WHEN IT COMES to successfully managing a pharmaceutical company today, the challenge is twofold: How well does your company manage the development
of science, and how well does it manage your markets and customers?
When companies excel in managing science, effective market development follows naturally—the best products should sell themselves.
But when pharmaceutical companies run into difficulty with respect to science management and development, they end up with
a weak portfolio and fewer new products in the pipeline.
To close the gap with competitors, they must resort to more creative means to sell their products and persuade their prospective
customers. The result? A disproportionate reliance on marketing and a dramatic increase in direct-to-consumer advertising.
NEW PRESCRIPTION NEEDED
Because the current business design is becoming economically unsustainable, the prescription for developing products faster
and more cheaply—and getting them into the marketplace more quickly—must be radically rewritten.
Time to market has always been important, but never as critical as it is today. Thanks to the Baby Boomers, there have been
striking changes in the market segments and in the types of medications needed for a large population of over-50s. Consequently,
we'll see the bifurcation of the pharmaceutical industry, as it splits into one market for therapeutics for acute and chronic
diseases, and another for lifestyle medications.
Pharmaceutical companies, therefore, will have to pick which market they are targeting. Should they choose lifestyle medications,
they must invest more heavily in marketing. Should they choose treatment for acute and chronic diseases, they must place a
greater emphasis on science development and management. (Within these separate markets, pharmaceutical companies could become
even more divided, with, for instance, some developing niche medications and others focusing on generics.)
The science management model is one that has been exploited successfully by biotechnology firms that have found ways to develop
products faster, cheaper, and more effectively. This is due, in part, to their smaller niche markets. But they also understand
how to reach patients more effectively, and their use of outcomes studies allows them to focus on the direct medications that
are needed for a smaller population. Pharmaceutical companies could benefit from this approach as well.
INDUSTRY PROGNOSIS: FUTURE CHALLENGES
In addition to the revolutionary changes pharmaceutical companies must make to their business designs, there are two challenges
that also must be addressed:
1) Demonstrating value and managing price. Price remains important, but demonstrating value is becoming even more critical.
Employers, health insurance companies, and patients will more closely scrutinize the price of medications and debate whether
the costs of these medications are justified. To that end, a number of pharmaceutical companies are experimenting with pay-for-performance
models or risk-sharing deals that tie drug prices to real results.
2) Restoring a damaged reputation. Pharmaceutical companies had long been perceived as organizations that do well by doing
good. But recent drug safety controversies, as well as revelations concerning profits and revenue, have tarnished pharma's
image. The industry, therefore, must become more attuned to social conscience issues and revisit its mission of helping to
solve acute and chronic disease problems globally, and not just in the most profitable markets.
WHEN DO YOU NEED A CONSULTANT?
Pharmaceutical companies should seek out the expertise of a consulting firm when they need informed advice and an objective
assessment (which is the greatest value a consultant can offer). They should also call on consultants when they are unable
to see the big picture.
For example, there are a number of issues that pharmaceutical executives, immersed as they are in day-to-day operations, might
not see as clearly as outside consultants do. One of which is:
- Change nature of competition. Competitors come not just from inside the industry but from outside as well, in the form of
medical devices or wellness programs, which may render some medications obsolete. Yet another source of competition exists
offshore. The dominance of pharmaceutical companies based in Europe and the eastern United States is starting to wane, while
the Pacific Rim pharmaceutical and biotechnology companies are gaining dominance. We will also see Asia and the Indian subcontinent
emerge as a force in the pharmaceutical industry within the next five to 10 years.