2011. In addition, AmerisourceBergen’s legal and financial troubles were accompanied by shareholder demands aimed at driving corporate governance changes in companies in the opioid supply chain. Determined to hold the company’s leadership accountable, the shareholders launched a campaign in early 2021 to reject the pay packages of executives. Should the board reduce the executives’ pay, as of means of improving accountability? Or does punishing the AmerisourceBergen executives for paying the settlement ignore the larger issue of a business’s responsibility to society? Harvard Business School professor Suraj Srinivasan discusses executive compensation and shareholder activism in the context of the US opioid crisis in his case, “The Opioid Settlement and Controversy Over CEO Pay at AmerisourceBergen.”

• 26 Apr 2023

How Martine Rothblatt Started a Company to Save Her Daughter

When serial entrepreneur Martine Rothblatt (founder of Sirius XM) received her seven-year-old daughter’s diagnosis of Pulmonary Arterial Hypertension (PAH), she created United Therapeutics and developed a drug to save her life. When her daughter later needed a lung transplant, Rothblatt decided to take what she saw as the logical next step: manufacturing organs for transplantation. Rothblatt’s entrepreneurial career exemplifies a larger debate around the role of the firm in creating solutions for society’s problems. If companies are uniquely good at innovating, what voice should society have in governing the new technologies that firms create? Harvard Business School professor Debora Spar debates these questions in the case “Martine Rothblatt and United Therapeutics: A Series of Implausible Dreams.” As part of a new first-year MBA course at Harvard Business School, this case examines the central question: what is the social purpose of the firm?

• 28 Mar 2023

The FDA’s Speedy Drug Approvals Are Safe: A Win-Win for Patients and Pharma Innovation

Expediting so-called breakthrough therapies has saved millions of dollars in research time without compromising drug safety or efficacy, says research by Ariel Stern, Amitabh Chandra, and colleagues. Could policymakers harness the approach to bring life-saving treatments to the market faster?

• 12 Dec 2022

Buy-In from Black Patients Suffers When Drug Trials Don’t Include Them

Diversifying clinical trials could build trust in new treatments among Black people and their physicians. Research by Joshua Schwartzstein, Marcella Alsan, and colleagues probes the ripple effects of underrepresentation in testing, and offers a call to action for drugmakers.

• 06 Sep 2022

Curbing an Unlikely Culprit of Rising Drug Prices: Pharmaceutical Donations

Policymakers of every leaning have vowed to rein in prescription drug costs, with little success. But research by Leemore Dafny shows how closing a loophole on drugmaker donations could eliminate one driver of rising expenses.

• 22 Feb 2021
• Working Paper Summaries

Private and Social Returns to R&D: Drug Development and Demographics

Research and development (R&D) by pharmaceutical firms focuses disproportionately on medical conditions afflicting the elderly. The proportion of R&D spending targeting older age groups is increasing over time. Even though these investments in R&D prolong life expectancy and improve quality of life, they have little effect on measured productivity and output growth.

• 14 Dec 2020

What Does December's Drug-Approval Dash Mean for COVID-19 Vaccines?

Even in the best of times, pharmaceutical regulators tend to rush through drug applications in December. Now add in a ruthless pandemic. Research and insights from Lauren Cohen. Open for comment; 0 Comments.

• 28 Sep 2020

What Can Economics Say About Alzheimer's Disease?

This essay discusses the role of market frictions and "missing medicines" in drug innovation and highlights how frameworks and toolkits of economists can help our understanding of the determinants and effects of Alzheimer's disease on health.

• 01 Sep 2020

How to Launch a New Biosciences Product: Start Small or Dive in?

C16 Biosciences wants to replace palm oil, a major contributor to deforestation, with a lab-grown substitute. But CEO Shara Ticku faces a tough decision in bringing the product to market. Jeff Bussgang discusses his case study. Open for comment; 0 Comments.

• 10 Aug 2020

COVID's Surprising Toll on Careers of Women Scientists

Women scientists and those with young children are paying a steep career price in the pandemic, according to new research by Karim Lakhani, Kyle Myers, and colleagues. Open for comment; 0 Comments.

• 13 Jul 2020

Merck CEO Ken Frazier Discusses a COVID Cure, Racism, and Why Leaders Need to Walk the Talk

VIDEO: Ken Frazier, one of only four Black CEOs of Fortune 500 companies, speaks with Professor Tsedal Neeley about the search for a coronavirus vaccine, how racism at the workplace holds back America’s progress, and his own upbringing just one generation from slavery. Open for comment; 0 Comments.

• 09 Jun 2020

In a Pandemic, What’s the Best Strategy for the Global Vaccine Alliance?

How should the vaccine alliance Gavi respond to the worldwide need for a cure for the COVID-19 pandemic? Tarun Khanna discusses his case study. Open for comment; 0 Comments.

• 01 Jun 2020

Rebates in the Pharmaceutical Industry: Evidence from Medicines Sold in Retail Pharmacies in the U.S.

Retail pharmacy data illustrates it can be misleading to use list prices instead of net prices to understand pharmaceutical prices. Analysts and economists working in public policy should be extremely cautious in drawing policy conclusions based on list prices alone.

• 28 Feb 2019

Pursuing Precision Medicine at Intermountain Healthcare

What happens when Intermountain Healthcare invests resources in an innovative precision medicine unit to provide life-extending, genetically targeted therapies to late-stage cancer patients? Professors Richard Hamermesh and Kathy Giusti discuss the case and its connections to their work with the Kraft Precision Medicine Accelerator. Open for comment; 0 Comments.

• 12 Jun 2018

In a Landscape of 'Me Too' Drug Development, What Spurs Radical Innovation?

Pharmaceutical companies are criticized for not producing more breakthrough drugs. But new research by Joshua Krieger and colleagues shows that, given a financial windfall, drug giants turn on the innovation. Open for comment; 0 Comments.

• 21 Feb 2018

When a Competitor Abandons the Market, Should You Advance or Retreat?

Companies pay close attention when a competitor drops out of the market, according to new research by Joshua Lev Krieger. Too often, though, they come to the wrong conclusion. Open for comment; 0 Comments.

• 09 Feb 2018

Developing Novel Drugs

This paper contributes to our understanding of how financing constraints affect the direction of innovation in drug development. The authors develop a new measure of drug novelty based on molecular characteristics, and explore the tradeoffs involved in decisions to develop more novel therapies. Open for comment; 0 Comments.

Emerging from disruption: The future of pharma operations strategy

In the past, many pharmaceutical companies (pharmacos) deprioritized operations strategy in the face of competing business pressures. This is now changing. Factors such as the COVID-19 pandemic, inflation, geopolitics, new therapeutic modalities, and new ways of working make it vital for pharmacos to carefully reconsider their long-term choices in sourcing, manufacturing, and supply chain.

Now is exactly the right time for this renewed emphasis on operations strategy, as pharmacos emerge from two years of intense firefighting. Succeeding in pharma under these new and challenging conditions will require succeeding in operations.

The focus for operational leaders may need to shift from the prevailing emphasis on continuous improvement—including cost savings, quality assurance, and constant readiness to deliver—to longer-term external challenges. These include high inflation and an increase in complexity and risk, as well as the compounding effects these forces have on each other.

Pharma operations leaders now have an opportunity to deliver even greater value to their organizations by achieving this shift in focus, but they must act quickly to keep abreast of the challenges confronting the industry. The effort will require enormous mobilization and thoughtful prioritization. This task will fall to leadership; only the CEO and head of operations are in the right positions to make it happen.

This article explores the challenges facing pharma leaders and the steps they can take to develop a more strategic, long-term, and integrated approach to operations strategy. It presents questions leaders can ask as they design the solutions needed to make sure operations can protect enterprise continuity while still delivering to patients.

A perfect storm of external challenges

The pharma industry is facing a multitude of challenging trends (Exhibit 1). Global demand is growing rapidly, and the unprecedented need for COVID-19 vaccines and therapeutics has put additional pressure on the industry. The industry’s ability to find innovative solutions to deliver COVID-19 vaccines while still meeting overall demand is a remarkable achievement, but rising global demand is still a significant challenge for the industry in the long term.

The product landscape also is changing swiftly. New modalities, such as cell and gene therapy and mRNA vaccine technology, have increased from 11 to 21 percent of the drug development pipeline—the fastest growth ever seen in the sector. This change is likely to bring more fragmentation of technology, new supply chains, and unique product life cycles.

In addition to these industry-specific trends, pharma has also been affected by broader global trends, such as supply chain pressures. While the pharma industry is considered somewhat protected by its high inventory levels and long-standing dual sourcing, over a given ten-year period, the likelihood of supply chain disruptions still represents a potential loss of 25 percent of EBITA . Inflation has risen in recent months to levels not seen for decades, leading to increasing costs for labor, raw materials, and transportation. This is over and above the persistent price pressures pharma is already facing, particularly in generics. Since pharma customers are not expected to fully absorb these cost increases, profit margins are under pressure.

Meanwhile, increased state interventions and protectionist trade policies are creating new pressures on manufacturing networks and could drive increased regionalization. This would be a capital-intensive exercise: to regionalize just 10 percent of current vaccine trade in one particular geographical region, governments would need to invest an estimated $100 million.

Would you like to learn more about our Operations Practice ?

The pharma industry is also facing talent shortages linked to wider labor market trends, including the 20 percent increase in demand for STEM-related roles across the life sciences industry in the United States. The current pool of pharma digital talent is at least 14 percent lower than demand, and many companies are finding it challenging to recruit technical talent. Compounding this challenge is the rise of remote working, which has increased employee expectations for flexibility. In response, nearly all pharmacos are experimenting with hybrid working models.

A few major trends point to an industry tailwind; one of them is the advancement of digital and analytics tools. Digital tools, robots, and sensors are becoming cheaper and easier to access, and they can be used to capture all manner of raw data. In addition, edge computing and cloud analytics are providing real-time optimization and transparency. Pharmacos are working to leverage the power of data to become more agile and resilient. However, to date, no pharmaco has emerged as a true global leader in this field.

The pharma industry is facing a multitude of industry-specific and global trends. But a few major trends point to an industry tailwind; one of them is the advancement of digital and analytics tools.

Each of these global trends represents significant challenges in and of itself, and the trends may be compounded and strengthened through their interactions. This compounding effect can add to the complexity of evaluating an effective strategic response.

Major implications for pharma

These global trends have six major implications for pharmacos: rising operational complexity, increasing risk, shifting capability requirements, higher capital expenditure requirements, variable-cost increases, and opportunities for savings (Exhibit 2).

Operations leaders may need to become comfortable navigating a more complex ecosystem as they respond to increased operational complexity. Risks may increase due to rising environmental, social, and governance (ESG) expectations and skills gaps, while new modalities and digital acceleration will also likely lead to a shift in capability requirements. This could necessitate reskilling and upskilling of staff, as well as a renewed focus on recruiting from outside of the pharma industry.

From a cost perspective, the pharma industry may see significantly increased capital expenditure requirements related to the construction of new sites and new digital infrastructure. Increases are also likely in variable costs in areas such as raw materials, transportation, and employee attrition, reskilling, and salaries.

Future of pharma operations

Pharma companies are experiencing a wave of innovations – from new treatment modalities, to smart machines, advanced analytics, and digital connectivity.

Although these implications are challenging, they may represent possible opportunities for savings in several areas. For example, ESG commitments on waste reduction could reduce costs, as could successful digital implementation. However, the challenge lies in monetizing these cost savings, given that the industry has long created value largely through revenue expansion rather than through cost savings.

Rising to the challenge: Actions to deliver value

To respond to these challenges, pharmaco leaders may now need to emphasize the importance of their operations strategy. They should consider taking a longer-term view and scaling activity across four key themes: network strategy and resilience, digital, operating model, and talent.

Expand focus on longer-term, transformative solutions

Operations leaders can address these challenges through several short-term and long-term responses. For example, problems associated with a more unpredictable supply chain could be addressed with a short-term approach of increasing inventory or a long-term initiative to establish an end-to-end supply chain digital nerve center.

Short-term levers can be an important part of the total response but are insufficient to fully mitigate the challenges facing the industry. To respond effectively, companies may need to accelerate new ways of working and embrace long-term thinking. This will require concrete action with a focus on making sure that strategies are put in place to weather the long-term headwinds the industry is facing.

Accelerate and scale responses across four strategic domains

To identify the actions that pharmacos could take, it may help to group these in terms of four strategic domains: network and resilience, digital strategy, operating model and ecosystem, and talent strategy (Exhibit 3). While these themes are likely to be familiar to any business leader, they now require a substantial shift in mindset. Acting on them also calls for a large investment of resources.

• Plan for and manage future resilience and reliability needs . Recent supply chain disruptions have pushed supply chain resilience up corporate agendas. Companies have been forced into reactive modes that employ short-term levers like building inventory. However, companies could better position themselves by solving multiple variables and building resilience into their operations strategy through longer-term actions like network design and dual sourcing.
• Scale end-to-end adoption of digital and automation . Digital has proven itself highly valuable to pharma operations. However, many companies struggle to move from targeted, single use cases to a fully scaled suite of solutions. And while the adoption of full-scale digital solutions can require heavy investment—around $50 million to $100 million per year for two to three years—the rewards can include significant cost savings, improved quality, and increased resilience, as well as greater employee effectiveness. Companies that truly scale and implement digital can better protect themselves from the pressures of the forces increasing costs for the industry. More and more companies are moving toward network-wide and end-to-end digitization; to date, the World Economic Forum has recognized 103 as “lighthouses,” based on their advanced application of digital technologies . Johnson & Johnson, for example, has successfully launched multiple Industry 4.0 lighthouses, including some focused on end-to-end patient connectivity and order fulfillment.
• Expand adoption of end-to-end partner ecosystems . Companies could also consider changing their operating model from a traditional hub configuration around originators to an end-to-end ecosystem of true strategic partners. More than 50 percent of companies already expect to intensify their collaboration models with other industry players through, for example, service agreements, joint ventures, or eco­systems. Some are already in motion; examples include Pfizer and BioNTech, which have already established a strategic partnership in mRNA technology discovery, and AstraZeneca and Huma, which are collaborating to scale innovation for digital health. These partnerships are indicative of increasing collaborations throughout the industry across functions.

Automation, centralization, and new job requirements may affect nearly 90 percent of today’s workforce, and to deal with this challenge, companies could adopt effective long-term strategies. Retaining talent is challenging in the present environment, with the share of workers planning to leave their jobs in the next three to six months standing at 40 percent since 2021 . 1 Aaron De Smet, Bonnie Dowling, Bryan Hancock, and Bill Schaninger, “ The Great Attrition is making hiring harder. Are you searching the right talent pool? ” July 13, 2022. Strategies for talent retention should therefore be broad and focus on more than just salary.

A viable long-term solution to talent shortages may need to involve more than increasing wages to attract people. To solve structural talent gaps, companies could ensure long-term reskilling and upskilling of the existing workforce. For example, Roche runs an operations rotational program to attract top talent with bachelor’s and master’s degrees, and early in the COVID-19 pandemic, Novartis launched a “choice with responsibility” policy to improve overall employee experience.

Successfully developing a robust operations strategy is complex and requires dedicated resources with the ability to focus on the medium to long term. This means the C-suite will need to prioritize efforts and provide adequate resourcing. Only the CEO and head of operations can set the appropriate direction for their organization, steer their company’s effort, gather the right skills and teams, and manage complex interdependencies and resource-intensive interventions.

Are companies doing enough?

As COOs look to emerge from the disruption of the past two years, reflecting on several questions could help them evaluate their organizations’ level of preparedness to respond to the trends affecting the industry. The process could provide foundational answers to inform a renewed operations strategy.

• Have you projected the impact of today’s current trends on your business?
• Do you have a focused, skilled, and scaled operations strategy team that identifies, prioritizes, and deploys initiatives across different horizons?
• Are your resilience measures proactive and dynamic, and are they being built on talent and digital capabilities to achieve greater agility and reliability?
• Have you experienced greater access to innovation and flexibility as a result of expanding your services and strategic partnerships?
• Has your digital strategy created benefits across your network and transformed your operation from digitally enabled to digitally driven?
• Have you achieved ESG improvements, and do you have a broad, long-term road map for ESG commitments (beyond net zero)?
• Has your operating model been agile enough to adapt to rapidly changing operations requirements, such as new modalities and potential disruptions?
• Have you successfully transformed your operations workforce and comprehensively improved the employee experience?
• Do you have an established governance process that incorporates past lessons into future strategy?

Although the pharma industry has performed a remarkable feat in delivering COVID-19 vaccines while also meeting growing demand, current trends create a challenging environment for pharma­ceutical companies. Companies face greater costs, complexity, and risk.

Now is the time to rethink operational strategy to respond to these trends and remain competitive. Such change may have associated challenges and will require bold and innovative leadership. But if companies successfully implement new strategies, they could position themselves to take advantage of the industry’s remarkable growth.

Hillary Dukart is an associate partner in McKinsey’s Denver office, Laurie Lanoue is a partner in the Montreal office, Mariel Rezende is a consultant in the Miami office, and Paul Rutten is a partner in the Amsterdam office.

The authors wish to thank Joe Hughes and Jean-Baptiste Pelletier for their contributions to this article.

Explore a career with us

Related articles.

Against the odds: How life sciences companies excel in large transformations

Four ways to make sure your pharma manufacturing strategy delivers value

Operations can launch the next blockbuster in pharma