Executive Prophesies Vision for the Future

Global trends indicate the shape of Things to come.
Mar 01, 2003

For the pharma industry, the year 2002 brought unprecedented competition, pricing pressures, public scrutiny, and ever-increasing regulation, all exacerbated by a weak economy. (See "Defining Events," pages 50-56.) Although a few companies forged new partnerships and produced life-saving treatments, many more struggled to meet the industry's challenges. And no road map exists to guide them through today's continuing market pressures or to help them anticipate tomorrow's challenges.

But a new Ernst and Young report, "Partners with Vision," called on some of the world's experts in the pharmaceutical, health, and related industries to explore how pharma might yet reach the golden age of medicine. This article summarizes the result of those discussions. Although their collective voices propose no single path, their leadership offers some guideposts to increased innovation, productivity, and accountability and may serve as a catalyst to foster better relationships both inside and outside the industry.

Time of Crisis In the next ten years, say the experts, success will come to those companies that build on past achievements and create a strong vision of the future healthcare marketplace, while dealing with two key dilemmas:

Market/investor paradox. Pharma costs are increasing while stockholders' investments are decreasing. Industry analysts and investors meticulously monitor how companies respond to those conflicting forces. Pfizer CEO Henry McKinnell predicts that "unsuccessful companies will be absorbed by those that have mastered the 'productivity paradox' by yielding return on R&D investment." At least two companies have successfully managed that paradox:

  • Novartis. To forge stronger relationships with top scientific and academic communities, the company moved its headquarters from Cambridge, England to Cambridge, Massachusetts.
  • GlaxoSmithKline. To create a more entrepreneurial environment, GSK is breaking up its R&D units and creating six independent Centers of Excellence for Drug Discovery. That new R&D structure provides the flexibility needed to better coordinate research, allocate funding, and improve pre-clinical research and clinical development productivity. GSK also announced that it has doubled its new chemical entities (NCEs) in clinical trials.

The "Partners with Vision" report explains why those two leadership components are critical to the industry's survival and argues that pharma companies can take the industry to the next stage, if they address four key areas:

  • global regulatory and legislative risk management
  • corporate accountability and leadership
  • pricing and intellectual property
  • expanding innovation.

In the wake of recent court settlements stemming from drug promotion and selling misconduct and ImClone's FDA missteps, mitigating and managing legislative and regulatory risk have become a primary industry concern.

To meet the demands of a global economy, pharma companies must comply with many countries' high regulatory standards. Global laws have become so cumbersome, however, that niche industries have emerged to support the many different national regulatory processes.

Despite those hurdles, pharma companies have developed expertise in navigating complex regulatory environments to get their products to market. They can do so by aligning their vision with that of each government and the public it represents.

In response to the question, "What are the prospects for a full partnership between governments and the industry?," leaders in the following countries outlined how partnerships with government will lead to better knowledge of public health issues, streamlined drug approval processes, greater access to essential medicines, acceleration of R&D, and increased capital from joint funding for research.

United Kingdom. Alice Pomponio of the British Consulate points out that the UK's Pharmaceutical Industry Competitiveness Task Force has brought together the expertise and experience of industry leaders with policy makers to optimize and strengthen the competitiveness of the UK business environment for innovative pharma companies.

Canada. Health officials forged a deal with Bayer AG to produce Cipro (ciprofloxacin), preserving the manufacturer's patent rights while obtaining the medicines needed for stockpiling against the threat of bioterrorism.

United States. Innovative private/public partnerships have emerged in response to tight state healthcare budgets. In exchange for guaranteed savings to state Medicaid programs, pharma companies are being given preferred status on state formularies. Despite those successful efforts, some industry advocates fear that such collaboration will shift power to regulators by virtue of government's purchasing power and inevitably to price controls, thereby reducing the capital needed for future R&D.

Increased regulation, price controls, and government demands that pharma companies provide free and highly subsidized access to drugs challenge the industry to view government as a partner, rather than an adversary. Several governments worldwide want to be part of the solution and are reaching out to pharma companies to lend their expertise to remove barriers to access, thereby making more critical capital and resources available to accelerate drug discovery and protect public health. One opportunity to pursue that partnership involves efforts to combat bioterrorism. Applied more broadly, a partnership between the industry and governments would encourage regulatory harmonization and improve communication among disparate nations in the effort to surmount global disease.

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