by Karan Arora

Gone are the days when an army of sales representatives could march into clinician offices with donuts and

samples. Big Pharma is finding it harder to show growth to its shareholders in lieu of higher regulatory hurdles, stringent guidelines around clinician access, and dozens of blockbusters like Lipitor, Diovan, and Zyprexa going off patent.

You might argue that with the changing economic climate, global expansion, and price increases, Big Pharma should be able to weather the storm; this would be true if the market landscape had not evolved as it did.

Today, alongside Big Pharma, there are several others competing for the same profits. Biotech’s, healthcare equipment, and generics, who are subsequently making it more challenging to deliver growth using those levers alone, are imperative for Big Pharma to evolve and find new business models.

At one time, research and development (R&D) and commercial reach were strengths of Big Pharma, while today, if left to operate “as-is”, it would lead to their certain failure. Chief Executive Officers of these organizations should be asking themselves the following three questions:

�Do� we� still� need� all� the� core�functions,� e.g.� marketing�research,� clinical� trial� design�and� manufacturing,� or� can� I�outsource�some�of�them?�The answer depends on the robustness of the future drug pipeline. For those organizations that have a full pipeline, perhaps retaining internal talent and expertise is the right thing to do. However, those organizations that have products going off patent and a dry pipeline, finding ways to reduce spending and focusing on drug discovery and/or business development and licensing activities may be the way forward.

�Do� we� have� R&D� assets�delivering�results�in�my�portfolio�that�are�low�performing�and�that�require�a�lot�of�cost�risk?If the answer is yes, the organization should go through a robust portfolio evaluation exercise where all the assets are stacked up against each other on the basis of Net Present Value. Those that do not meet the financial hurdles to fund going forward are either divested, “milked” or “sun-set”.

�Is� our� commercial� infrastructure,�e.g.� marketing� and� number� of�sales� representatives,� ideal� for� the�markets�we�are�in?

While many in Big Pharma have realized that it is wise to scale down in mature markets, several are waiting on the sidelines. They are maintaining their expensive infrastructure in the hopes of another blockbuster. They are afraid of diluting brand presence, or simply because their competitors have not done the same. It is imperative that these organizations do a full financial analysis of each of their markets and invest resources on the basis of future growth potential rather than market size.

Those organizations that successfully navigate through these complex and changing market dynamics will ensure longer-term sustainability. For those waiting to evolve, they should quickly assess if their organizational structure is optimal for future growth. Otherwise, it will be only a matter of time before they become obsolete.

Big Pharma has to Evolve

Karan Arora is the Senior Director Global Corporate Development & Proprietary Pharma Hospira.

Three Strategic Questions to Assess if Your Organization is on the Right Path

Higher regulatory hurdles, stringent guidelines around clinician access, and dozens of blockbusters going off patent, Big Pharma is finding it harder to show growth to its shareholders.

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