Market opportunities

Collectively the mature markets generate 59% of the total revenues but they are becoming more difficult places where to prosper. They are demanding better outcomes as a precondition for paying for new medicines. Financial pressures have played a part in hardening healthcare payers’ policies. Crushing demographic and epidemiological factors have compounded these economic woes.

Our report identifies four ways for pharma to offer more value without charging more or to prove that it can remove costs from another part of the healthcare system to make room for the higher prices it’s charging.

• Plugging leaks in the care pathway;
• collecting clinical and economic evidence of how medicines perform in the real world;
• measuring how patients feel; and
• developing companion diagnostics to let healthcare providers use precious resources more effectively.

By 2020, the BRIC economies alone will account for 33% of the world’s GDP. Are growth markets a solution to the harsher conditions of the mature ones?

Expenditure on medicines is rising far faster in the growth economies than it is elsewhere (see Figure 1). But serving the growth markets is very difficult, both because of their intrinsic problems and because they vary so much. That means the industry can’t rely on its usual methods for making a profit in mature countries. It has to adopt a totally different strategy – or, rather, different strategies for each market.

Costs per molecule are still rising relentlessly and the number of new medicines reaching the market remains broadly flat. Why?

Our research suggests a distinct problem is scientific and we think three changes would make a big difference.

• The industry should rebalance its expenditure and invest more in the early part of the R&D process to understand the molecular basis of disease and the role specific mechanisms play.
• Companies should become more selective about the therapeutic areas they cover and bolster their expertise by hiring or collaborating with the best people in their chosen fields of research.
• Every company should devise a clear path to clinical proof of concept for all compounds entering development and test them in humans as soon as possible, using the best tools for selecting subjects and endpoints.

Poor decision-making is another major factor in pharma’s declining R&D productivity. Some of the options for companies include:

• Prune portfolios to focus on the compounds with the greatest probability of success.
• Aim to build balanced portfolios, just as investment managers do when they’re managing financial assets.
• Compare a company’s portfolio with those of their rivals.

How will you change your corporate culture to address the challenges of the twenty-first century and foster innovation?

Our report covers a number of changes that industry’s senior figures can initiate including:

• Bring a more diverse perspective to the board
• Lay down clear ground rules about the kind of innovation they want and tell investors how much they plan to spend on R&D over the next few years
• Cut through the bureaucracy and create autonomous R&D units that report straight to the top
• Build networks that cut through the barriers between different business units and organisations
• Use measures and rewards that truly stimulate innovation