Ernst & Young, EyeforPharma and The Boston Consulting Group all argue that Pharmaceutical companies must overhaul their business model, transforming from drug suppliers to healthy outcomes providers. Failing to make the transition to this new phase, sometimes referred to as Pharma 3.0, will result in pharma being cut out of vital growth opportunities. To borrow an analogy from Dave Chase, CEO at Avado, pharma is at a crossroads and must follow in the footsteps of either IBM or American railroad companies. IBM reinvented themselves and won big. American railroad companies, however, refused to branch out and end up locked out of a very profitable market – automobiles. For an overview of what the transition to Pharma 3.0 is all about, check out the Ernst & Young presentation below:
As the presentation suggests, although some challenges stand in the way, Pharma 3.0 is a huge opportunity to boost growth and expand into new markets. The key question is whether or not pharma can find the right partners and take advantage of the most promising opportunities.
A Promising Opportunity
Pharma 3.0 offers hope in the face of the life sciences’ current woes, which include a patent cliff, reduced R&D productivity, pricing pressures and stricter regulatory environments. For instance, PricewaterhouseCoopers reports that the market for a personalized approach to health and wellness, which encompasses pharmaceuticals, medical devices, diagnostics, telemedicine, health IT and nutrition products, is expected to reach $452 billion by 2015. While many industries are eyeing this market, pharma is particularly well placed to take advantage.
Notably, pharma already has:
- Tremendous expertise in disease-based clinical knowledge
- Global reach
- Experience in managing stakeholder relations
- Significant resources
Pharma is taking notice of the opportunity – the number of 3.0 initiatives has increased 78% according to E&Y. Yet, non-pharma companies are still doing most of the investing. There is a true risk that if pharma doesn’t accelerate their efforts and find solutions for key challenges, they’ll be ousted from the market.
This new market is larger and more complex, making it difficult to determine what kind of partners are needed and where they can be found. Now, potential partners could be companies with know-how in everything from devices and diagnostics to mobile health, smartphone apps and video games. The chart below from BCG Perspectives shows the different initiatives pharma should consider in order to transform from a drug supplier to a healthy outcomes provider. To deal with this new challenge, companies must be able to find and develop relationships with new, unknown partners.
In addition to uncovering and managing new partners, pharma is faced once again with rethinking where innovation occurs and with whom. Innovation has to take place throughout the value chain, not just at the beginning in the drug discovery and development phase. For example, the commercial team must collaborate both with payers and patients and the R&D team. Finding ways to work together and collaborate effectively will be an immense challenge.
Going beyond CRM to PRM
To overcome these challenges, the ability to effectively scout, evaluate and manage a diverse array of partners has never been more important. Pharma needs more than a simple CRM platform, they need a PRM (Partner Relationship Management) platform. A PRM tracks not only contacts, but companies, assets, proposals and agreements. By keeping this information in one central repository, efforts aren’t duplicated and entire teams, despite their geographic location, can collaborate. Companies gain a comprehensive understanding of an opportunity and its strategic fit by inviting experts from BD, finance, R&D, marketing, external partners, etc., to contribute their insights. The transition to Pharma 3.0 won’t be easy, but those companies that make the change stand to win big.