Flexible manufacturing can help pharmaceutical industry avoid high costs of inaccurate demand forecasts

Survey about product launch challenges finds instances of demand forecasts off by more than 50%, leading to sales losses and reputation damage.

When a company fails to meet its forecasted demand, the lack of inventory can result in loss of sales, product risk and overworked employees. It is estimated that a delay in launch costs an average of $15 million per drug, per day, and research shows that a blockbuster drug will lose $1 billion in revenue annually until capacity is developed to meet demand. Generally, underestimating resulted from not having enough background data to support forecasting information.

“Making accurate demand forecasts is extremely challenging for pharmaceutical companies, particularly forecasts for new product launches,” said Michael Lehmann, executive vice president sales and marketing for Patheon. “As a driver of innovation and a transformative force in the industry, Patheon is focused on helping clients find innovative solutions to their challenges.”

If demand is overestimated, it leads to misappropriated capital, forcing manufacturers to mark down the price of the product, destroy inventory and/or close plants and lay off employees, losing the roughly $500 million it cost to acquire their pharmaceutical plant. Respondents said that they often overestimated demand when there is greater market volatility or when they were overly optimistic in their forecasting.

These inaccuracies in demand forecasting, combined with increases in complex manufacturing processes, are driving the need for more choices in manufacturing solutions. Pharmaceutical companies have started outsourcing drug production to take advantage of more flexible manufacturing offerings, and to mitigate risks and prevent the reputational damage resulting from inaccurate demand forecasts.

“It is clear that regardless of company size, product type, or market, the challenge of demand forecasting is a significant one,” said Dana Benini, vice president, ORC International. “Since forecasts by their very definition involve a degree of uncertainty, pharma companies should be talking about how flexible, scalable capacity can accommodate the variability factor, and minimize the impact of inaccurate estimates for a product that does not yet exist.”

Flexible manufacturing services, like those provided by Patheon, complement the traditional outsourcing service model through adaptable and scalable capacity, and allows clients to increase and decrease capacity as needed. In the face of uncertain forecasts, contract development and manufacturing organizations (CDMOs) can offer the facilities, equipment and process technology expertise needed for operations and risk management.

Patheon commissioned the study to better understand the challenges pharmaceutical companies encounter when implementing demand forecasts for commercial launches. The findings were based on in-depth interviews examining current forecasting processes, key issues that arise from inaccurate forecasting, and how forecasting needs will change in the future.