PHARMACEUTICAL SECTOR
Name – Jayshree Sharma
Roll No. – B2022008
RISKS IN PHARMACEUTICAL SECTOR
The pharmaceutical industry continues to evolve and change, particularly
in light of a number of important industry trends that are reshaping its
future. Pharma companies have high capital expenditure and long payoff
periods for assets. Like banks, pharma companies operate in a highly
regulated environment in which compliance risks are very high (for
instance, for improper or poor filings) and other risks (such as sales-
conduct risks) are present across many markets globally. Pharma
companies also face risks that cut across sectors, such
as cyberthreats, data breaches, supply-chain risks, quality risks,
geopolitical exposures, and risks from third and fourth parties.
Risk faced by pharmaceuticals Industry:
1. Increased Competition from Generic Drugs.
2. Product Liability.
3. Keeping Up with Technology.
4. Quality Control.
5. Patent Cliffs.
6. Data breaches and other cyber security threats.
7. Supply chain disruptions.
RISK TYPES
INTERNAL EXTERNAL
Quality Control Economic Risk
Patent Cliffs Cyber Security
Technological Supply Chain Disruption
Product Liability Competition
Internal Risk:
1. Product Liability: The FDA is also urging pharmaceutical
companies to cut down the cost of new drugs by streamlining and
speeding up the research and development process, which should
eliminate some overheard expenses. While this makes drugs more
affordable for consumers, it also means medications spend less time in
testing, increasing patient safety risk and regulatory risk.
2. Quality Control : Pharma companies have to ensure they meet the
quality standards while adhering to all local regulations abroad, and are
also responsible for blocking for illegal trafficking of counterfeit
medications. This requires stringent standards for all vendors and third
parties involved in the manufacture and transportation processes.
3. Patent Cliffs : A patent cliff refers to the expiration of drug patents
and the sudden drop-off of sales of products that previously constituted a
large percentage of the market. Essentially, patent cliffs put these dollars
up for grabs for competitors to produce and patent a comparable brand
name drug.
4. Technological : The study of human genomics is paving the way for
personalized medicine, in which drugs are built to work with an
individual’s unique set of genes, increasing their effectiveness and
safety. Failure to keep up with these technology advancements could
open the door for non-traditional players to enter the market and infringe
on pharmaceutical companies market share.
External Risk :
1. Cyber Security : As consumer data is becoming more valuable, the
number of cyber attacks is also increasing. Pharmaceutical companies are
especially vulnerable to cyber security threats. According to IBM’s 2020
Cost of a Data Breach Report, cyber attacks cost the industry more than
$5 million last year.
As cyber attacks become a more serious threat to the industry, investment
in cyber security will need to increase. Companies will also need to
implement better cyber security policies in the office and for remote
workers, or run the risk of a costly data breach. Investments in IoT
security may also be necessary for adopters of the technology.
2. Supply Chain Disruption : While global pharmaceutical supply
chains did not collapse under the pressure of COVID-19, the pandemic
revealed serious weaknesses in pharmaceutical logistics. The lean supply
chains the industry cultivated over the past decades are not resilient to
sudden shocks or issues with production caused by events like a
pandemic. As a result, long manufacturing lead times and unpredictable
demand are likely to cause problems through the end of the year.
The supply chain may also be vulnerable to intentional disruption by
cyber criminals. Moreover, poor visibility and transparency in the supply
chain may make a number of these challenges worse.
3. Competition : Upcoming patent cliffs will be bad news for some
major pharmaceutical manufacturers, but good news for companies
wanting to develop generic pharmaceuticals and consumers in search of
lower prices on medicine. For major manufacturers, these patent cliffs
will pose a significant risk. For the rest of the industry, the effect will
likely be significantly disruptive and could open up new opportunities for
smaller manufacturers.
4. Economic Risk : The economy is constantly changing as the markets
fluctuate. Some positive changes are good for the economy, which lead to
booming purchase environments, while negative events can reduce sales.
It's important to watch changes and trends to potentially identify and plan
for an economic downturn. To counteract economic risk, save as much
money as possible to maintain a steady cash flow. Pharma companies
have high capital expenditure and long payoff periods for assets. Like
banks, pharma companies operate in a highly regulated environment in
which compliance risks are very high (for instance, for improper or poor
filings) and other risks (such as sales-conduct risks) are present across
many markets globally.