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  • Preparing the Supply Chain Pharma Needs

    Preparing the Supply Chain Pharma Needs

    A.T. Kearney Pharma Supply Chain Panel 2014

    Pharma supply chain managers should have complexity reduction, end-to-end inventory management, supply chain segmentation, and greater agility at the top of their agendas.

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    We asked the participants in the A.T. Kearney 2014 Pharma Supply Chain Panel—more than 30 large global pharmaceutical companies, representing six of the world’s 10 largest companies in the sector—about their supply chain performance and priorities for the year ahead. Our study shows that many pharmaceutical firms have significant potential to improve across the main supply chain areas:

    • Customer service levels at the best pharma companies are world-class, at just a shade below the best consumer goods companies. Average levels, however, are 5 percent lower, and even seemingly small service-level differences of just 2 percentage points can translate into 80 percent fewer stock-outs at non-generic prescription drug firms.
    • Forecast accuracy is important to keeping inventories low—and production stable. Volatile demand and complex finished goods portfolios can make this a daunting challenge. Several companies (particularly non-generics) seem to have mastered the art, but the average pharmaceutical firm is far from a state of excellence. 
    • Total inventory at best-in-class consumer goods firms accounts for 70 percent fewer days of sales than at most pharma companies. Even the highest-performing members of our panel have not managed to reduce the gap to fewer than 61 days (that is, about 34 percent).
    • Total supply chain costs (as a percentage of COGS) at average performers present a 40 percent difference from the best pharma industry supply chains—which, at around 10 percent, are comparable to those of best-in-class consumer goods companies. Thus, supply chain costs at most pharma companies could be reduced by as much as 7 percentage points.

    While our study may have provided participants with concrete evidence of where and by how much they can improve their supply chains, most already have an intuitive sense of the areas that need to be addressed. More than three out of five respondents said that they will initiate or reinforce initiatives to reduce complexity and optimize inventories across the supply chain. Nearly half intend to address supply chain segmentation, and more than two in five will tackle agility. Customer centricity and emerging markets, although not on our panelists’ list of top five priorities for 2014, are two important topics that supply chain organizations in the pharmaceutical industry need to have on their radar screen.

    Addressing these topics is challenging indeed, but it is the only way to reach best practices. Industries such as consumer goods have proved that the effort pays off.

  • What Does the Future Hold for Medtech?

    What Does the Future Hold for Medtech?, 10 July 2014

    The structural trends impacting healthcare, and more specifically the medical device and diagnostics industry, today are unmistakable, disruptive, and transformational—more so than at any other time.


  • Prospering in a New Age of Medical Innovation

    Prospering in a New Age of Medical Innovation

    Health providers need to focus as much on influencing patients’ beliefs and behaviors as on treating their ailments.

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    Today, we are squarely in the third age of modern medicine, when the affordability and value of treatments have come to the forefront. So although the pharmaceutical industry is rightly upbeat about many of the innovative medicines coming through in areas such as cancer and hepatitis C, long-term prosperity can only come from exploiting the changing technological and social landscape to create far greater value.

    The growth of chronic disease has been largely driven by the behavior and lifestyle choices of an increasingly affluent world. The only way to control the growth is to modify these behaviors. Treatments in the third age will need to become much more holistic and seek to actively involve patients in their own treatment. Interventions will consist of a combination of pharmaceutical, behavioral, nutritional, and digital technologies.

    In sum, a far broader view of medical innovation will be required—one that encompasses new technologies based on fields of science that are barely understood or not yet widely accepted as part of the medical paradigm.

  • A World Where Products Go to Consumers Emerging

    A World Where Products Go to Consumers Emerging

    Chain Drug Review, 16 June 2014

    Direct to consumer retail models are a potential threat to community pharmacies, but with their neighborhood locations pharmacies are positioned well to excel at home delivery.
    By Bob O’Meara, Raj Kumar and Vishwa Chandra


  • Nutraceuticals: The Front Line of the Battle for Consumer Health

    Nutraceuticals: The Front Line of the Battle for Consumer Health

    Nutraceuticals represent one of the most exciting areas of health innovation, but achieving full potential will require all stakeholders to adapt.

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    Consumer healthcare has become the battleground where pharmaceutical and consumer goods firms compete for growth. With more people around the world dying from obesity than starvation, poor nutrition is now recognized as a major risk factor for chronic diseases. Most health systems are ill-equipped to deal with this trend. Increasingly, patients are being encouraged to take part in their own treatments, and a consumer market has been developing midway between the supermarket-based world of consumer goods companies and the scientific, pharmacy-based world of pharmaceutical firms.

    The front lines of this battle are nutritional products that have been proven to help prevent or cure disease. These “nutraceuticals” present a tantalizing opportunity for breakthroughs to prevent and manage common health problems, offering consumer-focused solutions to issues that are currently addressed only by pharmaceutical interventions—or not at all. However, despite being a hot spot for growth, they still suffer from the same challenges as the rest of the sector, with market growth barely keeping up with the rise in gross domestic product.

    In this paper, the third in our Winning the Battle for Consumer Healthcare series, we delve further into the nutraceuticals market to understand the opportunities and barriers to growth. We also look at the successes and challenges faced by both consumer goods and pharmaceutical companies as they strive to gain the upper hand in this promising new market.

  • Transforming the Medical Devices Industry through Unique Device Identification

    Transforming the Medical Devices Industry through Unique Device Identification

    MDT, 27 January 2014

    It is important to understand how to not only meet the requirements set forth by UDI, but also exceed them, properly harnessing transformation into opportunity. 


  • Drug Chains Can Flourish in an Omnichannel World

    Drug Chains Can Flourish in an Omnichannel World

    Chain Drug Review, 6 January 2014

    Chain drug stores have the ability to flourish in a world of e-commerce if they learn to properly harness their key advantages, including immediacy and experience.  


  • Mobile Health: Mirage or Growth Opportunity?

    Mobile Health: Mirage or Growth Opportunity?

    View study abstract and view the full report.
    Mobile health presents risks and opportunities for pharma and medtech companies.

    Abstract | More

    With chronic disease on the rise in an aging population and advances in medical technology straining the system, Germany’s healthcare system is facing rising costs. Mobile health (m-health) is a technology that will not only help ease this situation for companies in the health industry, but also revolutionize patient care and bring long-term growth. A branch of the e-health market that includes the use of mobile technologies for health services, m-health is applied primarily in the remote monitoring of patients with chronic diseases.

    As the Internet becomes ubiquitous through smartphone and tablet use, the hopes for m-health are high. This paper examines the true potential of m-health for various players in the German healthcare system—particularly those in the pharmaceutical and medical technology industries. Among the key questions answered are:

    • What is the mobile health promise?
    • Why is mobile health still waiting for its big breakthrough?
    • How attractive will the mobile health market be for the German health industry in the future?
    • How can the pharmaceutical industry profit from the mobile health market and what opportunities does m-health present for the medical technology industry?
  • Thriving in an Era of Disruptive Change

    Thriving in an Era of Disruptive Change

    The dominant theme of the coming era is likely to be innovation in the delivery and coordination of care.

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    The unconventional collaboration of the more than two dozen senior executives who participated in the Healthcare Innovation Roundtable—most had never met—prefigured the shape of healthcare to come. The roundtable, an A.T. Kearney partnership with the Center for Healthcare Innovation (CHI), brought together executives from multiple points in the healthcare value chain—payers and providers, big pharma, biotech, startups, academics, and venture capitalists.

    The group’s animated conversation was given structure by the Healthcare Disruptor Study, an A.T. Kearney-led analysis conducted with executives across the healthcare ecosystem that identified the forces reshaping the industry, and their candid exchanges illuminated the product and process innovations cropping up in every sector of healthcare.

    The dominant theme of the coming era is likely to be less a story of blockbuster drugs than of innovation in the delivery and coordination of care.

    The new era of healthcare will be characterized by frequent, even bold, partnerships between established and nontraditional collaborators. The ferment of new thinking at the October 2013 roundtable raised many topics with rich potential for deeper investigation, forming the foundation for an ongoing series of roundtable discussions over the course of the next several years.

  • It's Time for a Step Change in Pharma Operations

    It's Time for a Step Change in Pharma Operations

    View study abstract and request the full report.
    The pharmaceutical industry can unlock $135 billion in value by learning from leading CPG firms.

    Abstract | More

    The competitive landscape of the pharmaceutical industry is changing dramatically. Sales are slowing, innovation is losing its punch, and complexity is rising in markets and technologies. The old pharma paradigm of a pure focus on innovation and markets is changing; price, cost, and service are beginning to matter more. As a result, the economics of the industry are changing, and operations is becoming a differentiating factor in the competitive landscape. Leading Big Pharma companies understand the new rules of the game and have started investing heavily in improving capabilities and shifting paradigms in operations. They are seeking to be first in this race. Pharma companies that want to be on the winning end must follow suit.

    Comparing pharma’s operations with that of the consumer goods industry shows significant opportunities for pharma to improve in all major operations areas, including service, inventory levels, efficiency, quality, and innovation speed. By taking a page from the operational practices of consumer goods firms, the pharmaceuticals industry can unlock billions of dollars in value. They can make a step change in performance without reinventing the wheel, while still continuing to support the pharma industry’s economics.

    The value of this endeavor is enormous. Assuming an operational transformation that merely cuts the performance gap with the consumer goods industry by only half, a typical pharma company could increase its earnings margins by 7.5 percentage points and free up inventory worth roughly 11 percent of one year’s sales. A firm with about $24 billion in sales—the average sales for a top-20 company in 2012—could unlock roughly $1.8 billion in yearly earnings and $2.6 billion in cash from working capital reductions. Over the whole industry, this would equal $135 billion in additional cash.

    There is no silver bullet that magically brings results. Reaching world-class performance in pharma requires a holistic transformation based around a four-pronged “battle plan”: operations strategy, planning and reporting, execution, and people management. Within each theme are the moves pharma executives can make to create an immediate impact on their results and build a growing, long-term advantage.

  • video Are You Really Ready for UDI?

    Are You Really Ready for UDI?

    Learn more about FDA UDI compliance.

    Rajeev Kapoor and Chris Paddison, A.T. Kearney partners, describe how the medical device industry will be transformed by the enhancement of products and packaging with Unique Device Identifiers.

  • Digital Healthcare or Bust in America

    Digital Healthcare or Bust in America

    Digitization could be a major opportunity for healthcare industry players—if they take the right steps.

    Abstract | More | PDF | iPad | Kindle

    Forecasting the future of any industry is difficult, none more so right now than healthcare in the United States. There are countless reasons why healthcare will look different in the near future, not least of which being the country’s movement toward national coverage. However, digital transformation—the cumulative change that comes when digital technologies are introduced wholesale into an established industry—is poised to have an even bigger impact. For the U.S. healthcare industry, digital technology will be transformational, cutting healthcare delivery costs, eliminating errors through improved electronic medical records, and establishing routinized, evidence-based approaches to treatment.

    Digital forces are pulling at the industry and significantly altering services, products, innovation, delivery, and remuneration (see figure). There are digitally integrated healthcare providers, digital medical devices and technologies, and digital delivery and monitoring of home healthcare. In addition, new ideas are emanating from developing markets, agile competitors are embracing technology, and a digital-friendly federal administration is pushing innovation. And don’t forget the digital consumer who is used to digital banking, digital retailing, and digital education, and expects digital healthcare.

    Digital represents a tremendous opportunity—and a significant threat—for the various participants in the U.S. healthcare industry. No one in this industry can afford to fall behind. This paper examines how the healthcare industry can capitalize on digitization.

  • Less Detail, More Retail

    Less Detail, More Retail

    Pharmaceutical companies that effectively engage pharmacies and wholesalers can increase mature drug sales by 5 to 25 percent.

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    Retail pharmacies are no longer mere dispensaries of whatever a physician cares to prescribe. In many markets today, pharmacists can determine which laboratory’s product they will offer a patient with an INN prescription and which companies’ generic products they will stock. Gone, then, are the days when pharmaceutical companies could safely dedicate the bulk of their sales effort to sales calls to doctors and delegate their commercial relationship with the pharmacy to wholesalers.

    In many countries, drug companies are taking a page from the playbook of consumer goods manufacturers, pulling closer to the retail pharmacy by developing and delivering a value proposition tailored to its needs. An effective, pharmacy-centered strategy relies on a studied mix that includes sales representatives, online tools, and call centers.

    But although the retail pharmacy is the main target of a commercial trade channel (CTC) strategy, a full approach must also consider wholesalers and other stakeholders that intervene in drug dispensation, such as hospital pharmacies and dispensing physicians—and also patients.

  • The Modern Retail Pharmacy and mHealth

    The Modern Retail Pharmacy and mHealth

    Chain Drug Review, 30 September 2013

    The pharmacist’s role is changing with the introduction of mHealth, increasing their ability to incorporate mobile and wireless devices into their daily toolboxes to support patients and promote health.


  • Building Value-Based Healthcare Business Models

    Building Value-Based Healthcare Business Models

    As healthcare systems begin to pay for outcomes rather than products, smart patient-centric services will play a key role.

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    The pharmaceutical and medical technology industries survived the recent financial crisis relatively unscathed, but they are being transformed nonetheless as healthcare systems switch their reimbursement model from paying for products or services to rewarding clinical and health-economics outcomes. The task the industries face—demonstrating value based on a product focus—is far from simple.

    For one thing, there are inherent limitations to the value a single drug can bring to the management of complex, chronic diseases. Moreover, providing better health outcomes in exchange for fewer resources means that medications and interventions must be targeted to the right patients. Most importantly, perhaps, recent value-based price negotiations have revealed a dramatic lack of trust on both sides of the table.

    The outlook may be muddled, but one thing is clear. Players will need to radically adapt—or lose margins in defense of an old business model and leave the next wave of healthcare innovation to others.


In the News

Read insights from A.T. Kearney consultants quoted in the media. 

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