The Big Squeeze

The simple answer to pharma's pipeline crisis? Get more value out of the products you already have
Oct 01, 2004

Leading Practices in Lifecycle Management The promise of lifecycle management is that modest improvements will work together to create large results. This chart estimates realistic, achievable results in some key areas.
Between now and 2008, $40 billion worth of pharmaceutical industry revenues are at risk through patent expiration on just 19 products in the United States alone. Worldwide, a much more dramatic $72 billion stands to be lost.

Those revenues will not be replaced primarily by new blockbusters; more likely, in the near future, pharma will be looking at products in the $500 million to $600 million range. If so, pharma will need 80 new molecular entities (NMEs) in the next four years to replace lost US revenue—and 144 to make up for lost revenue worldwide.

Lifecycle Managements Impact at the Product Level These graphs show what happens when several dimensions of a product are managed simultaneously. With quicker time to peak sales and effective late-stage cost controls, a 13 percent increase in sales translates to a 22 percent increase in profit contribution.
One needn't be a pessimist to conclude that this isn't going to happen. The current drought in new products is unlikely to be resolved in the short term, and many industry observers believe the only way pharmaceutical companies will survive and prosper will be through more sophisticated lifecycle management. "We're going to be more dependent on existing product pipelines," said Chris Towler, former director of global regulatory policy at Glaxo Wellcome. "Smart companies will look to wring everything they can out of their existing products."

In a survey of pharmaceutical executives conducted by Capgemini, only about one-third rated product life cycle management as either a number-one or number-two priority in recent years. Ninety percent believe its importance will increase in the next five years, with 60 percent saying it would increase significantly from its importance today to be the top or second priority for drug companies. Apart from the need to develop innovative new drugs, no other business issue preoccupies senior pharmaceutical executives as much. As one put it, "If innovation is the number-one priority, product lifecycle management is number two."

Driving Change at the Portfolio Level Many companies face declining revenues because of patent expiries and price pressures. Lifecycle management can potentially preserve profits in a difficult business environment.
Focus on Contribution The main reason for product life cycle management's rising importance is simple, according to executives in the survey. With fewer truly innovative drugs in the pipeline and with the cost of bringing new drugs to market rising dramatically, companies need to maximize the value of existing products. "We have used product lifecycle management in the past as though it wasn't really very important—but the blockbusters are not around the corner anymore," explained one respondent.

Nonetheless, fewer than 20 percent of executives rate their companies' current execution as excellent and 30 percent as good. Thirty-five percent say their companies are average, while more than 15 percent believe they do a poor or very poor job of managing product life cycle.

lorem ipsum