The pharmaceutical marketplace is undergoing huge changes. Most pharma companies have traditionally done everything from research and development (R&D) through to commercialisation themselves. But within the next ten years, this model may no longer work for many companies. If they are to prosper, they will need to improve their R&D, reduce their costs, tap the potential of the emerging economies and switch from selling medicines to managing outcomes. Even the largest pharmaceutical companies will have to collaborate with other organisations to develop effective new medicines more economically, help patients manage their health and ensure that the products and services they provide really make a difference. Moreover, they may have to step far outside the sector to find some of the partners they need.
The global healthcare bill is soaring because the population ages, new medical needs emerge, and the disease burden of the developing world increasingly resembles that of the developed world.
In ten years, most medicines will be paid for on the basis of the results they deliver – and since many factors influence outcomes, this means that it will have to move into the health management space, both to preserve the value of its products and to avoid being sidelined by new players. Various forces are changing the environment in which the pharma companies operate and the relative positions of the different players in the healthcare arena. The global healthcare bill is soaring because the population ages, new medical needs emerge and the disease burden of the developing world increasingly resembles that of the developed world. Healthcare payers in the industrialised economies are already mandating what doctors can prescribe. The British National Health Service has, for example, also introduced a flexible pricing scheme under which the prices of new medicines can be lowered or lifted, depending on the results they deliver.
In ten years, few pharmaceutical companies will be able to “profit alone”
The developing world will soon come under similar pressure. The emerging economies will experience the most rapid growth in demand for medicines over the next ten years, but many of them will struggle to fund this demand. In ten years, few pharmaceutical companies will be able to “profit alone”. They will have to “profit together”, by joining forces with a wide range of organisations such as academic institutions, hospitals and technology providers to companies offering compliance programmes, nutritional advice, exercise facilities, health screening and other such services. The big market trends are: Patients are better informed, patients are paying a bigger share of the bill, personalised medicine is increasing, patients want cures (not treatments) and the emerging markets are becoming more important. In short, the rules of the business are shifting dramatically. And as Michael G. Jacobides, Associate Professor of Strategic and International Management at the London Business School, notes, when an entire “industry architecture” is transformed, it is not only “who does what” that changes, it is also “who takes what”.