The Covid-19 pandemic brought feverish attention to the research & development (R&D) capabilities of the life sciences sector.
Suddenly, the entire world had a vested interest in the creation of a new treatment, and with that, brought greater understanding of the work at large. Laymen were talking about clinical trials and supply chains. Everyone’s an expert.
This scrutiny has led to an increase in funding. The idea of another public health crisis has brought further investment into a market already worth in excess of $2trillion globally.
The life sciences community came together, and while there has more recently been some signs of that enforced harmony dwindling and produced a solution.
While the time scales and levels of collaboration were unprecedented, the work was largely the same. Any solution that comes from the life sciences, be it a drug or a piece of technology, is involved in a rigorous process, from ideation, to production, clinical trials, gaining regulatory sign-off, and then finally getting to market. This arduous process has created some of the most impactful inventions in human history, but it is fraught with challenges.
Take for example the steady decrease of patient interest in clinical trials. Some estimates show that an increased drop-out rate in the testing phase of the R&D lifecycle is slowing down 80% of life sciences projects.
Macro-economic factors caused by the pandemic are causing problems too. A fifth of life sciences businesses in the UK report supply chain issues since Spring 2020.
Here, we’ll look at the issues faced by the life sciences sector in more detail and look at how some of the associated risks can be mitigated.
Sophisticated and sometimes problematic supply chain
Global supply chains have been put under immense pressure by the Covid-19 pandemic. Data from the UK’s Office for National Statistics found that 16% of businesses had reported some disruption in their production line, be it from a shortage of labour or materials.
Life sciences companies are likely to feel this pressure more acutely. R&D requires highly skilled scientists and very specific, and often scarce, materials. A survey of life sciences leaders by Deloitte found that as many as 92% organisations were affected by a shortage of labour in the last 12 months, with a third reporting issues with obtaining raw materials. In biotechnology for example, the demand for semiconductors has ballooned in the past five-10 years, with two thirds of MedTech businesses reporting difficulty in acquiring the material required to manufacture hardware.
This has led to the creation of a large market of specialist organisations. The most common include:
contract research services
contract manufacturing organisations
clinical research organisations
Using these organisations can limit your business’s exposure to some supply chain risk, especially when it comes to accessing labour. However, it does pose several risks, including lengthened product cycles, management of intellectual property and bureaucracy.
The unknown of clinical trials
At the heart of R&D in the life sciences, is the idea of experimentation. Without a trial and error process, major medical breakthroughs would never have been made. It is a necessary step that presents a set of risks.
Clinical testing is the first time a new product is exposed to human use or consumption. If handled incorrectly, it can cause bodily harm or injury. Such occurrences can become bad publicity generators and expose the business to costly legal action.
Covid-19 has also had a profound impact on the trial process. Smaller trials were put on hold - one study of 62,000 R&D projects in the US found that just 57% of expected experiments happened during February and May 2020. Patients are also harder to come by. A study of surviving cancer patients revealed a 20% decrease in participation. This shortfall could be mitigated by the spread of remote tests - a survey of cancer patients found 80% of respondents were willing to take part in decentralised programmes - but such methods aren’t possible for all patients or projects.
First-to-market pressure
The Covid-19 pandemic has also put increased pressure on the pace of R&D. Prior to 2019, Deloitte found the average life cycle of a new product - including research, approval from regulatory bodies, recruitment of patients and trials - was 6.9 years. This fluctuated slightly during the pandemic, creeping over seven years in 2020, before dipping below that figure in 2021. However, the speed at which the vaccine was produced has put a new pressure on timelines.
Of course, speed has always been important. In life sciences, R&D is a primary driver of revenue. Being the first to market with a new treatment of drugs often means success and financial gain.
It also creates a market of fierce competition. Intellectual property disputes over patented technologies and treatments are commonplace as companies look to gain an advantage over one another.
Changes of Government regulations
Life sciences companies are subject to intense scrutiny from regulatory bodies. It is paramount that patients are protected: from bodily harm, injury or illness, or from bad actors attempting to access their health data.
Regulation is therefore stringent, and always changing. Laws can also vary widely depending on geography. For example, the UK government announced a consultation looking into the regulations for clinical trials, just a few months after life sciences companies in the country had to adapt to leaving the EU’s R&D regulatory framework. Constant diligence and organisational agility is required to stay compliant.
Key exposures for Life Science & R&D companies
Life science companies are uniquely exposed to a number of different risks. As we have touched on throughout this article, there are considerations to be made pertaining to health, intellectual property, and data protection. Therefore, it is important for organisations, in particular start-ups, to seek advice on building a comprehensive set of insurance policies that cover all sides of their operation.
How can we help?
Here at Lockton, we have a team dedicated just to life sciences and with our in-depth understanding, knowledge and specialism of your industry, we arrange tailor made policies backed up by year-round support. Read more about the policies we recommend for businesses getting started in life sciences or visit our Life Sciences page (opens a new window) and talk to our team.
