And The Future For Pharma Looks Like…
9 CommentsBy Ed Silverman // February 11th, 2010 // 8:46 am
With old business models broken and industry in transition, the future will hinge on just how well drugmakers adapt to new technologies. Patients, for instance, can and will want to manage their health records with such devices as smart phones and hospitals and payers will comb through electronic records, which means pharma will lose exclusive control over outcomes data.
These are among the findings in a new report from Ernst & Young consultants, who also believe pharma will have to consider alliances with food companies in emerging markets for help in managing supply chains. “Innovation is no longer just about the product — it now encompasses how you do business, who you do business with and how you mobilize your resources to contribute to healthy outcomes for patients.” says Pat Flochel, Ernst & Young EMEIA Life Sciences Leader, in a statement.
Other findings: 92 percent of execs surveyed believe new the most likely companies to enter what E&Y calls ‘Pharma 3.0 will be e-health, mobile-health and new medical technology firms; 67 percent say they are not well prepared for valuation and modeling potential deals with nontraditional partners; 75 percent believe that corporate and deal strategy, offer and market positioning, and due diligence will all be more challenging in ‘Pharma 3.0′ alliances; and 50 percent expect deals will become more daunting, while only 2 percent expect that they will become less challenging.
patrons99
So much for any perceived “right to privacy” in this country. With full implementation of the EMR, pharma and the insurers, will have a continuous feast on personal information of all kinds that arguably should remain private. In the wrong hands, information of this type could even be used for extortionate purposes. It is market-based medicine’s ultimate “wet dream”. There’s a synergy and convergence taking place. RFID chip implant “innovations” are already FDA “approved”. We are assured that our personal health information will be kept in a “secure” electronic database. Gosh, I guess we need not fear such progress. It’s inevitable. Better start getting ready for nanotechnology.
harpy
Ya gotta link, Ed? I’m being lazy. thx!
Christopher
There is a report on E&Y lifesciences page but I don’t think it’s the one referred to above. Here’s a link to the page; the article is in the south east corner: http://www.ey.com/GL/en/Industries/Life-Sciences
Ed Silverman
Hi Folks,
Apologies for the delay. The link is now there. Hope this helps.
Regards
ed
David Moskowitz MD FACP
What E&Y missed is that Big Pharma won’t exist in a few years. The few companies left are dinosaurs after the meteorite hit. Managed care has banished branded drugs to less than 30% of the market. Loss of marketshare explains the draconian consolidation going on in the industry for the past 20 years. The few giant companies left are terrified of failure, and have abandoned drug discovery. They have become banks with sales forces, but empty pipelines.
They can be easily replaced.
Drug discovery requires a new business model, since VC’s are just as reluctant to part with their capital as Big Pharma. Fortunately, the earliest steps in drug discovery are the cheapest and the most fun, scientifically.
My company is pioneering a new business model for drug discovery. We partner with other “starving artists”: academic labs and small biotech companies. Since there’s no cash, we barter: a share of the IP in exchange for labor and expertise.
We fancy ourselves the small mammalian rodents who will take over the pharmaceutical industry once the dinosaurs have fallen.
E&Y didn’t even see us on their radar. That’s how hard this industry is going to fall.
JaT
Good find, Ed
Christopher
Interesting views from David Moskowitz. Whether Big Pharma will disappear in a few years is up for debate and, for what it’s worth, I disagree. I believe what will happen is that Big Pharma will evolve more quickly than it has in recent years, that it will become less America-centric (for the reasons Moskowitz lists but not with his suggested consequences), and it will diversify in a number of ways. Companies will reduce their dependence on small molecule drugs aimed at big disease categories, they will continue to invest in generics companies (so that they can still operate in that space but with a different cost and infrastructure), they will buy into OTC businesses, animal health businesses as well as get more involved in allied services (see my example of schizophrenia treatment in an earlier post).
Companies like Moskowitz’s will be important for the reasons he states but I respectfully suggest they will not replace traditional pharma companies because they don’t have everything else required to function as such. Instead a new model will emerge which sees traditional pharma functions outsourced to providers. We see this now (Astra Zeneca outsourcing its entire clinpharm work to Quintiles) but much more will follow.
pharmavet
Diversification is the key to pharma survival. We just don’t know what form that will take. When I was with Abbott, our strength was diversification. When the Pharma division struggled in the mid-1980’s, the Diagnostics Division was sterling, with the introduction of the first AIDS diagnostic kit in 1985. This is just one example. This business model has produced 342 consecutive quarterly dividends for shareholders.
Mike Wokasch
You have to have products the market wants and is willing to pay for. Without innovation Pharma and Biotech will struggle in the evolving new healthcare market. Even ventures into emerging markets will be finite in leveraging current assets.
Diversification, while reducing risk and providing some security for revenue fluctuations also detracts from the focus and concentration of resources which will be needed to deliver the innovation in Pharma and Biotech. I believe the exception to this will be the need for Pharma to diversify and build expertise in large molecules and diagnostics (will be needed as compliments to drug treatment).
Abbott and Roche have these (not sure they are working as collaboratively, drugs and diagnostics, as they should) and have infrastructure and management processes in place which mitigates the distractions or dilution of resources needed to integrate or build them.
Innovative products with complimentary diagnostics are the name of the game.
mike@pharmareform.com