Innovation at Pfizer - Pharmaceutical Executive


Innovation at Pfizer

Pharmaceutical Executive

WL: Innovation is a very broad term—so broad that it risks becoming a cliché. Why has Pfizer opted to dedicate resources and visibility to this function as a strategic driver in the company's long-term business plan?

KP: The simple fact is that innovation—involving both products and business processes—is the way companies in our sector compete. Today, innovation, more than price, is the most important source of competitive advantage in the pharmaceutical business. This automatically makes innovation a strategic factor in how we respond to the enormous transition taking place in how medicines are discovered, developed, and marketed around a more diverse customer base. Simply put, innovation is the mindset that allows us to keep pace with market change.

WL: How do you define that change?

KP: Fundamentally, it is the move from a world in which our regulatory-approved medicines were paid for routinely, without question, to one where our customers are insisting that we build therapies around a lower cost structure, are clinically differentiated from existing products, and add significant incremental value to the entire healthcare system. A business model based on the proposition, "You should just pay," is not sustainable for any player in healthcare, public or private. Responding to the revolution in payer expectations is a challenge to any healthcare provider, but it is particularly acute for our industry, because in most health systems medicines are a "siloed" resource, with scant information available on how appropriate use of medicines contribute to cost efficiencies in funding.

Market change is also creating rich opportunities for companies alert enough to recognize them. One driver of change is the growth of the middle class in emerging countries, which means more discretionary income to meet the significant unmet demand for better healthcare. Innovation in how we relate to this new customer segment is vital, as the old business model focused on the most affluent top tier of patients is only going to deliver diminishing returns.

WL: In what ways is the Pfizer business model being recast to ensure the company is not left behind by market change?

KP: Over the years, Pfizer was regarded as the poster child for the blockbuster drug. Our focus was on medicines that served large, undifferentiated blocs of patients, mainly in primary care. We were enormously successful at that approach, in so far as our offerings delivered major public health gains in the struggle against chronic disease. Nevertheless, returns from this strategy have slowed due to the fact that off-patent generic medicines are now the standard of care for many chronic diseases. There is a general trend toward a loss of exclusivity for many of these blockbuster medicines; for Pfizer, the gap in revenue will be particularly acute over the next two years.

To fix that, our CEO Ian Read has a blueprint geared to preserving and building our "innovative core." It consists of three main elements: improving the cost efficiency of in-house R&D around new medicines that customers will want to pay for; restructuring of our eight Business Units to limit bureaucracy, build accountability, foster a proper balance between risk and reward, and allow for faster, better decisions on the ground; and becoming a better business partner to ensure we can seize the best new external opportunities, ahead of the competition.

Is There a Constituency for In-house Innovation?
On R&D, we are spending less and outsourcing more, building stronger ongoing relationships with the academic research community, and pursuing new approaches to the conduct of clinical trials. Our pipeline portfolio has been reshaped to emphasize potential-breakthrough, well-differentiated products like crizotinib for non-small-cell lung cancer (NSCLC) that can show real clinical benefit for patients with no alternatives against the current standard of treatment (see Pharm Exec, July 2011). Overall, the measure of success is in offering a solution relevant to the customer; whether that solution is in the traditional form of a product or a new process or application will depend on how well we can read the market, which is where my group plays a key role. It certainly demands a different approach, one that is sensitive to the desire to show a link to improved outcomes, not only for the individual patient, but for the healthcare system as a whole.

WL: Is it possible to retain the high margins Pfizer is used to by adhering to a "total health solutions" approach? Are you not taking on potentially costly responsibilities that go beyond that of simply selling a pill?

KP: There is little future for us in the healthcare system if we only focus on selling a drug like a commodity—health is not just about the kind of medicine you take. The emphasis we place is on being a good partner, and what that means is we have an ongoing obligation to ensure our medicines are safe as prescribed and promote adherence to therapy and ultimately to good health. That proposition justifies our margins—it does not undercut them—because providers will pay a premium for value. It's the partnering that drives new business and brings us together. In that sense, we position ourselves as part of the solution, but not the only solution.


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Source: Pharmaceutical Executive,
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