Winners will be those unafraid of hard-nosed competition, and with the agility and resourcefulness to re-shape their business models.
One of the big questions pharmaceutical companies are asking themselves today is whether times are good or not.
Although operating margins at 11 of the top 16 pharmaceutical companies have fallen more than three percent in the past couple of years, sales numbers are strong: a $300 billion worldwide market, with high per-capita spending not only in the US but in Europe as well.
However, a dramatic gap between spending and revenue is beginning to open. Accenture’s High Performance Business research forecasts that recent and upcoming New Molecular Entity (NME) launches between 2014 and 2019 are expected to represent $190 billion. But net sales in developed markets will total only $125 billion—a $65 billion gap. Margins are being stretched and companies are bumping up against limits in the market’s capacity to pay.
In this hypercompetitive environment, Accenture recommends life sciences companies improve their flexibility and responsiveness by undertaking three important actions.
Life sciences companies need to be relentless about driving value for the broader healthcare system through their drugs and associated services. They are no longer competing just against other drugs or types of treatment, they are competing for all the healthcare dollars out there. They need to:
Focus on economic value as well as safety and efficacy.
Be assertive about their aspirational label, going after unmet needs based on science as well as focusing on the economic value of their drug in a future marketplace that is extremely uncertain and price constrained.
Adhere staunchly to Target Product Profiles (TPPs) for each product in development, applying a ruthless mindset of objectivity to terminate unpromising drugs promptly to free up capital and mind space to focus on more promising drug candidates.
By leveraging new analytics technologies, life sciences companies can enhance their business models, innovate detection and diagnostics, and create services and tools to improve outcomes. They also need to:
Focus on money-saving, value-creating measures that their customers care about.
Invest in real-world data trials.
Increase the use of analytics to generate insights relevant to customers as a natural part of the R&D process, not as an afterthought.
Reshape business models
In corporate strategy, companies are rethinking their core business—personalized, rare disease, specialized, diversified, generic, over-the-counter, vaccine—and challenging the traditional business model of in-house discovery, development and commercialization of medicines. They also need to:
Apply new technology to drastically shorten development cycles to generate stronger evidence faster and more efficiently.
Be organized around helping customers achieve their goals, not around products.
Recognize Drug Hunters—employees who can identify product development opportunities against the unmet needs in the market, payer appetite to reimburse, the FDA’s threshold for approval and the market potential for commercial success.
The life sciences industry has become hypercompetitive and the stakes are continually being raised. Winners will be those who have superior insights, as well as the agility and resourcefulness to re-shape their business models as the industry evolves.