The changing landscape of life-sciences procurement
May 20, 2009 – 2:52 pm by Gina Monari
This morning, the Princeton Life Sciences Executive Breakfast, hosted by management strategy and operations consultancy company Archstone Consulting LLC, gathered top pharmaceutical industry executives to discuss procurement transformation and the affect of the biopharmaceutical industry on the U.S. economy. Paul Addis, VP, chief procurement officer within the Global Procurement Organization at Wyeth, began a presentation by recognizing the majority of the attendees as some of the brightest minds in the area of life-sciences procurement. Myself, not being of the majority, eagerly awaited the lessons I would learn while enjoying a hot-breakfast spread nestled within Forrestal Village’s Princeton Weston.
Wyeth’s experiences shed light on some of the challenges in the area of life-sciences procurement. A second presentation by Michael Eckstut, Life Sciences Practice Leader, Archstone Consulting, shared insights into the affect of the biopharmaceutical industry on the U.S. economy. The two presentations provided very different data, however, the bottom line of each maintained that during this era of bleak and challenging business conditions it is an ‘ideal time for change.’
The Weston’s U-shaped discussion table gathered together and fed a total of 19 representatives of some of the top global pharmaceutical companies based in New Jersey, such as Wyeth, Johnson and Johnson Co., and Bayer, as well as individuals from strategic procurement company SciQuest. Discussions included emerging challenges and opportunities in procurement in the life-sciences industry; how to drive procurement results in the difficult economic environment; the affect of procurement trends and regulations on the life-sciences industry, and in return how the industry affects the U.S. economy.
Wyeth’s procurement transformation
Wyeth has aimed to maximize procurement’s affect on the bottom line, seize new opportunities in the down economy, and develop a best-in-class global procurement organization. A three-year plan at the company has aimed to establish more cost savings faster, capture savings at the bottom line, influence business decisions across the value chain, provide value-based savings, and deploy a flexible organization model.
Key takeaways and lessons have been that it is beneficial for procurement to partner with finance leadership and chief financial officers on planning and tracking cost savings, that achieving a consensus across all stakeholders is “nice to have,” that it is more beneficial to work quickly with organizational changes and communications, and that early numbers-based and value-based wins are key in driving continued momentum.
New Jersey’s top procurement executives discussed challenges, such as the aim for transparency, managing supplier relationships, and procurement acting as an ‘agent of change’ during difficult economic times. These executives agree that one must indeed have a thick skin in order to initiate new processes and changes in this area.
Another reason to focus on the future of life-sciences procurement is a potential shift away from the model of treating diseases and toward prevention and/or personalized medicine. This has the very real potential of affecting the supply chain greatly going forward.
Industry experts in the area of procurement have stated as the healthcare industry seeks ways to make R&D initiatives more effective, procurement automation can bring significant speed, savings, and efficiencies to these efforts. SciQuest executives believe there is an enormous opportunity for procurement professionals to streamline processes involved and drive the bottom-line savings that are critical to their organizations.
Biopharmaceuticals and the U.S. economy
The energy of the room eventually shifted slightly toward the biopharmaceutical sector and its affect on the U.S. economy. With about 21,900 pharmaceutical jobs lost in 2008, the biopharmaceutical industry is being targeted as an important contributor to U.S. competitiveness and economic growth.
Mr. Eckstut predicts that the economic recession is set to continue behind 2009, and believes procurement can have a high affect on bottom lines. Concerns are that small biotechnology companies are facing difficulties obtaining capital. These companies are folding, venture capital investment is down 50%, and market capitalization is down 90%.
One industry grassroots initiative was highlighted during the discussion, called We Work For Health. This organization’s aim is to unite health consumers, biopharmaceutical company employees, vendors, suppliers, and other business, academic and community partners to demonstrate how these diverse groups are vital to the socioeconomic climate and provide shared benefits and a better quality of life to all. The partnership includes local chambers of commerce, universities and research centers, labor, businesses, patient advocacy organizations, provider groups, and biopharmaceutical research companies that work together to improve America’s healthcare system and strengthen the U.S. economy. The idea is that the biopharmaceutical sector is creating the momentum to protect and foster innovation and scientific discovery during this critical time.
With several PowerPoint slides of global corporate supply structures and procurement data swimming inside my brain, I digested my Java-fueled, fruit-filled breakfast and drove past the exit of Med Ad News’ former home in West Trenton, N.J. I reflected on the broad array of dynamic shifts and accomplishments that have occurred in the realm of healthcare in a matter of just six years. This meeting of the minds was a new experience for myself, as well as a few financial gurus in the Weston’s Middlesex room. Freshly mindful of the vastness and complexities that drive profitability forward, I concur that there will never be a shortage of lessons learned.
