Mumbai: Pharmaceutical firms have for long done it all—research and development, manufacturing and marketing of their drugs—by themselves.
Sector no bar: Pfizer and GlaxoSmithKline in April combined their HIV-AIDS drug development and sales operations into a single entity. Robert Caplin / Bloomberg
But as the industry fights a shrinking pipeline of new medicines, slowing market growth and increasing competition from generic drug makers, pharma companies may have to start collaborating with other firms, even outside the sector, global consultancy PricewaterhouseCoopers (PwC) says in a recent report.
“The top companies saw their market value soar 85-fold between 1985 and 2000. But this (integrated business) model is now under huge pressure and, by 2020, it will not work,” PwC said in the report titled Pharma 2020: Challenging business models. “If they are to prosper, they will need to improve their R&D (research and development) productivity, reduce their costs, tap the potential of the emerging economies and switch from selling medicines to managing outcomes—activities few, if any, companies can accomplish on their own.”
For instance, Pfizer Inc. and GlaxoSmithKline Plc in April combined their HIV-AIDS drug development and sales operations into a single entity, to leverage their capabilities as well as beat the limitations they face as separate programmes.
PwC noted that Spanish tele-medicine provider Medicronic Salud has joined hands with communications firm Vodafone Group Plc and device maker Aerotel Medical Systems Ltd to offer a wireless home health monitoring service.
In the UK, Prudential Plc, the country’s second-biggest insurer, is collaborating with Virgin Active Health Club to offer a critical illness policy that provides subsidised gym membership and rewards those who exercise regularly by reducing premiums.
The report, released globally on Friday, is the concluding part of a series by PwC, titled Pharma 2020. In 2007, the series focused on issues that would have a major bearing on the industry by 2020, and in 2008, on virtual R&D. Earlier this year in February, PwC studied key changes in marketing strategies.
Sujay Shetty, associate director, India pharmaceuticals and lifesciences advisory, PwC, said on Sunday that big drug makers have started collaborative steps with organizations outside the industry, especially with information service providers. Shetty was part of the global team that prepared the report.
PwC says the current downturn will hasten the shift to collaborative models. “The pressure to change to new business models could come from outside the pharmaceutical sector, perhaps triggered by regulators, investors and healthcare payers,” it said.
According to Jo Pisani, partner in the pharmaceutical and life sciences practice at PwC, such collaborations will be a “do or die” requirement for pharma firms and healthcare payers alike.
The changing face of the healthcare model globally and demands from different stakeholders means pharmaceutical companies have to provide holistic solutions rather than narrow treatments. In tomorrow’s world, this means that they must work more with other parties, Pisani said in a statement.