Pricing pressure identified as top risk facing global life sciences sector - Ernst & Young survey

The health sciences sector has been impacted globally with the economic downturn which has created pricing pressure risk for healthcare companies, according to The 2009 Ernst & Young Global business risk report.

The report highlights that in the coming year?s healthcare players will need to emphasize even more on value demonstration as they are confronted with mounting healthcare costs, a shrinking tax base, aging populations and a mandate to provide care for a larger pool of citizens.

The 2009 global report, based on interviews with some of the sectors? leading CEOs, analysts, commentators and academics, identified capital allocation and capital access as the second big risk globally for this year as well, followed by boosting R&D productivity initiatives as a new entrant in third place.

Opportunities for Indian players

Says Hitesh Sharma, Partner and National Life Science leader, Ernst & Young, ?The global risks to the sector are posing several growth opportunities for the Indian pharma & healthcare industry. With pharma and biotech companies increasingly emphasizing on efficient capital allocation, a large number of global companies should now focus on building their R&D facility in India, in addition to their offshoring and outsourcing activities.?

According to Mr. Sharma, ?Like the global pharma industry, the Indian industry also faces several challenges though of a different kind. With the biotech industry and few pharma companies facing challenges on raising capital most of these companies are looking at using existing capital most efficiently. Indian Pharma companies with effective business models will have enough opportunities going forward to acquire companies that strategically align with their overall business strategy.?

Top risk for the Indian pharma and biotech sector

Says Mr. Sharma, ?Pricing pressures, including Government controls is also among the top business risk faced by the Indian pharma and healthcare sector. Capital access and allocation for the Indian region and Identification of new business models would be other key risk for the sector in India.

From a global perspective following are the other top risks facing Life Sciences companies, and the steps that companies can take to address them:

? Revolutionizing business models: Companies can adopt a portfolio approach, experimenting with different models to learn from other industries and explore new partnership models. Most important, they should take steps to ensure flawless execution.

? Ensuring safe products: To manage an increasingly complex global supply chain, companies should adopt a comprehensive risk management approach, plan early for post-marketing surveillance, and build strong relationships with Customs authorities in order to improve efficiencies and protect against counterfeiting.

? Protecting and capturing the value of intellectual property: The industry can increase advocacy on behalf of patent reform.

? Sustaining a culture of innovation: Companies are exploring alternatives to the fully integrated R&D model that most pharma companies are built on. Opportunities exist to invest more selectively in defined therapeutic categories, and to reinvest in the people and talent pipeline.

? Global supply chain integrity: Companies can improve due diligence of third party suppliers, increase vigilance about regulations and standards in emerging markets, and employ more robust supply chain management and internal controls.

? Enabling access: With increased pressure to broaden access to therapies, companies can proactively define and execute a comprehensive approach in emerging markets, exploring creative pricing approaches and local strategic partnerships.

? Loss of reputation: It is currently vital to take steps to ensure effective risk management, choosing partners carefully, and maintaining high standards for product safety and data transparency.

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

For more information, please visit www.ey.com

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by Amber Sironzkar (few years ago!)

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