A Case for Pharmaceutical Company Business Model Change

This from a white paper originally appearing in the April 2017 issue of the Harvard Business Review

The authors – Martin Ihrig and Ian MacMillan – led a large, multi-national pharmaceutical company (fictionally named PharmaCo) through exercises aimed at helping the company better understand and assess options for future growth.

The authors write:

In such a tightly interwoven ecosystem (sic – as the pharmaceutical industry), you can’t focus exclusively on the customer and your company. You need value propositions that other stakeholders can buy into—which vastly complicates the process of identifying successful innovations. Of course, expanding your focus also increases your opportunity. Companies that figure out how to manage this complexity will enjoy a powerful competitive advantage in finding and selecting innovations.

Pharmaceutical companies have long had to work within just such a system, juggling the needs of patients, physicians, health care providers and insurers, distributors, and government agencies. Tweaking an antidepressant formula to make it more effective might look like a good idea from the perspective of patients and doctors, for example, but it might also raise medical insurance costs and increase the risk of side effects, triggering more regulation.

Nevertheless, when looking for growth opportunities, pharma companies have typically focused fairly narrowly on drug development—in which the main factors are need (How many patients suffer from a given condition?) and science.

But sustaining growth and profitability in this way has become

increasingly difficult, and many pharma companies are now turning to service innovations, which often require stakeholder buy-in because they typically change consumption patterns and how the ecosystem works in ways that a new drug does not.

This company has realized its future can no longer be dependent on R&D and the risk in being pipeline dependent. The leadership wanted to know what are the other opportunities that may take the company away from the traditional R&D-based model. Through several exercises, well-laid out in the paper – the company came to the conclusion that it needed to refocus from patient acquisition to patient retention – an opinion long held here at Inspired Health Strategies (IHS). The company finally realized what other industries have long-vince learned – that their future is finding ways to keep its customers instead of continually finding new ones. How to do that? Via building a portfolio of patient support services. Voila!

The authors are really focused on the process by which they led the company to its conclusions. IHS is selfishly interested as it is good to see a company make an investment in taking its leadership through this kind of process and come to the conclusion it did. The industry is waking up to the idea that real change in business model is necessary to compete in the future.

To download the complete white paper please click here: http://bit.ly/2rt3QGQ


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