Global life sciences industry merger and acquisition activity continues to soar. Large pharma brands are swallowing up smaller specialists and start-ups to fill gaps in their portfolio, or to accelerate access to adjacent markets/broader geographical territories. Meanwhile the contractor/service provider sector is experiencing its own consolidation, as the major consultancies and contract research organisations (CROs) look to expand their core activities by acquiring specialist regulatory and pharmacovigilance capabilities.
So what impact is this reduced choice having on the market? For patients, fewer drugs companies could affect supply and the price of the medicines which their lives, or their quality of life, depend on. Acquiring firms may review their newly enlarged portfolios and decide that some medicinal products are too niche and no longer worth investing in, or that prices must be hiked to compensate for lower volumes of sales. There are concerns too that market consolidation will threaten innovation in drug discovery, if big players prioritise shareholder dividends over societal ambition.
The service provider shake-up
Market consolidation is being felt further along the supply chain, too. The large business process service providers have identified new opportunities to expand into specialist regulatory reporting and pharmacovigilance (PV) services, as demand for support in both of these areas has increased substantially. At the same time, smaller focused regulatory affairs service experts have spotted an opening to diversify into PV solutions, and vice versa, accelerating the process by merging with complementary service firms. Other drivers of acquisitions include a desire to absorb new process, technology and data analytics capabilities at speed, to keep adding value for clients.
For life sciences firms looking to spread their risk as their support needs grow, the dwindling choice of service providers brings with it some practical concerns, however. Do their procurement teams really want to place all of their eggs in one basket? And can they be sure that size, scale and range of services will necessarily result in higher quality, expertise and experience across all disciplines?
Certainly life sciences firms will need to vet suppliers’ respective credentials to ensure their delivery capability is sufficient for their requirements. For instance, regulatory and PV services are not going to be a core competency for a large multi-service CRO or generic service organisation and, compared to a dedicated post-marketing surveillance and reporting service provider, these organisations may well have limited teams of people qualified in the latest European requirements, and so on.
Other questions to pose are to what extent service providers have successfully integrated their various systems, following a merger. Who is the point of contact now? If the acquired companies retain their original structure, who is in charge? How well blended are the various parties, really?
So, while size and scale may seem appealing, the devil is in the detail. It is worth considering service providers’ strategic direction too. If their acquisition plan is geared chiefly to challenging/competing with research organisations then, once again, client firms would be justified in questioning where the long-term focus of their time and investment will be. Will current service lines endure?
Delivery models and teams
On/offshore delivery models are changing too, of course. The economics of provisioning back-end services such as case – processing and medical writing are being steadily eroded, so the big multi-service agencies will increasingly have to look elsewhere for their process efficiencies.
Strategic application of technology will be important here. Yet, up to now, the major service providers have not typically used the most modern and dynamic approaches and tools for information management. They may talk theoretically about the potential for automation, but a ‘vision’ for artificial intelligence and other advanced technologies doesn’t necessarily equate to useful applications and visible benefits to the client in the here and now. And all too often the human involvement required for quality control undermines the promised ROI of advanced AI solutions.
A further consideration is the need for compatible cultures – the ‘fit’ of people – when life sciences firms are choosing service partners. In a volatile market, there is justified concern that over the course of a multi-year contract, the service provider and/or the client could undergo transformation following a merger or company restructuring. So the feel of the relationship may be very different in two to three years’ time.
These are all factors that firms must take into account when embarking on new contracts or service relationships: not just each party’s financial stability and business model; but also whether that organisation is likely to still exist and operate in its current form in three or five years’ time. If it’s a small, specialist service provider, might it have been absorbed by a large CRO, with an impact on approach, culture, people, service delivery and price? If the supplier is a CRO, considerations might include whether they continue innovating and investing in the given service area if other lucrative opportunities emerge in the intervening years which become a distraction.
Bid defence: a chance to scrutinise supplier strategies
The point is not to underestimate the impact of any shift in scenario, and to look for sufficient assurances about long-term strategy and delivery approach when calling on potential suppliers to defend their bids. This invaluable process, fairly unique to the life sciences industry, provides the only real chance for firms to get a feel for the people they’d be working with, what’s special about the way they work, the tools and techniques they employ, and so on.
Asking prospective suppliers to set out their vision and roadmap for continuous improvement is equally important. An experienced, good-quality, independent service provider will be able to talk through planned service innovation, and willing to challenge the way things are done today to provide better results tomorrow.
That might be by harnessing cloud-based software tools to simplify processes such as information gathering and client-partner collaboration, continuously adding new value and improving outcomes. Contrary to the hype at events and across the media, technology-enabled process innovation does not have to involve the latest bells and whistles. It could be something as simple as client portals and security-protected file management ‘boxes’/shared online folders – where project-focused parties dispersed across different locations can collectively build records in one place – without risk of duplicating or missing content because an individual didn’t receive or can’t locate a particular email.
Certainly, incremental innovation, in the interests of adding new value for customers, is something all organisations up and down the life sciences supply chain should be aiming for, in the name of progress and increased benefits for customers.
Being discerning will pay off in the long run, and as choices continue to diminish. The key is to keep asking the right questions.
Alan White is chief executive of Arriello, a global provider of market access, regulatory affairs and pharmacovigilance solutions and services for pharma and biotech