Pharma MUST change! Pharma WILL change!

A recent piece in the New York Times talked about how Research in Motion (RIM) the maker of Blackberry is struggling to offer new ideas relevant in an iPad world where just being able to get your email on a handheld device is hardly something exciting enough to constantly excite customers. It reflects a pattern. When a company discovers something that is truly exciting, others copy and follow. This happens to the point that what was once the object of technical differentiation (and therefore competitive) becomes a non-negotiable prerequisite.

This was a trend that was once thought true of only the technology sector. Unfortunately it is now true of the healthcare sector as well. Hospitals that focus only on delivering healthcare are no longer considered as the best in the sector. The ones that have the most caring staff who seem to “understand’ the patients’ problems and “listen” to them are far more valued. No wonder hospitals have begun to hire Chief Listening Officers too!

Similarly, pharmaceutical companies that once were valued for merely bringing out medicines to market, through R&D, are no longer thought of as valuable. Investors seem to constantly pressurizing pharma CEOs to control costs and do more to get results from the billions of dollars they pour into their research labs. Especially since the past decade has brought heightened scrutiny of drug safety, government probes of sales and marketing practices, and greater pricing pressure through both policy reform and generic competition.

The quickest to react was GlaxoSmithKline PLC CEO Andrew Witty. He has been changing the company from a pure pharmaceutical business to a diverse healthcare conglomerate, a strategy most rivals must pursue to drive growth. Most pharma companies today are pushing to sell more products in fast-growing ’emerging markets’ such as Brazil, Russia, India and China. Witty is also increasing efforts to bring medicines for tropical diseases to the poorest countries, at minimum profit. Yet, these are all variations of the same strategy. To bring products [medicines] to market.

Why is pharma not exploring other areas that can create more value for patients? Probably because the industry thinks of them as patients and not as consumers. Could that be the essential difference? Are companies doomed to repeat this cycle over and over again? I would argue they are not, but it takes real strategic vision and an ability to combat the internal power dynamics that always favor a profitable core business over an uncertain and failure-prone new one. The critical question executives must ask themselves is, whether they are making enough investments that would allow them to be well prepared to face a scenario when they begin to serve consumers and not patients.

Today executives are working endlessly to polish or perfect their business plans. The same is true of innovation. Workshops, workshops and even more workshops. But what most people miss is that the plan isn’t the thing. The business is the thing. Clever plans that can’t be commercialized are nothing more than wasted reams of paper.

Pharma companies must change! They will change! But they wont make that change very successful if they continue to think in the same way that they’ve thought for the last few decades. This time they must think as if they are creating a new business. There are different roles in the creation of a new business. One mistake executives make is thinking that new businesses must start small and that they are just small additions to the ‘existing core business’. They aren’t. When companies work at building capabilities and a new business model they must treat that phase of uncertainty as a temporary search for a repeatable and scalable business model.

The lesson? Pharmaceutical companies are faced with stiff competition from both within the industry as well as from non-traditional players. While business model innovation is just waiting to happen, it is sad that most executives today do not feel the need to prepare for the challenges that the industry will face later in this decade. While there have been some signs of change creeping into the system, there is a concerted need to disrupt and reinvent existing business models that will keep the industry relevant to consumer demand. How else will pharma be the preferred partner as consumers prefer to move from health outlays to better health outcomes?

11 thoughts on “Pharma MUST change! Pharma WILL change!

  1. Mr.Salil, what you have expressed is the reality and the people who are sitting at the top should take care of this. If you go behind cost cutting and the good bottom line, this is what happens. You have to look at the bottom figure but also look at the priorities and the business.

    What has happened in the last one decade of the indian pharma industry is a shame. We are ashamed to call our selves as medical detail man. Where has gone all the ethics, principles? Now every one is just looking at how much I will get.

    I am not blaming any one but only i am expressing my view.

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    1. Mr. Salil, You are absolutely right. Being a part of this industry, it’s my personal abservation, that pharmaceutical companies have more foccused on their ROI instead of patient prosperity. These are just for saying that “We are comitted to provide patients complience” What happen in Pakistan pharma. Well reputed companies are involve in un-ethical activities by doing give & take with the Doctors. Ethical & leading Multinationals are going to close their business. like Roche, Up-jhon pharm, & so many. What’s your suggestion regarding this current sanario’s?? We are ready to strive hard but for positive change.

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  2. I agree Prasanna! You were right in saying what you did. The point is how do we change it? If we don’t talk about it or express our displeasure, change will never come.

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  3. Dear Mr. Salil,
    Thanks for sharing some nice ideas. Yes ! things turning around faster now a days with consumer getting more & more aware. It is good if Pharma companies will also start taking care of different types of patient compaliance and providing better service at lower costs. In case technological advancment is no more the only criteria for leadership but much more benefit to consumer is now need of hour, then why its “unfortunate” that healthcare industry also will be facing this? I got confused with your remarks in 2nd paragraph 2nd line. Please help me to understand that.

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  4. Mr. Salil my eulogy for writing this article. ‘Corporate Shared Value’ seems the only way ahead for growth of both consumer and company.

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  5. Dear Pranesh,

    Thanks for your question and for reading my blog! Until the recent past, obsolescence was a phenomenon that set in relatively quickly with technology products. The novelty in a mobile phone with great features would wither in a few months as competitors brought in better phones with better features. Therefore, features cease to attract consumers. The same logic is now applicable in healthcare as well. Hospitals are traditionally known to serve the ill. However, just doing that well does not create novelty. Similarly, pharma-cos with only innovative medicines will not hold consumer fancy. So, what can pharma do to attract consumers? Looking for answers in that direction will throw open huge opportunities for growth which are currently getting overlooked. Let me know if I have answered your question!

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  6. sir,

    why the foreign company are come to us because they know our knowledge of consumers

    If the consumers knowledge increase the problem will automatically solved.

    if the consumer knows the thing they the kranti will come auto

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  7. The issue is you can’t give up quality (at all levels product & services)and expect the model to work. Emerging markets needs to have a model which provides its world class services within reach of the customers(value for money). Cutting costs and just trying to grab the share of the pie does’nt work.Investment maybe of a different kind may hold the key….taking a cue out of your listening officer thing…but the model needs investment

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  8. Prithwish, you are absolutely right! And thats the point I was trying to get at in the post. The model MUST change! Investments will follow a strong plan and that plan will follow a clear objective. If pharma becomes clear about what will drive its growth (products, services or both) and then decides where to build capability in order to ride the wave, investments will happen in the right places. The problem today is that few pharma leaders know what will drive growth in the future!

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