At this stage, it is unknown just how much America’s new 10% tariff on the UK will cost the pharmaceutical industry. However, given that these levies include medical products, businesses can certainly expect to feel an impact from the change. Blaise Walshe, Procurement Specialist from Barkers Commercial Consultancyexplores how these new tariffs could impact the sector as a whole.

Uncertainty means one thing for large, complex businesses: protecting the share price. Now is the time for pharmaceutical businesses, wanting to save profits in a volatile environment, to up the ante in managing brand reputations and supplier costs. This is where Chief Procurement Officers (CPOs) provide value. 

Their teams manage larger supplier networks than most other industries, as the development model for medical trials is to outsource. However, the more suppliers that procurement manages, the higher the chances of reputational and cost challenges. CPOs, therefore, must help their teams mitigate these risks - the best way being to collaborate significantly more with their colleagues in the Operations Development team. 

Managing costs and brand reputation 

Before we delve into this solution, let’s consider why the task of managing cost and reputation is so vital. 

In the pharmaceutical industry, brand image is very fragile. The smallest compliance breach - even if the company isn’t directly responsible - can have catastrophic effects.

In the late 2000s, GSK picked up a compliance issue in an audit. It arose from social structures in the country they were working in, not from within business. Regardless, GSK did the right thing and flagged the issue with the regulator. The result was significant public scrutiny and brand damage. Why? Because the buck always stops with the sponsor. 

GSK is not alone in this scenario - many large pharmaceutical companies have experienced something similar. The takeaway for procurement teams is that how businesses act, and project themselves, matters. 

This good corporate behaviour must also extend to managing costs. 

Interestingly, supplier costs are rarely top priority in clinical development procurement - in the cost-time-quality paradigm, it’s time and quality that take the spotlight, as it is these two goals that help to get drugs on the market. But, while cost is not the primary concern in running medical trials, it still needs some consideration. And now, with markets and supply chains ever more uncertain, we must dial up its importance.

So, how can CPOs keep costs and reputations in a healthy band? 

Engaging internally

The answer to managing cost and brand reputation is to partner with colleagues who have deeper expertise - such as those in Development Operations and Clinical Science functions. They can impart value and expose unexpected ways to mitigate compliance breaches or wasteful spending. 

For example, if a procurement professional suspects they are spending too much on medical monitoring for a study, but is reluctant to push down the cost in case it harms data quality and impacts the study’s integrity, it would be helpful to ask for a second opinion. Someone with an operational background could easily look at a budget and development plan, and know immediately what components should cost. 

It's also beneficial to tap into these internal experts on a regular basis. This can be done during formal collaboration sessions, or just by working in the same room every now and then. By allowing for some face time, procurement teams can listen to the scientists’ converse, ask questions, and really build upon their knowledge. 

The idea is to have as few barriers as possible between departments. The more integrated procurement can be with internal specialists, the more effectively they can work with suppliers to reduce compliance risks and bring down costs. This can be formalised by integrating procurement into the clinical study and development teams, which will help position professionals as key team members, rather than just admin support.

From here, procurement can significantly help brand reputation by managing compliance with internal teams and suppliers, and ensuring all qualification processes and documentation are in order.

Looking ahead

In addition to helping the share price by minimising costs and potential reputational issues, CPOs can take their role a step further. 

CPOs can encourage procurement teams to collaborate with suppliers, to accelerate the development process and help get drugs on the market earlier. By doing so, the business will enjoy exclusive access to the market for longer, all while competitors catch up. The result? Pharmaceutical companies are actively making money and allowing patients more rapid access to new and innovative treatments.

So, as the UK’s pharmaceutical industry weathers the storm from US tariffs, CPOs have a chance to step up. Leaders who prepare their teams to cut supplier costs and protect brand reputation - and potentially even get drugs to market earlier - can add true value and help keep the industry robust.