05 Oct 2018
Whether it’s a hard exit or a soft departure, Brexit is happening and it is going to have an impact on the healthcare/life science industry in ways that we are only now starting to fathom. As we do not know the outcome of the negotiations that are currently underway, we must make assumptions about the future now, so we can create scenarios and make decisions. Consequently, it would be wise to reflect on how the correct use of assumptions can help prepare you for this uncertain future.
In this article, I put forward three key areas that need to be considered when planning for the ambiguity of Brexit. Due to the uncertainty, each business needs to define the key assumptions reflected in their future plans, and these assumptions need to be constantly monitored through an effective management process.
A good process will ensure that each assumption the business makes is kept live by an owner, who continually assesses new information to validate the assumption. When new information suggests that the assumption needs revising or refreshing, the owner will flag this up to the business and initiate a discussion on the implication of potential change. Organisations which have implemented Integrated Business Planning (IBP) will do this better than those that have not.
Mutual recognition currently allows for the testing and release of a product in one country to be recognised in another country, after it has been shipped. If this mutual recognition does not exist after Brexit, there will be huge costs and time associated with re-testing and releasing product that has crossed out of the EU and into the UK, and visa-versa.
Organisations on both sides will have to make assumptions about what the testing and release procedures will be after Brexit. Acquiring additional resources, transferring test methods and validating testing procedures takes time and money, and once implemented will have an impact on lead times and inventory across the supply chain. Current Government advice in the UK recommend supply chain inventories to be increased by six weeks!
Organisations that get this assumption right will find the transition a smoother ride than those that do not, and those that have not even developed assumptions are in for a shock.
If you have an IBP process, you will have already been working on and validating your assumptions in this area.
Have you developed assumptions for your post Brexit testing and release lead times?
Nobody knows right now whether there is going to be a Free Market, a Common Market or a Customs Union. What we do know, however, is that each of these outcomes will have a significantly different impact on your organisation. The supply lead time differences and cost differences will be significant enough that you might consider a different supply chain design.
Every week, I consult with organisations that are moving manufacturing to a different location, or are building new warehouse or additional warehouses in different locations. These plans are all based on assumptions that the organisation has made about what the future is going to look like. The healthcare industry is not immune to the effect of these shifts in the market post-Brexit.
What is your post Brexit assumption about the market? Are you making an assumption about trade agreements and tariffs? Are you assessing the cost impact of your assumption?
Bringing new products to market is the lifeblood of the life sciences industry, and the processes for doing this are complex at best. Currently, there are processes allowing mutual recognition of national regulatory agencies and there are centralised approval processes for members of the European Medicines Agency (EMA).
Post-Brexit, it is not clear whether the UK will be a member of the EMA and therefore, the process for registering and obtaining marketing authorisation for new UK medicines is unknown. If the post-Brexit landscape sees the UK drug developers unable to get mutual recognition or access to the centralised procedures, the time to market for UK-developed drugs could be slowed down by years.
UK-based pharmaceutical companies will have to make assumptions on which way they believe the negotiations are going to go. They will need to determine the impact that this assumption has on their Portfolio Plans, and to create mitigating actions where needed. Organisations which have reached the higher levels of IBP maturity will do this well, and certainly outperform those that are waiting to see what happens.
Do you have assumptions around the introduction of new products to your portfolio after Brexit?
Oliver Wight will be hosting an event in London on 22nd November, focusing on the impact of Brexit on UK organisations. If this blog has left you wanting to know more about how you could come through this change intact, or even if you would just like to test your current thinking with your peers, register for this event here.
I look forward to seeing you there.
Associate, Oliver Wight EAME
Gary has over 25 years’ experience working in the Chemical and Pharmaceutical industries, holding various senior positions, including Managing Director, before becoming an associate at Oliver Wight. Gary brings a pragmatic and persistent approach to business development, and believes that people are the key in driving business transformation.