AstraZeneca UDPoster Presentation at DIA PM Meeting
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Emerging Trends in Pharmaceutical Business Models

Emerging Trends in Pharmaceutical Business Models

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AstraZeneca UDPoster Presentation at DIA PM Meeting Presentation Transcript

  • 1. Emerging Business and Operational Models In the Pharmaceutical Industry: The role of Project Management P. Krishnan, Operations Research Program, University of Delaware, Newark, DE, 19716 Surya P. Chitra, AstraZeneca LP, 1800 Concord Pike, Wilmington, DE,19850 Transition to New Global Economy INTRODUCTION Drivers & Business Model Changes Traditional Business Models Pharmaceutical Operations q The pharmaceutical industry is beginning to q Blockbuster Model (Sales > $1B) unravel business and operational models across DRIVERS/ INFLUENCERS mDiscovery to Distribution REGULATIONS the value chain to create a new industry picture Cost Inefficiencies Cost of Capital Competitive Products Price Pressures Long Development Cycles Low entry Barriers q Factors influencing the pharmaceutical industry mHigh Cost & Long Time include: Oil/ Petrochemicals Electronics Personal Care mLarge Profits from Few Drugs m Risk Mitigation of Increased Regulations Operational/ Business Model Drug Clinical Formulation Marketing Distribution Chemical/ Pharmaceuticals Automotive m Management of the Price Pressures Specialties Discovery Development & Manufacture & Sales q Diversification Model m Reduction of Drug Development Costs and 1970 1980 1990 2000 2010 mSmaller Markets – Many Drugs Time mRelatively High Development Cost m Management of Patent Expirations BUSINESS MODEL CHANGES/ STRATEGIES § Alternatives to Blockbuster Model Cost Management Emerging Market Strategy Geographic Leveraging SUPPLIERS q Other Combination Models Differentiation Model All to Segmented Targets Customer/Value Management § Competition from Generics m Leveraging Technology & Global Markets Transformation INNOVATION Drivers/ Influencers for Change Project Management: Risks/Decisions Evolving Operational Models qReduced Cost and Speed of Development NOT INCREMENTAL INNOVATION PRODUCERS qGeographic Placement of Supply Chain “Marginal Benefit to Patients but CUSTOMERS - Innovation - Value Balance Risks - Efficiency TRADITIONAL m Discovery & Manufacturing to India Boost Short-term Corporate Profit ” RADICAL - Speed - Low Cost Transparency - Long Life Reach m Development to China, India, Eastern EU or q Brand Extensions - Product 1. True Innovation - Product Technology PHARMACEUTICAL RADICAL - Price q Formulation Changes Russia INDUSTRY ’S 2. Risk & Uncertainty - Geographic & q Geographic Expansion - Value SUSTAINED INNOVATION Management qLeveraging the Technology - Easily Information q Mergers & Acquisitions - Services GROWTH 3. Simpler Structure/ - Supply Chain “Optimum Medical and Economic Value - Supply m Electronic Data Capture q Vertical Integration Effective Decisions q Re-engineering Costs to Patients” 4. Value Chain Leverage m Electronic Research Organization INCREMENTAL q Out Sourcing 5. Adaptive Flexibility INNOVATION - Extensions qOut sourcing the Manufacturing - Novel Individualized Medicine Disease Management - Formulation - Quality Weighted - Delivery qDirect Distribution Channels - Lasting Decisions Biologics Biomarkers/ Diagnostics m Direct to Consumer (DTC) RADICAL DECISIONS THROUGH CALCULATED RISKS VALUE CHAIN RESTRUCTURE STRUCTURE REDESIGN RISK: CALCULATING UNCERTAINTY RISK: PRODUCT DEVELOPMENT RISK: PHARMACEUTICAL VALUE CHAIN Project Management of Resources Early Revenue Potential More Stage R&D PRODUCTION PRODUCT LAUNCH R&D PRODUCTIO PRODUCT LAUNCH M & A Created Complex Organizations N 25% Target Drug Clinical Formulation Marketing Distribution 55% Building Blocks for Change Drug Clinical Formulation Marketing Distribution Fewer 85% Discovery Development & Manufacture & Sales Discovery Developme & Manufacture & Sales 24% 76% nt •Rules •Simple 2005 Expenditures 23Aug05 25Aug05 PROGRAM RISK PRODUCT RISK Target Early Late •Processes •Flexible Decisions Structure Product Launch Project Risk Launch Risk Revenue Potential Late Which parts of Each •Speed More Execution Risk Competitive Risk Stage Information Motivation •Adaptation Function is Crucial to Regulatory Risk Regulatory Risk Target •Technology Company Value Chain? ’s Fewer 55% 1 •Knowledge Share 85% Decisions Based on More Past Decisions Based on Experience Than Risk Models Statistical Risk Early Target Late 1 27Aug05 29Aug05 Models Product Launch MANAGING ADAPTIVE FLEXIBILITY SUMMARY CONCLUSIONS • ADAPTATION • External Dynamics Change is Inevitable in The Industry q Incremental & Radical Innovation • Technology • Globalization m Balancing the Decisions • Uncertainty q Managing Risk & Uncertainty Project Management Needs to be Dynamic m Risk Models and Forecast q Simpler/ Effective Organizations • FLEXIBITY Need to Blend Experience with Calculated Risks m Speedy & Adaptive Decisions • Operations • Strategies q Value Chain Management It’s Not the Management of Science, • Structure It’s What Science Forces one to • Innovation m Prioritized Decisions Manage DIA PM SIAC & PMI Pharmaceutical SIG Conference quot;The Changing Pharma and Biotech Industry: Re-negotiating the Role of Project Management“ Sep 25 2006 - Sep 27 2006; Philadelphia, PA