1) Demonstrating the value of their medicines Efforts are underway to make controls more rational by precisely gauging the health and economic value of medicines through health technology assessments. These efforts, which are subject to varying standards between countries, are making it difficult for manufacturers to provide timely and compelling evidence that will meet the needs of a growing and disparate set of evaluators and decision makers, including patients, physicians, payers and regulators. Meanwhile, payers continue to apply and adapt pay-for-performance programs as a means of achieving productivity improvements in healthcare systems.
2) Improving productivity related to their research and development efforts The current R&D model—in which companies work individually to develop products—may not be sustainable because of the costs and risks involved. Many companies are relying more heavily on external sources to fill their R&D pipeline. This is no longer a temporary patch, but a core strategic direction for many companies. However, these deals are limited in availability; driving the true value from them remains a challenge. Furthermore, as true innovation becomes harder to find, demonstrating clinical safety and efficacy is no longer sufficient, and with limited healthcare budgets, health economics now becomes a key hurdle for R&D. Pricing and reimbursement must be addressed as a core part of the clinical development program. A further complication is that we are just entering a new era of medicine where preventive medicines are entering the marketplace. In many cases these will not be sold to the typical pharma buyers—they will have very different health economic considerations and R&D needs to take a much bigger role in preparing the market.3) Enhancing their commercial productivity in light of changes in the marketplace Substantial changes in the global marketplace are driving manufacturers of all types of pharmaceuticals—R&D-based, generics, and over-the-counter—to accelerate their pace of restructuring to get greater value from sales and marketing investments. In what has been described as an end to the "arms race" among pharmaceutical companies, companies are finally taking action to resize the sales force and reevaluate the marketing investment.
WHAT TO DO RIGHT NOW
I am equally convinced that the pharmaceutical industry needs to start:
1) Thinking about payers as customers. Most pharmaceutical companies tend to think of payers as gatekeepers and not as customers. Pharmaceutical executives should think carefully about how to win the longer term argument on demonstrating the value of medicine; to do that, it must learn to think of payers as customers.
2) Assessing the emerging role of the consumer. Whether it is through rising co-pays, or through markets in Asia and Latin America (which are likely to stay largely self-pay for the foreseeable future), the consumer must be invested in as a key customer.
3) Preparing for real change Changes currently underway may seem fast, but a single round of cost-cutting—no matter how dramatic it may seem—is not going to be sufficient to adjust company operations and organizations to the future realities—the magnitude of changes in the product portfolio, relative influence of physicians, payers and patients and regulatory shifts.
IMS Health, parent company of IMS, is a provider of business intelligence and strategic support for the pharmaceutical and healthcare industries. IMS Consulting provides solutions in areas that including strategic market development, R&D portfolio management, sales and marketing effectiveness, information management, organization strategy, pricing and reimbursement, and performance management.
Ray Hill is general manager of IMS Health Consulting. He can be reached at [email protected]