Healthy Skepticism Library item: 15578
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Publication type: news
Pharmaceutical Companies Are Looking to Reshape the Multi-Billion Dollar Drug Industry, Says New PricewaterhouseCoopers Report
Pharma Live 2009 Apr 30
http://pharmalive.com/news/index.cfm?articleID=622905
Full text:
What music downloads did to redefine the music industry business model is an example of the level of innovation needed to reshape the $800 billion drug industry, finds the latest report in the Pharma 2020 series from PricewaterhouseCoopers LLP, released today. According to PricewaterhouseCoopers, two new pharmaceutical business models are emerging that could transform the competitive landscape of the pharmaceutical industry in the coming years.
The two models – one a federated model and the other a fully diversified model – are both based on pharmaceutical companies becoming more collaborative with other industry players while managing proprietary assets that they either own or control the use. But PwC says the economic downturn is accelerating the collaborative approach, and pharmaceutical companies must act quickly, or risk becoming the spoke and not the hub of newly forming networks.
*Under the federated model, a single company (which may or may not be a pharmaceutical company) creates a network of separate entities that share a mutual goal such as the management of outcomes in a given population. They also will share a common supporting infrastructure as well as funding, data, access to patients and back-office services. The interdependence holds them together, and they are rewarded for their efforts using measures such as increased life expectancy or quality of life. An example of this would be a federation formed to address cardiovascular disease and composed of drugs companies, clinics and diagnostics to provide diagnosis and treatment as well as nutritional advisors and stress management services to prevent disease. One pharmaceutical company could participate in many different federated networks.
*The fully diversified model is one in which a pharmaceutical company expands from its core business into the provision of related products and services, such as diagnostics and devices, generics, neutraceuticals and health management. According to PricewaterhouseCoopers, only the largest pharmaceutical companies are likely to follow this path, which is a safer starting point down the collaborative path. The recent flurry of merger and acquisition activity demonstrates movement in this direction. The fully diversified model enables companies to reduce their reliance on blockbuster medicines and spread their risk by moving into other market spaces with the potential to act as a bulwark against generic competition.
Both the federated model and fully diversified model provide a means of moving into outcomes management by offering combined product-service packages and playing to the growing political emphasis on prevention rather than treatment. Supplementing its products with “wellness” services would also help a company to create a more positive corporate image and develop more powerful brands.
According to PwC, the changing face of healthcare delivery and demands from different stakeholders, including patients, will force pharmaceutical companies to provide holistic solutions instead of narrow treatments. To do so, they will have to join forces with a wide range of organizations from academic institutions, hospitals and technology providers to companies offering compliance programs, nutritional advice, stress management, physiotherapy, exercise facilities and health screening.
“Even the largest pharmaceutical companies will soon need to step outside their sector and collaborate with other organizations,” said Anthony Farino, US Pharmaceutical and Life Sciences Advisory Services Leader, PricewaterhouseCoopers LLP. “Pharmaceutical companies will begin to reap the benefits of ‘profiting together’ versus taking a ‘profit alone’ approach to creating value, and their ability to create networks of collaboration will dictate their success.”
The paper, Pharma 2020: Challenging business models, is the fourth in the Pharma 2020 series. It outlines the driving forces behind the business model changes, and how pharmaceutical companies can create greater value by taking a more collaborative approach. A full copy of the report is available at www.pwc.com/pharma2020businessmodels. Other papers in the series include Pharma 2020: Marketing the future and Pharma 2020: Virtual R&D, Which path will you take?
