Executives Face Possibilities and Pressure in Life Sciences Industries

While the challenges facing life sciences worldwide are vast and varied, clear trends uncovered in three key economies indicate that medical fields are undergoing massive changes—changes that will require brave, ethical leadership.

The life sciences industry is no stranger to controversy and conflicting opinions, and as the world continues to change at a pace that’s difficult to match, leaders find themselves confronted with extraordinary opportunities and challenges.  

According to the recent Economist Intelligence report, Healthcare Outlooks 2024, the forecast for healthcare and pharmaceuticals includes an ongoing balancing act between drug price increases and pricing regulations, climate change concerns, digital health and AI disruptions, and concerns relating to an aging population. Healthcare spending is expected to overtake inflation, finally recovering from the strains of the COVID-19 pandemic. However, resources will remain constrained in many countries as leaders attempt to bring down fiscal deficits and public debt levels.  

A few of the predictions for 2024 include:  

• Healthcare spending will rise by 6.1% in US-dollar terms and by 1.1% in real terms. 
• Pharmaceutical spending will rise by 6.5% in dollar terms as drug prices continue to rise – despite efforts to regulate them. 
• According to US census data, the number of people celebrating their 65th birthday in the US will peak in 2024. The World Health Organization (WHO) predicts that in 2024, the population of individuals aged over 65 years will officially outnumber those under the age of 15 in the WHO European Regions.  
• Life expectancy has increased by about 10 years, but life quality has only been extended by approximately 3 years. This increases demands on drug production and pharmaceutical innovations.  
• The healthcare sector is expected to set aside more than 10% of its budget, up from about 5% in 2022, to further AI and machine learning. 

We spoke to Signium Partners in three significant economies to find out how these changes are both presenting possibilities and placing pressure on the executive environments in life sciences in Italy, the USA, and Japan.  

The Reason Scientists Need to Develop Business Skills 

One of the most significant obstacles that seems consistent across most regions is the pressure on pharmaceutical costs. Speaking from Signium Italy, Senior Executive Thibaud Eckenschwiller says, “In Europe, not only do we have many issues relating to the supply chain, but our healthcare systems are also consistently underfinanced. Most drugs are reimbursed. Innovative drugs are expensive to develop, and we have to ask how we are going to finance those innovative drugs or make them available in Europe at all.” 

“There are many innovative drugs released in Japan that offer a high value of treatment, but at a very high price,” says Katsuro Kuroda, Senior Consultant at Signium Japan. Japanese authorities have consistently dropped the reimbursement prices of older drugs, while significantly increasing the usage of generic drugs at the cost of research and development-based pharmaceutical companies. This has generated room to accommodate such innovative drugs in the healthcare budget. Kuroda reveals that Japanese authorities are now heavily involved in managing the quality issues and supply shortage of generic drugs.   

In the meantime, rationalization of healthcare services is delayed, and increased total healthcare costs are hugely balanced by pharmaceutical cost reduction. This discourages pharmaceutical companies’ research and development activities in Japan. 

Meanwhile in the USA, Signium USA’s Global Life Sciences Practice Leader Brian Evans, presents a slightly different picture, saying, “The US has the highest prescription drug prices in the world, resulting in a market with much higher profitability than countries where pricing is more heavily regulated. Companies set the price based on market data, making the argument that these profit margins are necessary to offset the incredible costs of research and development for new, innovative drugs.”  

This is anticipated to change, though. As of September 2024, the US government will be able to negotiate pharmaceutical prices for a small selection of drugs through Medicare for the first time. This may usher in new practices that could ultimately impact the US’s flourishing pharmaceutical industry.  

Eckenschwiller speculates on how these challenges demand greater dexterity of skills from executives in the life sciences industry. He says, “The further up the ladder you go, the more important it becomes to combine scientific knowledge with managerial skills. The challenge is to find top scientists with managerial savvy and managers competent to challenge the new technologies that are now emerging.”  

“In many industries, having people cross over from other sectors can be healthy,” he continues. “But in terms of pharmaceutical development, regulatory processes, and manufacturing, managerial roles in any life science field are extremely specific. It’s rare for us to find a non-industry match for these roles.”  

Evans supports this, saying, “Most of the time, the biggest differentiator between those who are good candidates and those who are great is their communication skills. This translates into how effective they can be as leaders. How they convey and sell ideas cross-functionally and explain technical things to non-technical people is hugely important. That’s one of the things we try to evaluate in an interview with technical leadership candidates.” 

In Japan, recruiting C-Suite leaders is even more difficult because of the language and culture barrier for international candidates and the aging executive talent pool. “Most of our senior leaders in life sciences are over the age of 50,” says Kuroda. “The official retirement age used to be 60, but the government is encouraging all sectors to extend this to 65 years and higher. This would slow career development of younger people.”  

Italy also faces the challenges of an aging executive workforce. Eckenschwiller estimates that two-thirds of their general practitioners are over 60 years old, with very few younger practitioners being raised up.  

The future belongs to specialists who embrace technology 

Some of the issues being faced in the pharmaceutical and life sciences industries are global and may seem insurmountable to individual organizations. Our contributors believe that recruiting the right talent and placing powerful leaders at the helm could play a pivotal role in how each organization contributes to the bigger picture.  

As artificial intelligence and technology advance, Evans urges people not to perceive AI as a threat but as a tool. “The best thought I’ve heard about AI across any industry is that AI is not going to replace people; people who use AI are going to replace people who don’t use AI.” 

For example, in pharmaceuticals, AI has been used for years to manage huge sets of data and even accelerate many workflows in drug development – not replacing the work being done by talented scientists and drug developers, but accelerating it. “Using AI to supplement the human element and improve or fine-tune something that humans are creating or working on is where the big opportunity lies,” says Evans.   

Kuroda believes that leadership in life sciences will depend on improving training in specialized areas. “Japanese people are now required to develop specialist skills and knowledge in the life science industry. Generalists may find it easier to move around from one role to another, which used to be a typical concept for career development in Japan, but it’s not what we are seeing in multi-national companies, and it’s simply not going to work in life sciences.”  

Eckenschwiller is optimistic about the industry, saying, “Life Sciences may be challenged on margins, but in terms of growth potential, it will remain a privileged industry. If I were 25 years old, I would choose this industry again.” 

He goes on to share that the industry needs a generation of leaders with a combination of business acumen, technical industry experience, and a high consideration of ethical decisions. “The purpose of our business is very clear,” he says. “We save and extend lives. We improve lives. We should be proud of our business, and we must do it in a compliant and ethical way. When we look for people, we look for those who share these values.” 

Doing good business for the health of people 

In closing, we consider Thibaud Eckenschwiller’s words: “In our industry, we do good business for the health of people. It’s why we wake up every morning.”  

Although the life sciences landscape is complex, with challenges in finance, sustainability, manpower, supply chains, and ethical use of AI, the ultimate outcome should be simple: doing good business to meet the health needs of humans across the world.