In an industry based on innovation, Life Science companies continually reshape healthcare by bringing new technologies and treatments to market every year.
While each new development brings the potential to improve people’s health and lives, it also carries an underlying risk of bodily injury arising from the potential side effects of a new device or medicine, which remain unknown until the lengthy clinical trial process collects the appropriate level of data.
Beyond that, these companies also face ever-evolving exposures - from supply chain risks to cyber vulnerabilities – amplified by the industry's increasingly global nature.
Many Life Science companies outsource most of their operations, from research to manufacturing, sales, and cloud storage for their data storage systems. But supply chains that stretch across the globe can prove fragile, as we’ve seen during the pandemic.
The extraordinary demand for personal protective equipment (PPE), active pharmaceutical ingredients (API), test kits and vaccines quickly revealed pinch points, including shortages of workers, raw materials and production capacity.
Specifically, with production clustered in some regions of the world, the supply chain is vulnerable to shocks. The lengthy lockdown imposed on factories in Malaysia resulted in a global shortage of medical gloves, as the Malaysian market manufactures approximately 65% of the world's supply.
Despite all these disruptions, the sector has successfully managed the most significant risks faced and helped us through this challenging period.
Supply chain issues: Marine congestion around the Shanghai port as a result of the latest lockdown in April 2022 (Source)
As Asia Pacific countries embark on their return-to-normal journey after more than two years of pandemic conditions, let's consider the lessons learned and how the risk landscape evolves as the Life Science sector builds on its preparedness for future pandemics while continuing to manage the impact of COVID-19.
There is a greater reliance on technology (e.g., the cloud, IoT, AI, blockchain, robots) to provide greater supply chain visibility and an enhanced ability to track and trace both manufacturing inputs and finished products. Technology is also helping to overcome distribution challenges, such as the use of automated drones for delivery into remote regions.
Finally, the integration of technology into the supply chain also means that many activities along the supply chain have now gone virtual, with significant volumes of data being stored in the cloud.
Since the pandemic, large pharmaceutical companies (or even governments) are increasingly looking to establish local manufacturing capacity or reduce dependency on major supplier nations. For example, a company was set up in Australia to produce PPE domestically, with their sole client being the government.
In the case of APIs, many healthcare companies currently manufacture them globally, then regionalize their drug products. They are also looking to be less reliant on China and India, the world's biggest suppliers, and replace API sourcing with capacity from elsewhere, for example Thailand or Malaysia.
The risks posed by government interventions, lockdowns and competition for resources have put supply chain diversification high on Life Science corporations' agenda.
Before COVID-19, something would have to go really wrong to lose a supplier. Now companies actively look to have two or three different providers supplying the same component to avoid putting all their eggs in one basket.
However, such diversification could mean an increased workload for the quality control teams, with every component from every supplier requiring quality checks.
Given their heavy reliance on outside suppliers and manufacturers, Life Science firms are not immune to disruptions along the supply chain. There are many ways things can go wrong, and some are outside their control (e.g., COVID-19 clusters among suppliers' employees impacting staffing and ability to meet production and distribution timelines).
In a crisis-prone world, besides making sure their suppliers have a solid recovery plan in place, contingent business interruption coverage can protect Life Science companies against operational and financial implications from supply chain breakdowns. In addition, they need to thoroughly understand critical supply chain components and interdependencies to minimize the duration and impact of any disruptions.
Find out more about risk mitigation and engineering services to help identify vulnerabilities in an end-to-end Life Science supply chain.
This article provides only a general description of the products and associated services offered by Chubb. Any advice in this article is general only and does not take into account any specific objectives, financial situation or needs, or the prevailing laws and regulations in the relevant jurisdictions. Readers relying on this advice do so at their own risk. Any reference in this article to other content does not constitute or imply an endorsement or recommendation by Chubb. The graphics and animation used in this article are not intended to illustrate nor are they representations of the coverages, services and service levels offered by Chubb. Please review the full terms, conditions and exclusions of the relevant policy(ies) and consider whether the advice is right for you. Coverages are underwritten by one or more Chubb companies. Not all coverages and services are available in all countries. Coverages and services are subject to licensing requirements and sanctions restrictions. This article is neither an offer nor a solicitation of insurance or reinsurance products. Terms and conditions apply to the services. Please contact your local broker or agent for advice. ©2022 Chubb. Chubb®, its logos and Chubb.Insured.SM are protected trademarks of Chubb. Published 05/2022.
We help you stay ahead and informed with these helpful tips and tricks