John Castellani: Industry's Level Bet on a Dizzying Future - Pharmaceutical Executive

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John Castellani: Industry's Level Bet on a Dizzying Future
Will reinforced evidence and messaging continue to deliver results in a changing healthcare marketplace? Can PhRMA's own business model synch with industry's? Pharm Exec takes a closer look at PhRMA's new leadership


Pharmaceutical Executive


William Looney: PhRMA is one of the most visible representatives of an institution in transition—the Washington-based trade association. How are you adapting to change—representing an increasingly diverse constituency, shaping events in the midst of pervasive market uncertainty, and establishing clear metrics on public policies that provide the basis for commercial success?

John Castellani: The biopharmaceuticals industry is at a crossroads. Where we end up depends entirely on decisions that are now being made—by ourselves and also by the increasing number of stakeholders that shape a sector accounting for nearly one-fifth of GDP. Healthcare is being transformed by a variety of forces, both public and private. For us, the basic question is, Can we adapt so that US leadership in medical innovation continues or will we be relegated to the status of a public utility? We've heard this before, but no one quite accepted that our country would be presented with so stark a contrast in outcomes. I can assure you that the issue has now been joined; the stakes are very clear.

The high stakes are actually a positive for our industry. It means that PhRMA's strategy to cope with market change is now highly focused and thus easy to explain. We believe our 45 members are the single biggest driver of innovation in the healthcare system, providing not only life-enhancing medicines but—increasingly—services and processes that do four things: enhance quality, increase access, save money, and improve the efficiency of many complementary technologies. The patient is the first recipient of our work as well as the end beneficiary. To the extent that the patient represents the public, we perform a valuable societal role that stretches our remit beyond commerce.

WL: A clear vision is harder to realize when an industry is forced to confront wrenching adjustments to its historical business model. Certainly this is true in pharma and biotech today. Virtually every company is releasing earnings reports that emphasize cost cuts and layoffs rather than new investments in R&D. How do you continue to make the case for advancing innovation when the pervasive sentiment is retrenchment?

JC: One of the priorities I have set for PhRMA is to explain to our stakeholders how innovation fits in the broader economic cycle. You cannot escape the economic cycle, no matter which industry you are in. Demand for medicines is down, and that has a short-term impact on resources available for innovation. But what is notable about our industry is we still invest for the long-term; our members' R&D commitments—which far exceed the annual budget of the entire National Institutes of Health (NIH)—can actually help reverse the cycle and speed recovery. Few other industries have such long lead times in the way they spend money. You don't see all the positives until toward the end of the development cycle.


John Castellani, President and CEO, Pharmaceutical Research and Manufacturers of America (PhRMA)
We also have to communicate the changes taking place in science. Medical innovation has always been costly, but today it is more than that—it is transformative, in that success is not predetermined, and the process of discovery and development is hard to institutionalize through the standard organization chart. Capturing the assets derived from good science requires a different, far more flexible, networked, and open-ended model for organizing the business.

Innovation is equally shaped by three contending socioeconomic forces: the patient's desire for accessible and affordable healthcare, government payers seeking more fiscal responsibility, and investors who wish to maximize their ROI. While the industry is still on a learning curve here, PhRMA believes these three objectives actually complement each other. Companies have to be smarter and more efficient in the way they manage drug development and discovery because there is no longer one fixed way to achieve pipeline success.


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