WILLIAM LOONEY: What about the impact of all the merger activity? In traditional theory of economics, increased concentration tends to decrease
Sanjiv SHARMA, NicOx: My comments today are reflective of my own view. That said, I contend that consolidation in the industry reveals that some
companies are not prepared strategically to cope with the competitive environment. It's a short-term defensive tactic and
it rarely succeeds in repositioning the firm for success. Big mergers are an investment in buying time, which means that companies
who take this path often find they have to do it again.
Tony COLES, Onyx Pharma: Consolidation is also driven by the competitive implications of a growing burden of compliance that makes the industry's
"license to operate" very costly. It helps to have scale and size where there are now so many barriers to entry: extensive
P&R requirements, safety regulations, expensive investments in information and evidence, and curbs on promotion, are just
a few. We are a high-risk industry and we can only look to the high failure rate in pharma development to document the financial
consequences. An extensive resource base is a shield against insolvency.
PASCHELES: Our industry is actually still very fragmented; no one firm controls more than 10 percent of the drug market. Consolidation
makes sense if the objective is to assert more control over dynamic forces in the marketplace, aiming for increased operating
efficiency around essential functions like drug development, selling, and manufacturing.
WILLIAM LOONEY: What evidence do we have about the most successful approaches to managing through this harsher competitive climate?
Paul SNYDERMAN, Ipsos Research: We all agree that the ground rules for competitive engagement are shifting. The problem is that our metrics for evaluating
the competition are less relevant. Everyone is learning in real time. What good is the 10-year generic erosion model today,
when what we have is not erosion but a meltdown?
DALY: Globalization provides an opportunity to leverage the innovation latent in other markets. New tools to drive access and manage
costs are coming increasingly from Europe to the US. Contracting is a good example—and "managed care," in a sense, existed
in Europe long before it became the standard of practice here [in the US]. And we now have the exposure in emerging markets.
These are at another stage of the competition cycle entirely. The reality is, our industry, when you examine it from a global
perspective, is not mature. The era of the billion-dollar blockbuster is not over. And there are many models of delivering
and financing medicines to explore.
Look at the radically different situation just across our own border. Lipitor may be the top product in the US, but in Mexico
six of the top 10 medicines are symptomatic and Lipitor ranks 10th in sales. Why? Because the majority of that market is self-pay;
people don't buy for conditions they don't see or feel. There may be tremendous value for future opportunities in the US and
other markets from this insight.
WILLIAM LOONEY: As Stan Bernard notes in his columns for Pharm Exec, the competitive cycle has been driven by "game-changing" strategic leaps that characterize a decade: Merck in the 1980s
with its productive R&D model; Pfizer in the 1990s, in fueling growth through market-powered acquisitions; and more recently,
Roche/Genentech's leveraging of targeted biotechnologies to help dominate the oncology market, the largest therapeutic area.
COLES: We only have to look at other industries to see this point. Consider how IBM made its mark on mainframes, then ceded ground
to Microsoft and its portability platform around the desktop, which in turn led to Google and its wireless search tool that
ushered in the hand-held PDA revolution. IBM came to recognize the impact of these "disruptive technologies," and after shedding
thousands of jobs and absorbing heavy losses, created a new niche for itself as an integrated service provider. That is one
of the challenges facing us right now: do we change the model, moving from just supplying the pill to being essentially a
healthcare service provider, and in the process, doing more things for all people?
NORMAN: The only way to compete today is to find a way to provide a solution to a healthcare challenge. Success has less to do with
the science of developing that great new medicine than with figuring out how payers and patients are going to react to the
product—then giving them a way to access it in line with their own business model.
PASCHELES: Successful competitors are going to be first in defining a whole new vision of what the healthcare sector is. The boundaries
are clearly expanding, which is why this new vision is, to date, heavily weighted toward diversification—generics, vaccines,
biologics, small molecules, animal health, OTC, nutritionals, etc. The notion is that a pure pharmaceutical player will not
be able to address the needs of the marketplace.
SNYDERMAN: I'm not sure this idea goes far enough. Plugging these market segments sounds to me like checking boxes. And, oh yes, we
are going to expand our stake in the emerging markets! I think disruptive technologies will require the industry—especially
big pharma—to take this much further. And not everyone will be flexible enough to make the transition.
COLES: We know what many of these disruptive technologies are; the potential and risk behind large-molecule biologics is one [example].
You have to start first in managing the price tag for entry, with a sophisticated awareness of the different marketing realities,
government safety and risk regulations, and how reimbursement drives patient share. That's the precondition; success means
you must innovate beyond that, even if it means turning the business model inside out. What is stopping us from doing it?
Do we understand that the future is here—today?
SHARMA: This industry is risk-averse. Our products save lives but they also can take lives. We find safety in regulation, but that
inhibits flexibility and a fresh approach. Industry sees itself as an innovator in developing a new product, but when the
product is finally launched we become narrow and very tactical. Industry forgets the significant opportunity for innovation
in the way new medicines are commercialized.