Pharma 4.0: expected benefits & challenges

In the past decades, pharmaceutical companies' profitability has been negatively impacted by rising R&D costs and clinical trials failure [1]. In addition, big pharma companies are increasingly investing in biopharmaceutical products as this market is reportedly growing twice as fast as that of pharmaceutical products. [2]. However, unlike traditional pharmaceuticals, biopharmaceuticals' production poses new challenges as they rely on technological platforms involving living, attenuated or inactivated organisms [2].

The development, production, and marketing of pharmaceutical and biopharmaceutical products is a fastidious and tricky task involving many internal and external stakeholders (e.g., Researchers, operation & marketing managers, suppliers, distributors, regulatory agencies etc.). Therefore, efficient information sharing and continuous process improvement are required to optimise time and resources management and ensure increased productivity, competitivity, and ultimately profits.

These are precisely the promises of Pharma 4.0, that is to say, the implementation of Industry 4.0 (I4.0) in the Pharmaceutical and Biopharmaceutical sector. 

In this short article, I will provide some data regarding the benefits reported by manufacturers after I4.0 technologies adoption and some of the challenges they encountered on the way. We will also emphasise some similarities and singularities of Pharma 4.0 in this regard.

Implementing Industry 4.0.

Before presenting I4.0 benefits and challenges, I think it is important to precise a few points.

First, I4.0 can be viewed as a business management theory defined by six main principles: Interoperability, Virtualisation, Decentralisation, Real-Time capability, Service-orientation, Modularity. For more details, take a look at my previous article on the topic “Introducing Industry 4.0”.

Second, the implementation of the aforementioned I4.0 principles is powered by the adoption of new technologies. However, I4.0 implementation is not a one size fits all process; therefore, the choice of technologies and the order of their adoption should be tailored to the specific industry, company, or plant's needs.

Figure 1: Acatech Industry 4.0 maturity index from [3].

Third, I4.0 implementation is a long-term journey, not a short-term project. As shown in Figure 1, different levels of I4.0 maturity mark-out this journey and correspond to the new capabilities acquired by companies along the way. Ultimately, the sixth level dubbed "Adaptability" refers to a highly automated and autonomous factory able to self-optimise production.

Benefits of Industry 4.0 implementation in the manufacturing sector.

As said in my previous article on this topic, I4.0 is not only intended to manufacturers. In fact, I4.0 impacts all aspects of a business far beyond supply chain or operation management. Quantitative data on the benefits of I4.0 implementation, however, are scarce and even lacking for some industries, such as the biopharmaceutical industry. Indeed, compared to other industries such as the automotive and aerospace industry, I4.0 adoption in the pharmaceutical industry is reportedly slower, contributing to a lack of data on Pharma 4.0's benefits [2].

To measure the full benefits of I4.0 in manufacturing companies, McKinsey experts evaluated the impact of its adoption on eight corporate value drivers presented in Figure 2 [4]. These data reveal that I4.0 implementation led to a 3-5% increase in productivity, 30-50% reduction of total machine downtime and up to 85% increase in forecasting accuracy. The data relative to productivity and machine downtime was confirmed by a KPMG report on I4.0 in the British automotive industry which found 3-5% increase in productivity and 20-35% reduction of total machine downtime [5]. As the level of I4.0 maturity of those manufacturing companies probably improved since 2015, the current benefits could be even more significant. 

Figure 2: Benefits of Industry 4.0 implementation in manufacturing companies throughout the eight main drivers of corporate value drivers [4].

Another study found that data collection across the supply chain and full machine to machine and machine to cloud communication has increased EBITA by 2 to 5% depending on the supply-chain complexity. Besides, 20 to 30 % increase in customer satisfaction has also been reported after I4.0 implementation [4].

Although quantitative data on Pharma 4.0 benefits are lacking, a recent literature review and analysis of key stakeholders’ interviews on the matter, revealed that similar benefits are expected [2]. For instance, I4.0 implementation could allow real-time quality control of the production process and immediate correction of any deviations observed.  Thus, Pharma 4.0 could prevent the loss of entire production batches, as happening in a process relying exclusively on a post-production quality control [2].  

Overall, the authors identified four areas where Pharma 4.0 should provide significant improvement. These are by order of importance:

1) Performance & Productivity: Improvement of production processes flexibility and employees’ productivity.

2) Competitiveness: improvement in market positioning compare to other biopharmaceutical companies.

3) Regulatory aspects and socioenvironmental responsibility: Better data traceability and waste reduction, among others.

 4) Organisational culture and Strategy: Better governance illustrated by an optimised organisation and administrative resources usage.

Challenges of Industry 4.0 implementation in the manufacturing sector.

If executives from the pharmaceutical industry are so confident in Pharma 4.0's benefits, why is the implementation that slow?

In fact, in all sectors, I4.0 implementation is met with many hurdles. A 2016 McKinsey survey among top executives of manufacturing companies on barriers to I4.0 implementation revealed the main hurdles they faced at different stages of their journey.

As shown in Figure 3, initially, most hurdles are related to leadership and change management. The difficulty of coordinating between departments, defining a clear business case or recruiting collaborators with the required skills are good examples [6]. Surprisingly, the lack of financial resources is not one of the top 5 barriers to I4.0 implementation in large corporations. However, in  Small and Medium-size Enterprise (SME), high investments and operating costs is the third most often cited barrier to I4.0 implementation [7]. 

Figure 3: Evolution of the main barriers to Industry 4.0 implementation according to a 2016 McKinsey Industry 4.0 Global Expert Survey [6].

Not surprisingly, the cybersecurity risk is among the main barriers reported to I4.0 implementation. According to many experts, it is the leading risk associated with its enabling technologies [8, 9]. Indeed, full implementation of I4.0 could make companies more vulnerable to cyberattacks with detrimental consequences on business operations’ continuity, confidential information leakage, and companies’ reputation [8]. Therefore cybersecurity technologies are regarded as crucial I4.0 enabling technologies [10]. In recent years, some academic even added security to the six I4.0 design principles[11]. 

Later on, in their I4.0 implementation journey, companies report legal and technical issues (e.g., systems interoperability) regarding data sharing, management and exploitation.

Not surprisingly, those hurdles are also encountered during Pharma 4.0 transition but are enhanced by the strong regulatory requirements inherent to manufacturing products directly impacting human health [2]. For instance, unlike in other manufacturing sectors, the investment cost is the top barrier to Pharma 4.0 implementation. Indeed, according to top biopharmaceutical executives, the cost of validating the compliance of new Pharma 4.0 technologies to be used in production could be in some cases two to three time more expensive than the technology themselves [2]. This constraint, coupled with difficulty forecasting the return on investment of adopting these technologies in the absence of published precedent, partly explains the slow pace to Pharma 4.0 transition.

Concluding remarks 

Despite a lack of quantitative data on Pharma 4.0's benefits, data from other manufacturing sectors and insights from practitioners suggest that they will be significant across the board of biopharmaceutical companies' activities. However, the slow pace of transition to Pharma 4.0 reflect the tremendous challenges encountered by companies upfront. 

Although new technologies are at the heart of I4.0, its implementation cannot be reduced to their adoption. Implementing I4.0 requires a good understanding of these technologies, their benefits, and their implementation's organisational impact or requirement. Therefore, pharmaceutical companies should use I4.0 maturity and readiness frameworks to identify their strengths and weaknesses regarding digitalisation and their readiness to further I4.0 technologies adoption. Based on this assessment, a road map should be created, allowing an orderly implementation of the most appropriate technologies. As I4.0 implementation represents a paradigm shift for most companies, it is essential to realise that its successful implementation requires the entire workforce engagement from top to bottom.Therefore, change management frameworks usage, and efficient cooperation between I4.0 implementation's teams across the company are key success factors.  

References

1.         Schuhmacher, A., O. Gassmann, and M. Hinder, Changing R&D models in research-based pharmaceutical companies. J Transl Med, 2016. 14(1): p. 105.

2.         Silva, F., et al., A Field Study on the Impacts of Implementing Concepts and Elements of Industry 4.0 in the Biopharmaceutical Sector. Journal of Open Innovation: Technology, Market, and Complexity, 2020. 6(4): p. 175.

3.         Kumar, R. and E. Nampuraja. Making Industry 4.0 Real - Using the ACATECH I4.0 Maturity Index 2018  [cited 2020; Available from: https://www.infosys.com/engineering-services/white-papers/documents/industry-4.0-real.pdf.

4.         Caylar, P., K. Naik, and O. Noterdaeme. Digital in industry: From buzzword to value creation. 2016  [cited 2019 2nd October]; McKinsey analysis:[Available from: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/digital-in-industry-from-buzzword-to-value-creation#.

5.         KPMG, The Digitalisation of the UK Automotive Industry. 2016: https://home.kpmg/content/dam/kpmg/uk/pdf/2017/04/The-digitalisation-of-the-UK-automotive-industry.pdf.

6.         Mckinsey&Company. Industry 4.0 after the initial hype: Where manufacturers are finding value and how they can best capture it. 2016  [cited 2020 30th January]; Available from: https://www.mckinsey.com/~/media/mckinsey/business%20functions/mckinsey%20digital/our%20insights/getting%20the%20most%20out%20of%20industry%204%200/mckinsey_industry_40_2016.ashx.

7.         Zimmermann, V. SMEs and digitalisation: The current position, recent developments and challenges. 2016  [cited 2020 30th January]; Available from: https://www.kfw.de/PDF/Download-Center/Konzernthemen/Research/PDF-Dokumente-Fokus-Volkswirtschaft/Fokus-englische-Dateien/Fokus-Nr.-138-August-2016-Digitalisierung_EN.pdf.

8.         Culot, G., et al., Addressing Industry 4.0 Cybersecurity Challenges. IEEE Engineering Management Review, 2019. 47(3): p. 79-86.

9.         Rubio, J.E., R. Roman, and J. Lopez. Analysis of Cybersecurity Threats in Industry 4.0: The Case of Intrusion Detection. in Critical Information Infrastructures Security. 2018. Cham: Springer International Publishing.

10.       Büchi, G., M. Cugno, and R. Castagnoli, Smart factory performance and Industry 4.0. Technological Forecasting and Social Change, 2020. 150: p. 119790.

11.       ur Rehman, M.H., et al., The role of big data analytics in industrial Internet of Things. Future Generation Computer Systems, 2019. 99: p. 247-259.