Pharmaceutical companies must branch out and forge new collaborations if they are to survive the global economic crisis, says Mr. Abhijit Ghosh, life sciences leader, PricewaterhouseCoopers Services LLP, Singapore.
The pharmaceutical industry is entering a challenging era of uncertainty. The global economic crisis has intensified the strain on a marketplace which was already struggling to come to terms with soaring costs, the drying up of drug pipelines, and the pricing pressures created by the emergence of generic medications. We predict that by 2020 the current business model will become unsustainable, and a new landscape will arise for companies, healthcare providers and patients alike.
Pharmaceutical companies must adapt quickly if they are to survive these challenges and emerge stronger in the new marketplace. The days of ‘blockbuster’ drugs are coming to an end, and companies can no longer rely on a strategy of making huge investments to single-handedly develop and market their most promising molecules. Public expectations, too, are changing: as patients become better informed they demand a more holistic approach to healthcare, shifting the balance away from universal, one-size-fits-all treatments and into the realms of prevention and personalized medicine. Moreover, by 2020, medicines will be paid for on the basis of results, not products, and companies will be forced into offering broader health management services to ensure that they achieve the best outcomes.
Few companies will be able to meet these daunting goals on their own. In an industry where ‘profiting alone’ has long been the mantra, it is now ‘profiting together’ that offers the key to survival.
We predict that pharmaceutical companies will join forces with a range of external organizations in future: from hospitals and academic centers to companies which offer physiotherapy, stress management, nutritional advice and health screening. Many of these collaborations will be unconventional, as an increasing number of non-pharmaceutical companies enter the arena. The technology sector in particular is one where partnerships with the pharmaceutical industry will be beneficial, as drug providers team up with manufacturers of portable devices and implants.
Two models are proposed for the strategy of collaboration. The first is the federated model, which would see a network of separate entities coming together with a common goal and a shared supporting infrastructure. Each partner could play to their strengths and expertise: for example, the pharmaceutical company could focus on drug development while other players worked on improving patient compliance and encouraging them to lose weight. One such example of federated collaboration is already underway in Spain, where Vodafone has joined forces with Aerotel Medical Systems, a device manufacturer, and Medcronic Salud, a telemedicine provider, with a view to providing wireless home monitoring services. Bringing clinics and hospitals into such partnerships in future could even provide medical companies with access to outcomes data, allowing them to monitor the long-term effects of treatment outside the clinical setting.
The second approach to collaboration is the fully diversified model, in which a pharmaceutical company expands to provide related products and services. This enables them to spread their risk away from reliance on blockbuster drugs and into other market areas. Johnson & Johnson, for example, has branched out from drugs into medical devices and diagnostics, and has recently begun building a web-based wellness and prevention platform. GlaxoSmithKline (GSK) and Novartis have both invested heavily in vaccines, while Roche is translating its expertise in molecular diagnostics into consumer products for measuring allergen levels indoors. These diversification approaches, however, require substantial investment, and may detract from the core business and create risks which might even alienate investors.
Besides the financial and commercial benefits of increased collaboration, there are also obvious public health implications, particularly as the global burden of chronic disease continues to rise. Research by the RAND corporation shows that the US alone could save some US$28 billion if all diabetes, asthma, pulmonary disease and congestive heart failure patients enrolled in disease management programs – not to mention the considerable economic benefits in terms of working days saved.
Pharmaceutical companies will need to make their own decisions on how to move forwards, depending on their individual circumstances. Some are already exploring collaborations which previously may have seemed unlikely. In April this year, for example, GSK and Pfizer announced the joint formation of a new firm for HIV drug development, with 11 existing products and a further 17 in the drug-discovery pipeline. It is hoped that this combined venture will offer a broad and sustainable approach, with potential for growth in future.
Some companies, however, will find it harder than others to survive the current economic crisis, and it is small biotech firms that may face the roughest ride. Those with one or two promising molecules in the pipeline will most likely need to collaborate with big companies for their development, or seek to sell their stake entirely and join the ever-growing number of mergers and acquisitions.
Despite the current crisis there is optimism in the industry: in a recent survey we found that CEOs of pharmaceutical companies were more confident about their prospects for growth than their peers in other industries. It remains to be seen how the landscape will evolve and whether this optimism will be justified, but it is clear that the industry cannot stand still. Profiting alone is no longer an option, and the sector must branch out into new partnerships if it is to continue to move forward.
No comments:
Post a Comment