Tag Archives: self-serving

Covid Prompts Pharma To Move Away From Competition Driven Business Model

Posted on by
Reply

As deliberated in my just previous article in this blog, Covid has been a watershed in several areas of pharma business. One such key area is its competition driven strategic business model. It aims to deliver significant value for a longer time than the competition, protected by a patent thicket driven TINA factor – and only for those who can afford such patented drugs. It didn’t matter, if a vast majority of patients are denied access to these medicines, with a dangerous pricing trend acting as an insurmountable barrier. Flying solo has been the motto of most players in this ball game, to delight the stock markets.

Interestingly, Covid pandemic seems to be changing this model. Pharma industry, by and large, is now trying to demonstrate its core value for the society – moving away from displaying competition driven one-upmanship. In this article, I shall deliberate on this area.

Covid poses both – a humongous challenge and a great opportunity:

As the article, published in the MIT Sloan Management Review on April 16, 2020 highlights: ‘The COVID-19 pandemic may well prove to be the biggest challenge for humankind since World War II.’ The same holds good for the pharma industry, as well. The drug companies are now expected by all, to play a pivotal role in the fight against the pandemic ‘that is bringing health care systems to their knees and sending shock waves through economies across the globe.’

This is generally because, pharma industry possesses wherewithal to develop effective drugs and vaccines to combat this health crisis – if not alone, but certainly collectively. It also offers a great opportunity for pharma to ‘walk the talk,’ by demonstrating upfront that meeting all patients’ unmet needs lie at the core of the pharma business. As I quoted a global CEO in one of my articles articulating, this crisis also comes as ‘a Shot at Redemption in Pharma Industry.’

Thus, if the industry reacts quickly and responsibly, it may have the chance to also redeem a reputation that’s been tarnished for years. Some of these instances are, illegal marketing practices, corruption scandals, and obscene pricing of vital drugs, the MIT Sloan article underscored. Flying solo in this situation may not be just enough, if not foolhardy.

Flying solo in this situation may not be enough:

Taking this initiative won’t be a piece of cake, either, if pharma companies prefer to do it alone during this unprecedented health crisis.  The drug players will need to be willing and able to successfully collaborate with other players in the race to develop treatments and vaccines. Otherwise, their legitimacy will be fundamentally questioned, especially when the entire world is running against time.

The rationale of two top drug companies entering into collaborative arrangements is obvious – the realization that pooling of all resources together is the best way of delivering effective Covid related solutions to the society at the shortest possible time. The good news is, pharma has already taken the first step in this direction, even when some of them are competitors, in several areas – moving away from their competition driven business models, as of now.

Once strange bedfellows – now partners:

The article published in the Bloomberg Law on June 05, 2020 very aptly observed: ‘The race to address the pandemic has brought together strange bedfellows as big-name companies’ partner with their rivals.’ The Scientist also wrote on July 13, 2020: ‘The urgent need for tests and therapeutics has brought companies together and pushed researchers to work at breakneck speeds.’

One can find this happening on the  ground now, as some major pharma and biotech companies, including Eli Lilly, Novartis, Gilead, and AstraZeneca, formed a group called COVID R&D to share resources and expertise to try to accelerate the development of effective therapies and vaccines for COVID-19. Besides, Roche Holding AG and Gilead Sciences Inc. have teamed up on trials for a drug combination to treat Covid-19.

There are several instances of such collaboration also in the Covid vaccine area. For example, GlaxoSmithKline plc struck a deal with Sanofi to produce 1 billion doses of a coronavirus vaccine booster. Besides, Pfizer from the US and BioNTech from Germany are joining hands to co-develop and distribute a potential Coronavirus vaccine, aimed at preventing COVID-19 infection.

It’s a reality today that Covid-19 has brought not just the strange bedfellows within pharma and biotech companies together. Academia and governments have also moved on to the same collaborative platforms, to save people from a deadly and super contagious infection, in the shortest possible time. We have witnessed this

in India, as well. For example, the Council of Scientific and Industrial Research (CSIR) and Aurobindo Pharma Limited have also announced a collaboration to develop vaccines to protect against SARS-CoV-2 or COVID-19.

The rationale and some possible issues: 

Each of these players is bringing some expertise and intellectual property to the table. “As they work together, they’re going to create more, so you have the ‘yours,’ the ‘mine,’ and the ‘ours’ of collaboration,” as the Bloomberg Law points out. That said, any collaboration of such nature and scale will have its own share of legal issues, such as, patents, trademarks, trade secrets, revenue sharing models, and more.

The collaborators, in pursuit of saving mankind from Covid-19, are expected to find enough alternatives to resolve these glitches for a win-win outcome – not just for now, but much beyond – with the dawn of a new collaborative model. The rapid general acceptance of this collaborative model by more and more drug companies to meet unmet medical needs in many other areas – much faster, in all probability, will delight the health care consumers and also be appropriately rewarded.

Leveraging the collaborative business model beyond pandemic:

E that as it may, it still remains an open question to many, whether such collaborative model will be leveraged for an accelerated rate of drug, vaccine and diagnostics development beyond the pandemic.

The good news is, as The Scientist article reported, some pharma players are seriously pondering how to continue working in this new way – with the same sense of urgency and purpose, for other disease areas too. They believe, the lessons being learned with the collaborative models, may help expedite development of therapeutics in other serious conditions, such as, Alzheimer’s, intractable cancers and autoimmune diseases.

If and when it happens as a predominant business model, suffering patients and the society, in general, would lap it up and the innovators would be suitably rewarded. However, the paper also says, there are still some drug companies who prefer to continue working in a more insular fashion, as was happening in the old normal. But, experts also feel, that should not cause any worry, as long as majority prefers to continue following the collaborative models, in the new normal, as well.

Pharma would make a good profit from collaborative business models too:

For those who say that drug companies won’t make good profit from Covid drugs and vaccines, Pfizer CEO has an answer. Albert Bourla, Pfizer’s CEO, reportedly, has no patience for the argument that pharmaceutical companies should not be making a profit on the drugs and vaccines they introduce to fight Covid-19. This article highlights, at $19.50 per dose, the 1.3 billion doses of Pfizer BioNTech Covid vaccine that the Pfizer plans to make by the end of next year, could translate to nearly $13 billion in sales, after the company splits its revenue with its partner BioNTech. It is roughly the same as Pfizer’s all-time best-selling drug Lipitor sold in its best year.

Adding to it, another article on the same issue, published by Fierce Pharma on August 13, 2020, further reinforced the above expectation. It wrote, the longtime Evercore ISI pharma analyst haspredicted the total market for COVID-19 vaccines would be worth $100 billion in sales and $40 billion in post-tax profits. It assumed frontrunner Moderna would supply about 40 percent of the market, Novavax would take 20 percent and the other vaccine developers would split the rest. “One could look at the field under this base scenario and conclude it is reasonably valued in total,” the analyst concluded.

Nonetheless, there could still be several points that remained unanswered in this analysis. But the bottom line is, the collaborative model is not just profitable, it starts generating profit earlier and faster – virtually eliminating the cost of possible delays when a company flies solo.

Conclusion:

With a seemingly flattening curve, the Covid pandemic still continues, alarmingly. As of October 25, 2020 morning, India recorded a staggering figure of 7,864,811 of Coronavirus cases with 118,567 deaths.

With this backdrop, COVID-19 has provided the pharma industry a new opportunity to demonstrate its true value to the society – not the self-serving ones. It’s now clear that no one can rule out, there won’t be a similar unprecedented health catastrophe in the future too. It may come in various different forms, or may even be from a rapid and complex mutation of the same lethal virus.

Moreover, such crisis may not come and go in just a few months – may even linger for a long time. In any case, these may again be equally disruptive – or even more disruptive to lives, livelihoods and the economic growth engine. In such a scenario, putting the brightest scientific brains of the world together will be critical, and adding top speed to the process being the essence to come out of the crisis with least possible damages.

Covid pandemic has also demonstrated that the competition-based model of the drug could be a serious retarding force in that endeavor. What will matter, is a well-structured collaborative model that can create a win-win situation – both for patients and the business. I reckon, it’s about time to move into this model to find most effective drugs and treatment solutions for many other unmet needs related to a host of intractable diseases, much sooner.

There could, of course, be some business issues with this model. But those can be resolved amicably for an all-weather greater success in business, along with protecting the society – for all. From this overall perspective, it appears, Covid pandemic now sends a strong signal to pharma companies to move away from predominantly competition driven business models, expanding more into collaborative ones.

By: Tapan J. Ray    

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

 

Pharma’s ‘Value Delivery System’ Still Tuned To A Self-serving Mode?

Posted on by
Reply

Just as any other industry, pharma business is also primarily a ‘value delivery system.’ Its each and every employee need to understand and internalize this basic philosophy of the business. This organizational mindset needs to be created by the very top – setting examples for others to embody the same. The top could encompass the promoters themselves, or the professional CEOs – truly heading the organization and not working under the shadow of the promoters, or even the Board of Directors of professionally managed companies.

Although, this mindset should prevail pan organization, pharma sales and marketing functions are usually responsible to deliver a well-thought out set of brand values and associated services to doctors, patients and other stakeholders, effectively.

Against the above backdrop, I shall explore in this article whether it is happening in the pharma industry. If yes, is the ‘value delivery system’ is tuned to a self-serving mode, wherever it is happening? If so, to what extent it is denting the reputation and image of not just of the companies concerned, but of the drug industry as a whole. Before I proceed further, let me elaborate on what exactly I mean by the ‘value delivery system (VDS).’ 

Value Delivery System (VDS):

Creating more and more customers and retaining them, as long as possible, is the core purpose of any business, as was articulated by the management guru Peter Drucker, decades ago. Thus, like others, pharma organizations, as well, require making it happen in a sustainable way for business excellence.

The entire organization – starting from product and service development activities, right up to the frontline sales and marketing, should always be engaged in delighting the customers with the values they expect – driven by this mindset. It is worth noting that value expectations of pharma customers, are expressed in various ways. These need to be properly captured, analyzed, interpreted, packaged and effectively delivered during each company- customer contact, such as, while interacting with doctors, patients, hospitals and Government.

Thus, the term ‘Value Delivery System (VDS), encompasses an integrated chain of processes within an organization. From this perspective, it should get ingrained in the culture of a pharma company – without any broken links – between the functional areas and the integrated value delivery process.

Who is deciding what patients would value in pharma?

In the real world, ‘customers point of view’ or ‘what the patients would value’ in a product, is decided by the pharma companies – derived generally from the published clinical trial results of the products. Accordingly, these are woven around the brand features and benefits.

The value delivery system of the company packages these in a way that it thinks would generate increased prescription demand and delivers to all concerned. These values, which are overall financial business performance-centric, are mostly ‘self-serving’, and was working very well to meet the internal objectives, until recently.

How to ascertain value for patients in pharma marketing?

One way to ascertain these factors is to ask patients directly. But this process has certain limitations. This was once aptly articulated by Steve Jobs in an interview, where he said: ‘I think really great products come from melding two points of view -the technology point of view and the customer point of view. You need both. You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.’

Taking a cue from it, I reckon, drug companies need continuously generate and analyze enough relevant data, from multiple sources, for an in-depth understanding of what patients will value. Making these values an integral part of the product and services, in a creative way, pharma should aim at delighting the customers through effective delivery.

The article titled, “Reclaim The Glory Of Value,” published in the eyeforpharma on January 08, 2019 also reiterated that such ‘value’ must always be defined by the customer.  ‘And true value can only be achieved by understanding the world of the patient and solving the issues most critical to them.’

The external impact of product centric value assessment:

This financial result focused value delivery system got exposed to the stakeholders, since sometime. Overall business performance, though generally slowed down, some companies did produce extraordinary results, even after remaining tuned-in to the self-serving mode. Nevertheless, what got dented most is the pharma industry reputation, with a long-term impact.

Although, the survey capturing fast declining reputation of the drug industry, was done in the United States, it is apparently no different in other countries. Consequently, the quality of general public’s trust in pharma started getting murkier. Strong headwinds are now limiting the pace of progress of the industry, with many governments, including India, taking stringent policy measures to protect the patient interest.

The only way is to ‘reverse the pyramid’:

The only way for the pharma industry, in general, is to take a fresh look at their business approach, which still remains a value delivering machine. The companies need to think afresh while arriving at the ‘value for the patients’, by reversing the business pyramid – positioning the patients’ core values at the top, and delivering them to all concerned with well-crafted content, on the most effective platforms.

Tuning VDS in sync with patients’ core values, is fundamental:

It has been well established today the delivering values built around the quality, efficacy and safety of a brand can no longer ensure the best clinical outcomes for patients. This holds good even when the conventional sales and marketing activities are carried out through a large sales force and backed by huge financial resources. The main reason being, the pharma value delivery system is not delivering the core value that modern day patients expect.

Many patients of the new generation value empowerment and desire greater involvement in their end-to-end disease treatment process. For example, when they want understanding and help on how to manage the high treatment cost to survive from a life-threatening illness, some companies try to compare the ‘cost of treatment’ with the ‘cost of life’, which is an undiluted self-serving value.

It may sound absurd, but I have witnessed the top echelons of pharma companies saying so. This can possibly happen only when they feel contended with a smaller patient base fetching higher profit due to high drug prices, though unaffordable to most patients. But this model is not sustainable. It would further damage already dented pharma reputation, drawing more ire from stakeholders, including the government.

Thus, tuning VDS in sync with patients’ core values is fundamental in the emerging scenario. The question that follows what then are the core values of the new generation patients?

Two ‘core values’ that patients generally expect:

In my personal view, there are the following two ‘core values’ that consumers of medicines would generally expect during their end-to-end disease treatment process. However, the signals of such expectations – direct or indirect, may come in different ways and forms that need to be properly captured by the pharma companies, with the careful application mind:

  • Value of unique product and service offerings: The need for this value arises right in the beginning, when patients are in search of a solution for prevention, cure, or management of a disease. It is, primarily, the difference felt by the customers between the product and service offerings of one pharma company from the other. While finalizing the choice for the resolution of the problem, patients may take into account one more important factor. This usually covers the quality of their interaction with the doctors, including the pharma companies, though their respective patient engagement platforms, if any.
  • Value of a unique patient experience: After making the final choice, patients would value to feel a unique experience during the entire span of the treatment process. The quality of a brand, its effectiveness, safety, affordability and accessibility, among others, would be the individual components of the whole experience. What would matter most is the residual impact, created by the sum total of each of these components. And this value may be termed as – the unique patient experience.

Effectively delivered, the wholesome impact of patients’ treatment experience will be a lot more than the sum total of each the individual components, as mentioned above. Conversely, any hurdle faced by patients even with one component of this value chain, can potentially create a bad patient experience. This may adversely affect both patients and the concerned pharma company, in tangible terms, which I shall discuss below. Thus, the perceived value of ‘unique patient experience’ is very high, and can’t be wished away, any longer.

Tangible gain of pharma for doing so, or vice versa:

Let me illustrate this point with an example – drawing from the above core values and a self-serving value delivery system.

As we know, non-adherence to medication is one of the important reasons for poor clinical outcomes, besides progression of the ailment – further compounding the disease burden. Ample research studies indicate that ‘high cost of drugs is the biggest barrier to medication adherence,’ or, at least, one of the major causes of non-adherence.

Patients pay for non-adherence by their deteriorating health conditions. Alongside, pharma companies also pay a high price in terms of lost sales and profit, besides dent in reputation – for this single factor. Another research report estimated an annual revenue loss of USD 637 billion for non-adherence to medications for the treatment of chronic conditions. The same report highlighted, globally, revenue loss has increased from USD 564 billion in 2012 to USD 637 billion in 2015, with US-based revenue losses increasing from USD 188 billion in 2012 to USD 250 billion in 2015. Otherwise, this could have been a significant tangible gain for pharma.

Conclusion:

Pharma business, just as any other industry, is a value delivery system. This system needs to be optimized, both for tangible financial gains and also for building company reputation. Creating increasingly satisfied patients, including other stakeholders, should be the prime drivers for this optimization process.

Two core values – built on signals, suggestions and indications coming from the bottom of a conventional business pyramid – the patients, need to be effectively captured, analyzed, packaged and then delivered through the VDS. In no way, these values are to be based on what the top of the pyramid thinks, based on only clinical trial results. Such values are usually self-serving in nature, the long-term impact of which is not quite favorable, either. Reversing the pyramid, patients should be allowed to play a pivotal role for the company in the core value creation of a brand, in innovative ways, for subsequent delivery on appropriate platforms.

This will create a win-win situation, both for business growth and also in delighting most patients with access to high quality and affordable novel treatments, for a healthy life. However,considering today’s reality where most pharma companies’ ‘Value Delivery Systems’ are still tuned to a self-serving mode, a serious introspection by individual companies seems to be an urgent need. More proactive players in this game, will emerge as winners with better business performance, in tandem with improved corporate image and reputation.

By: Tapan J. Ray   

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.