Pharmaceutical outlook 2012 is it still uses the same map or change the direction

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How We manage our pharmaceutical business in the future?

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  • Historically, the biggest contributors to industry revenue
    The good old days of the pharmaceutical industry are gone forever. Even an improved
    global economic climate is unlikely to halt efforts by the developed world’s governments
    to contain spending on drugs. Emerging markets will follow their lead and pursue further
    spending control measures. Regulatory requirements—particularly the linkage among the
    benefits, risks, and cost of products—will increase, while the industry pipeline shows little
    sign of delivering sufficient innovation to compensate for such pressures.
    These factors suggest that the industry is heading toward a world where its profit margins
    will be substantially lower than they are today. This dramatic situation requires Big
    Pharma executives to envision responses that go well beyond simply tinkering with the
    cost base or falling back on mergers and acquisitions.1 A bolder, more radical approach
    to Big Pharma’s operating model must become a realistic planning scenario. While an
    immediate corrective response in the coming weeks and months may not be the answer,
    a purposeful strategy that provides for this change in the medium and longer term is
    necessary.
    The case for difficult times ahead is straightforward. McKinsey analysis shows that over
    the years, real price increases, rewarding past innovation and changes in pathways for
    treating patients, have been the most significant driver of the pharma industry’s growth
    (Exhibit 1). Less attention has been paid to managing the cost base. The industry may have
    recently begun to focus on that, but its heart doesn’t seem to be in the effort, and it has
    little to show for these efforts.
    growth have been innovation, real price increases, and
    changes in care pathways.
  • See article challenge.pdf
  • The challenges have collided with other problems in global economies to send pharmaceutical companies into an era of increased cost pressures and lowered market valuations. Margin and earnings pressures are bringing an increased focus on traditional financial controls and operational efficiencies, in an industry that has historically given them little attention. Topics like purchasing and supply management, IT cost containment, outsourcing and offshoring, and manufacturing cost reductions are becoming increasingly important to senior executives. In the face of these challenges, the pharmaceutical industry needs to innovate and change in terms of product innovations and creative approach to the distribution models and internal organisation design.
    (Data form file LinkClick.pdf)
  • And "me-too" competition makes it hard to turn enough drugs into blockbusters. Our analysis suggests that overall return on investment in new drugs has fallen to 5%. Every drug class has become crowded, and most companies are chasing similar diseases. Compared with the cost of developing and marketing drugs, big pharmaceutical companies’ problems in R&D are modest. The primary one is attracting talented scientists to work in big and potentially bureaucratic companies rather than in research laboratories or biotech companies. Motivating creative employees is clearly a challenge for big companiesbut it is not confined to pharmaceuticals.
    The best way to recruit scientists would be to break the development log-jam - a move away from the blockbuster model. Instead of placing bets in many therapeutic areas in the hope of striking it lucky, pharmaceutical companies could focus more on particular areas of expertise. That would help them build enough know-how to make better choices among research leads. Science may also come to their aid. One reason so many drugs fail in clinical trials is that they are tested on random samples of patients suffering from illnesses. But some targeted drugs, such as AstraZeneca's Iressa, a lung cancer treatment, have an effect only on some patients. Genetic profiling or pharmacogenetics should allow faster approval of drugs aimed at a defined group of patients.
    (Data form file LinkClick.pdf)
  • The pharmaceutical industry is one of the most profitable of all industries and making cultural changes in these highly profitable companies, where “superior” feeling exists in most corners of the organisation, make CEOs job increasingly tough. But, smart CEOs know that past and current profitability of their companies provide no guarantee to future profitability and success. Leading cultural change is the ultimate test since no business survives over the long term if it can’t reinvent itself. Reinvention is not changing what is, but creating what isn't. But, human nature being what it is, fundamental culture change
    is frequently resisted mightily by the people it most affects - those in the trenches of the business.
    Instil values that drive behavioural change and improve productivity
    Over the last five years, we have studied the top 20 pharmaceutical companies try to transform themselves into better competitors. These transformation efforts have gone under many themes: speed and quality enhancement, reduce organisational complexity, reengineering business support functions, restructuring, externalisation, and change behaviour and culture. But, in almost every case, the primary objective has been the same: to make fundamental changes in how business is conducted in order to help cope with a new, more challenging market environment. Only a few of these transformation efforts
    have been successful. A few have been utter failures. Most fall somewhere in between, with a distinct tilt toward the lower end of the scale. The lessons that can be drawn are interesting and will be relevant to companies in other industries, who share similar heritage to the pharmaceutical industry (e.g., Oil and Gas, Energy and Utilities, etc). The most common lesson to be learned from the more successful cases is that the transformation effort goes through a series of steps that, in total, require a considerable length of time. Skipping steps creates only the illusion of speed and never produces a satisfying result. A second lesson is that critical mistakes in any of the steps can have a devastating impact, slowing momentum and negating hard-won gains. Perhaps because we have relatively little experience in reinventing organisations, even very capable senior executives often make at least one big error (see Change Management or Reinvention? by Pal and Hammond). It has become very fashionable in pharmaceutical circles to talk about values, which are routinely advertised on companies’ websites. But, often there is little behind the advertised values when interactions are conducted at the ground levels. However, for pharmaceutical companies we studied, values truly are a primary driver behind cultural transformation since values drive behaviours. And they help the companies find business opportunities and motivate both employees and other stakeholders. To
    compete effectively, large pharmaceutical companies must respond quickly and creatively to opportunities wherever they arise, and yet have those dispersed activities add up to a unified purpose and accomplishment. The companies that meet this challenge rely in part on clear standards and disciplines, including, at the most basic level, standardised processes. Standardisation does not mean that no enhancements can be made. Standardised management practices and technologies in pharmaceutical companies are the equivalent of infrastructure in cities: They allow people to stop wasting energy on basic activities and instead focus on higher value matters. But providing a platform on which creative people, such as scientists in the R&D sites, can build is only half the battle. What is also required is a shared set of values to guide their behaviours, choices and actions. Values, in hearts and minds, turn out to be the key ingredient in the most vibrant and successful of today’s top pharmaceuticals. Once people agree on what they respect and aspire to, they can make decisions independently and not work at crosspurposes. When they team up on a project, they communicate and collaborate efficiently, even despite great differences in backgrounds and cultural traditions, because they have a strong sense of business purpose and company identity.
    (Data form file LinkClick.pdf)
  • See article usyo11.pdf
  • See file SD_2008_2012_Report_EN.pdf for detail
  • See article challenge.pdf
  • Pharmaceutical outlook 2012 is it still uses the same map or change the direction

    1. 1. 01/ 30/ 15
    2. 2. Growth rates in main economic regionsGrowth rates in main economic regions 01/ 30/ 15 2 1) Forecast, ECONOMIC RESEARCH & CORPORATE DEVELOPMENT Working Paper 146 March 30, 2011.
    3. 3. Link between drug use and life expectancyLink between drug use and life expectancy in an ageing Europe (2005-2010)in an ageing Europe (2005-2010) 01/ 30/ 15 3 Generic Medicines: Essential contributors to the long-term health of society IMS data
    4. 4. Pharmaceutical Outlook 2012Pharmaceutical Outlook 2012 01/ 30/ 15 4
    5. 5. Why ?????Why ????? 01/ 30/ 15 5 http:/ / www.economist.com/ node/ 15062719 http:/ / blog.wingu.com/ ?p=137
    6. 6. Contributions to revenue growth for Pharma, biotech, andContributions to revenue growth for Pharma, biotech, and generics players,generics players, 1989–20101989–2010 1 In real 2009 dollars; figures do not sum to totals, because of rounding. 2For originator products (ie, nongeneric) in developed markets. Source: S&P Capital IQ Unit; McKinsey analysis Explained byExplained by innovation, realinnovation, real price increases, andprice increases, and changeschanges in care pathwaysin care pathways 01/ 30/ 15 6
    7. 7. The pharma industry’s composition hasThe pharma industry’s composition has evolved considerablyevolved considerably 01/ 30/ 15 7 Growth relative to industry,1 1989–2010, % 1 Includes only companies with >$500 million in revenues in real 2009 dollars. Midsize pharma companies defined as those with $500 million to $5 billion in revenues; Big Pharma as thosewith >$5 billion. Source: S&P Capital IQ Unit; McKinsey analysis
    8. 8. Utilization of generic medicinesUtilization of generic medicines within the unprotected marketswithin the unprotected markets 01/ 30/ 15 8 Generic Medicines: Essential contributors to the long-term health of society, IMS Health
    9. 9. What happens after that ????What happens after that ???? 01/ 30/ 15 9
    10. 10. The key trends now emerging and theirThe key trends now emerging and their implications for Pharmaimplications for Pharma 01/ 30/ 15 10Pharma 2020: Challenging business models Which path will you take? , All these publications are available to download at: www.pwc.com/pharma2020
    11. 11. Major challenges facing pharmaceuticalMajor challenges facing pharmaceutical companiescompanies 01/ 30/ 15 11 PHARMPHARM AA ProductivityProductivity PricePrice PipelinePipeline Serving theServing the underserveunderserve dd IPIP InnovationInnovation
    12. 12. Average cost of bringing a drug toAverage cost of bringing a drug to market has risen over $1.0 billionmarket has risen over $1.0 billion 01/ 30/ 15 12
    13. 13. Rising pressure on PharmaceuticalRising pressure on Pharmaceutical CompaniesCompanies 01/ 30/ 15 13 Substitute patent productSubstitute patent product with parallel imports orwith parallel imports or genericgeneric Better terms & conditionsBetter terms & conditions Rally doctors and patientsRally doctors and patients against pharmaceuticalsagainst pharmaceuticals Artificial increase of “outArtificial increase of “out of stock”of stock” PHARMACIESPHARMACIESPHARMACIESPHARMACIES Cooperation with genericCooperation with generic supplierssuppliers Better terms & conditionsBetter terms & conditions DelistingDelisting Push parallel tradePush parallel trade Repackage hospital packsRepackage hospital packs NOTE : Not all actions of wholesalers and pharmacists are applicable to all types of medicines
    14. 14. Generic Medicines :Generic Medicines : • Providean affordable, goldstandardmedication for many major illnesses • Allow access tomedicines for agreater proportion of the population • Stimulatehealthy competition with thebrandedsector • Deliver savings tonational health bills • Enablefuturelong-termsavings in theexpandingroleof medicines vs. hospitalization • Arehigh quality products 01/ 30/ 15 14Generic Medicines: Essential contributors to the long-term health of society, IMS Health
    15. 15. Managing contradictions is a norm in successfulManaging contradictions is a norm in successful and mature pharmaceuticalsand mature pharmaceuticals 01/ 30/ 15 15
    16. 16. Key strategic priorities forKey strategic priorities for pharmaceutical CEOspharmaceutical CEOs 01/ 30/ 15 16
    17. 17. Four innovative waysFour innovative ways companies can use their sales reps to drive growth.companies can use their sales reps to drive growth. 01/ 30/ 15 17
    18. 18. The Sustainable Development StrategyThe Sustainable Development Strategy 01/ 30/ 15 18 Investors Society Custom ers & suppliers Personnel & Contractors Local com m unities The challenges as seen through the prism of the Group’s stakeholders expectations Economical actions Environmental actions Societal actions TowardsTowards sustainablesustainable developmentdevelopment Meeting stakeholders’ requirements Towards Sustainable Development, Assessment and Prospects 2008-2012, www.solvay.com
    19. 19. By 2020, the pharmaceutical, payer and providerBy 2020, the pharmaceutical, payer and provider value chains will be much more closely intertwinedvalue chains will be much more closely intertwined 01/ 30/ 15 19Pharma 2020: Challenging business models Which path will you take? , All these publications are available to download at: www.pwc.com/pharma2020
    20. 20. The provision of healthcare is movingThe provision of healthcare is moving closer to the patientcloser to the patient 01/ 30/ 15 20 PATIENTSPATIENTSPATIENTSPATIENTS Emergency room,Emergency room, DiagnosticsDiagnostics Intensive care,Intensive care, Minor Surgery,Minor Surgery, Major Surgery,Major Surgery, Other out –Other out – patient servicespatient services Initial diagnosisInitial diagnosis PrescriptionsPrescriptions Routine ChecksRoutine Checks OTC drugsOTC drugs Basic MedicalBasic Medical AdviceAdvice Secondary Care Primary Care Self - Care PATIENTSPATIENTSPATIENTSPATIENTS Emergency room Intensive care Major surgery Web based self-Web based self- diagnosticsdiagnostics OTC drugs for chronic &OTC drugs for chronic & non-chronicnon-chronic conditions -conditions - ““““Wellness” servicesWellness” services Secondary Care Primary Care Self - Care Complex diagnostics & treatmentsComplex diagnostics & treatments Minor surgical proceduresMinor surgical procedures Basic diagnostics & prescribing by nurseBasic diagnostics & prescribing by nurse practitionerspractitioners ““Life checks”Life checks” Healthcare Delivery in 2020Healthcare Delivery in 2020Healthcare Delivery in 2007Healthcare Delivery in 2007 Pharma 2020: The vision Which path will you take?*Source: PricewaterhouseCoopers
    21. 21. Pharmaceutical companies will focus most of their marketing effortsPharmaceutical companies will focus most of their marketing efforts onon the policy-makers and payers who determine which medicines arethe policy-makers and payers who determine which medicines are prescribedprescribed 01/ 30/ 15 21Pharma 2020: Challenging business models Which path will you take? , All these publications are available to download at: www.pwc.com/pharma2020
    22. 22. What Attributes Do Physicians Value inWhat Attributes Do Physicians Value in Their Relationship with PharmaceuticalTheir Relationship with Pharmaceutical Companies ?Companies ? 01/ 30/ 15 22
    23. 23. ConclusionConclusion • In the future the context in which Pharma operates will be very different fromIn the future the context in which Pharma operates will be very different from that which prevails today :that which prevails today : – Many blockbuster product will be get patent expiry – The Globalization of the markets, as  Demand for medicine rises in the developing world  The globalization of R&D, as a growing share of R&D migrates to Asia;  The globalization of the regulations governing the development of new medicines, as national and federal agencies collaborate;  The globalization of information, as healthcare payers share data on the clinical and financial performance of medicines – Changes of behavior customer  Needs and wants  Feature and benefit product for specific population – Leadership and Managing people  Resign and Fired  New Employee  Retire of many CEO / Manager 01/ 30/ 15 23
    24. 24. 01/ 30/ 15 24

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