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Introduction: Globalization and the Opening of New Markets Read chapter Read first chapter

2017 | OriginalPaper | Chapter

Innovation for Health: Success Factors for the Research-Based Pharmaceutical Industry

Author : Christoph Franz

Published in: Evolving Business Models

Publisher: Springer International Publishing

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Abstract

Over the last decade, the pharmaceutical industry has undergone a period of breathtaking change driven by scientific progress and changing market realities. A description of the drivers of the industry and the key levers of pharmaceutical innovation leads to the conclusion that, although the business model remains essentially without alternative, it needs to evolve.
Pharmaceutical companies have been reinventing their business model as they have diversified away from the blockbuster model into portfolios of more targeted medicines in strategic therapeutic areas, as well as into other segments such as generics and biosimilars, consumer products, vaccines, or animal health. For companies focusing on patented medicines, the ability to foster research productivity and innovation while globally increasing access to these drugs is crucial for their success.
The research-based pharma industry is currently in the early stages of the next phase of significant change: real-world outcome data from clinical practice will be increasingly digitized and analyzed, in addition to existing data sets derived from clinical trials. The ability of companies to make use of “big data” will become key to innovation and the improvement of health outcomes, both by optimizing existing treatment options and by gaining new insights for research and development purposes. The pharma industry has the chance to make use of this big data opportunity in the best interests of patients and overall healthcare value, at a time of growing political pressure to short-term drug budget savings.
As companies invent new business models to better manage health outcomes, they will sustain focus on covering unmet medical needs through scientific insights and by expanding access to their medicines. The success factors underpinning the evolving business models of research-based pharma companies will be expanded on below.

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Footnotes
1
The pharmaceutical market includes biopharmaceuticals, over-the-counter (prescription-free) drugs, and traditional medicines (including generics) distributed and administered through regulated delivery systems, such as pharmacies, hospitals, clinics, physician offices, and mail order.
 
2
OTC pharmaceuticals are medicines available to patients and consumers without the need for a prescription; they have to be used primarily to treat a condition that does not require the direct supervision of a doctor and must be proven to be reasonably safe and well tolerated.
 
3
Medical devices.
 
4
The pharmaceutical business of selling drugs that legally require a medical prescription to be dispensed.
 
5
A blockbuster drug generates annual sales of at least 1 billion USD for the company that has developed it.
 
6
The term “generics” or “biosimilars” applies to copies of brand-name drugs. After the patent on a brand-name drug has expired (see Sect. 2), other pharmaceutical companies can start to copy it using the extensive documentation filed by the original discoverer and manufacturer with the approval authorities (USA, FDA; EU, EMA; Japan, PMDA; etc.).
 
7
While it is relatively easy to identically copy small molecule products produced by chemical synthesis (“generics”), it is very challenging to copy biotechnological products (“biologics”) as they have big and complex molecular structures and are obtained in living systems through highly complex manufacturing processes which are impossible to reproduce identically (therefore, copies of biologics are called “biosimilars”).
 
8
Loss of exclusivity (patent expiry or data exclusivity).
 
9
SG&A covers sales, marketing, as well as general expenses incurred by the product pipeline.
 
10
An aggregate figure that includes all costs incurred in producing the goods including write-offs from plant, property and equipment, raw materials, and inventory.
 
11
New molecular entities.
 
12
Companies used to have less diversified drug portfolios with one or more blockbuster drugs (sales of more than 1bn USD).
 
13
Accurate diagnostic tests reduce costs by identifying patients with a very high likelihood of responding to a drug, diminishing subsequent health problems, reducing hospitalization, or avoiding unnecessary treatment.
 
14
The fast and dramatic increase in understanding the human genome and its influence on the biological pathways in the human body.
 
15
Worldwide 16,000 hospitals and 86,400 readings/day, according to Referral MD. USA alone: 75 % of nonfederal acute hospitals.
 
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Metadata
Title
Innovation for Health: Success Factors for the Research-Based Pharmaceutical Industry
Author
Christoph Franz
Copyright Year
2017
Book
Evolving Business Models

Print ISBN: 978-3-319-48937-7

Electronic ISBN: 978-3-319-48938-4

Copyright Year: 2017

DOI
https://doi.org/10.1007/978-3-319-48938-4_7