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BDO 31 Oct 2018 11:44am

Life sciences - the case for cautious innovation

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Caption: A look at BDO’s recent survey on global risk

Digital technologies are providing new and faster ways of developing and delivering products and services. The life sciences sector is not immune to these developments. Supply chains, legal and regulatory frameworks and political factors are all changing as a result.

BDO’s recent survey on global risk found that 81% of business leaders considered that a successful innovation strategy is critical to staying competitively relevant. A real risk to businesses that do not innovate is that they will be left behind by the competition or that the changing environment will render them obsolete.

The life sciences sector is ripe for innovation, with the increased ability to access large volumes of data quickly and the rise of new technologies including artificial intelligence and cognitive computing transforming the tools available to manage the complex industry network of manufacturers, distributors, clinicians and patients. However, for a sector that has always been at the cutting edge of innovation, life sciences companies have embraced the new technologies with caution.

“Aside from the considerable cost involved, the consequences of failure may be the reason why innovation has been more gradual in life sciences”, says Jon Dee, Director in BDO’s Risk & Advisory practice. “In this industry quality is paramount to meet the requirements of regulators and to retain the confidence of patients and clinicians. To adopt unproven new technologies without testing them rigorously is a big risk when operating in a highly regulated environment where faulty products or supply chain delays can directly affect patient health.”

However, innovation is taking place in spite of the risks. Financial and competitive pressures are driving life sciences companies to invest in new technology to improve efficiency, reduce R&D cost and provide greater control and visibility over their supply chains.

The impact of change is already being felt in clinical trials. Sponsors and Contract Research Organisations (CROs) are embracing new tools such as analytics platforms and cognitive technologies such as machine learning and natural language processing to collect and analyse data from multiple sites. These tools can be used to highlight productivity and data quality issues quickly, enabling action to be taken in respect of unproductive sites or to cease studies that are not likely to produce useful results, at a much earlier stage.

Technology such as wearables and tablets is revolutionising the way that patient data is collected, reducing the need for clinicians to spend time organising tests and providing a steady stream of real time data.

Pfizer is using new techniques and emerging digital technologies, including wearables and apps to support patient recruitment and to make it easier and more convenient for patients to follow medication schedules and visit clinics.

Astrazeneca is now in the second phase of an IT transformation programme, enhancing its use of data and analytics, software and cloud technology to drive innovation and efficiency throughout the business.

Merck KGaA was an early investor in new technology to innovate in supply chain management, using sensors and algorithms to automate its operations. Computers are being used to make decisions about scheduling production, allocating raw materials and distributing products. Major companies such as Pfizer and GlaxoSmithKline are using Radio-frequency ID (RFID) chips to track their drugs from manufacturer to consumer.

With its security features and the potential for all users to see real time transactions and revisions, Blockchain is also being considered by the life sciences sector as a means to better control and manage supply chain. The MediLedger Project in the USA includes many of the leading industry players, including two drug distributors and four Big Pharma companies. The aim is to develop a Blockchain solution that will enable packagers, distributors, manufacturers and logistics services to track and trace a drug's progress through the entirety of the supply chain, thereby reducing quality control errors and the risk of counterfeit drugs.

However, as business operations become ever more reliant upon technology new risks emerge. The IT systems that support key life sciences functions such as R&D, manufacturing, supply chain and sales channels are the main arteries of the business - safeguarding and communicating data, including critical or sensitive information. Any disruption to these systems or breach of their integrity can cause significant damage. “The increasing dependence on technology to drive the operational model is powering an increased cyber threat and considerable potential for the theft of intellectual property” says Dee.

Governance needs to keep up with these pressures and changes through investment in technology and capabilities. Increasingly companies are looking to their Chief Information Officers to drive the investment agenda through the business and keep the board up-to-date. However, boards still need to have the necessary skills and understanding of the new ways of working to embrace the changing operational model fully.

They need to make a step change in their understanding of how technology works, ensuring the controls within their business reflect the shift towards quicker, higher-volume use of technology and the dependency and supply chain risks associated with that: being aware of what those controls are and making sure they are robust and reliable enough to protect the business.

Dee senses that the industry is responding to this challenge. “There are many exciting and innovative developments already underway and Board membership in many businesses is being enhanced to reflect the need for deeper understanding of the new technology”.

However, the pace of advances that are beginning to disrupt the whole product lifecycle mean that it can still be difficult to make the right investment decision and implement change, whilst ensuring that effective risk management remains in place. New systems must be tested carefully. They take time to bed in, often requiring refinement and control enhancement to reduce the exposure to risk. “Although the need to innovate is now unavoidable, the caution and rigour adopted by the sector is well founded,” Dee concludes.

To find out more about the survey findings and BDO’s insights into their implications for risk management, download the full Global Risk Landscape 2018 report here


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