Outsourcing, offshoring, and new value propositions key to Big Pharma's future?
FOR IMMEDIATE RELEASE—March 16, 2009
CONTACT: Kim Keating,
603-646-2733
HANOVER, N.H.—As the pharmaceutical industry's once hugely profitable business model founders in the changing global economy, big pharma is looking to innovation and new partnerships to help right itself. The drug developers' progress in streamlining their operations and enhancing their products and services was the topic of the Third Annual Tuck Global Healthcare Conference on February 27, 2009 at Tuck's Raether Hall.
Keynote speaker Caroline Kovac, PhD, a venture partner with life sciences investment firm Burrill & Company, addressed an audience of Tuck business students, Dartmouth Medical School students, Dartmouth undergraduates, medical professionals, academics, and industry representatives. She opened the conference by heralding the current "period of transformational change in human healthcare [driven by] changing demographics, new economic models, medical science and technological innovation, information and communication technologies, and globalization."
"The next ten years in healthcare," she predicted, "will be about ‘creative destruction' and will threaten some existing business models," but will "offer extraordinary opportunities as well."
Engaging New Partners
Panelists in the first of the conference's two panel discussions offered perspectives on how outsourcing and offshoring parts of the highly intensive drug development process can improve research, shorten product development time, streamline operations, and better meet rapidly evolving healthcare needs. Successful outsourcing, all agreed, will require new strategic alliances.
Among pharma's new partners are enterprises such as panelist (and T'05) Julia Dan's biotech startup NuCure. The young company, its president and CEO explained, helps speed new product entry into the market by bridging development and clinical/commercial success between the U.S. and Asia.
Panelist and Oncopartners President and CEO Michael Choukas described his contract research organization (CRO) in similar terms. Oncopartners was created in 2007 as a response to the rapid expansion of oncology clinical trials and the growing challenge of meeting study enrollment objectives in North America. The CRO chose to work in Brazil, he said, because "there are 150 million uninsured people, there is a lack of experience and capital to build research centers, and there is a high degree of motivation to participate in clinical research."
From panelist and retired Pfizer senior director Preston Hensley's perspective, academic partnerships also will be essential alliances for big pharma. Hensley identified current failures in pharmacology efficacy and safety as critical problems, and concluded that academic partners will more effectively handle the basic biomedical research that is often more costly for pharma to conduct. A new corporate structure and financial relationship between the partners will help assure that research is therapy-driven. Hensley warned, however, of a danger in offshoring innovation, a U.S. core competency.
Innovations Driving Change
While panelists in the second discussion session identified some of the product and service innovations pharma is currently exploring to add value for patients, physicians, and insurers, it quickly became apparent they viewed process innovations as the real driver of change in the healthcare industry. These, they agreed, have been largely independent of big pharma. They credited payers—the ‘real customers' of healthcare products and services—with bringing change to treatment processes through demand for effectiveness and cost-effectiveness.
Panelist William McGivney, PhD, CEO of the national Comprehensive Cancer Network (NCCN), pointed to the detailed compendium of Oncology Practice Guidelines the NCCN compiles and makes available to the oncology community as an innovation of immense value. More than 800 of the world's best oncologists devoted over 12,000 hours of their time pro bono to develop the guidelines to give cancer patients access to the latest treatments. Their compendium is a global resource that provides the best current information on treatments for all types of cancer with the goals of improving the quality, efficiency and effectiveness of treatments.
McGivney also said that while treatment trends come and go, comparative effectiveness is a "real" healthcare model that will directly affect pharmaceutical companies.
The sole representative of big pharma on the panel, Novartis Vice President Joanne Chang, PhD, agreed that evidence-based medicine is an important treatment premise. Pharmaceutical companies, she added, are implementing post-treatment tools such as patient outcome registries to provide valuable additional insights about products.
When questioned by moderator Zhenya Lindgardt of the Boston Consulting Group about big pharma's readiness to reinvent itself, panelists agreed the industry has a long road ahead, but said there are positive signs.
Closing keynote speaker Martin Reeves, also from BCG, elaborated. "Innovation equals getting paid for novelty, and opportunity space is [currently] wide open."
Founded in 1900, Tuck is the first graduate school of management in the country and consistently ranks among the top business schools worldwide. Tuck remains distinctive among the world's great business schools by combining human scale with global reach, rigorous coursework with experiences requiring teamwork, and valued traditions with innovation.
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