E-drug: Future directions for the pharmaceutical industry
-------------------------------------------------------------------------
Warning: Long message!
Mr. Fred Hassan, Chief Executive Officer, Pharmacia Corporation,
gave a plenary lecture at the World Conference on Clinical
Pharmacology and Therapeutics last summer. It was titled "Being a
modern pharmaceutical company: New paradigms for the
pharmaceutical industry". In this lecture, he presents his
perspective about the factors needed for success for a
pharmaceutical company in the present time. This statement by the
head of a major international pharmaceutical company should be of
interest to people interested in drug discovery, development, and in
access of patients to medications. It was published in Clinical
Pharmacology and Therapeutics 2001 (May); 69: 281-5, so that it
could be read by a wider audience and is at
http://www.harcourthealth.com/scripts/om.dll/serve?action=search
DB&searchDBfor=art&artType=fullfree&id=a115450
It can also be reached through
http://www.harcourthealth.com/scripts/om.dll/serve?action=home
and then going to the journal and then the May issue.
Marcus Reidenberg
Marcus M. Reidenberg, MD
Professor of Pharmacology and Medicine
Head, Division of Clinical Pharmacology
Weill Medical College of Cornell University
Editor, Clinical Pharmacology and Therapeutics
1300 York Ave., Box 70
New York, NY 10021
e-mail: mmreid@med.cornell.edu
phone (212) 746-6227
fax (212) 746-8835
[Thanks to Mr Reidenberg for alerting us to this interesting article. I
print the article below. Mr Hassan's lecture emphasizes the need to
"build the trust and support of the public � trust and support that
will be essential to success in the future" and that companies need
focus on key markets in the future. Please note that he also says
"This does not mean ignoring other markets. But it does mean
strategically concentrating resources and top management attention
on success in the key markets. Again, this is very different from our
industry's approach in the past, which focused on therapeutic areas
across geographical regions." The proposed change in priorities
away from geographical access to potentially succesful markets is
imporant! An encouraging development is that the industry is
starting to see patients a empowered health consumers. Distributed
as fair use. HH]
-------------------------------------------------------
Commentary
Being a modern pharmaceutical company: New paradigms for the
pharmaceutical industry
Fred Hassan
Peapack, NJ
Good morning! It is a pleasure to be with all of you today. It is a
great honor to have been invited to speak to such a distinguished
group!
I've been reviewing the agenda for the meetings during this week.
What I see is impressive, and exciting. It reflects the revolutionary
progress underway in our industry as we enter the new millennium.
The excitement of the work you are engaged in is captured by the
genomics revolution. The mapping of the human genome opens the
door to enormous advances for medical science. Advances that will
enhance and extend the lives of patients in extraordinary new
ways.
This week, you are hearing from many experts on recent research
achievements � and on future directions. So instead of duplicating
those perspectives, I would like to focus my remarks this morning
on a somewhat different subject. And that subject is the broader
environment of the pharmaceutical industry, where so much of your
work is applied.
Today, I would like to give you my perspective on the key success
factors for a modern pharmaceutical company, in this new century .
. . or to put it another way, to identify what I see as the new
paradigms for our industry as we confront a dramatically new�and
fast changing�world. Today, I'll cover 4 points:
First, I'll describe what I see as the key factors in the competitive
business environment for our industry.
Second, I will identify what I perceive as new paradigms for
success in the pharmaceutical industry as we grapple with that new
environment.
Third, I will give you my perspective on what I see as the ultimate
new paradigm for our industry�the rise of the empowered
consumer, who is also an active citizen in his or her political
system.
And finally, I would like to describe what I see as a new imperative
for the pharmaceutical industry.
The imperative to develop, and then lead, a policy agenda that is
seen as highly relevant to the societies in which we operate. This
policy leadership, I believe, will be essential to further build the trust
and support of the public�trust and support that will be essential
to success in the future. Let me begin with the competitive
environment.
As all of you know, we are in a period of accelerating consolidation
in our industry. What were 17 pharma companies listed on the US
stock exchanges not long ago have now reduced to just 11! It is
my expectation that this consolidation will continue because even
the largest of the global companies have only single-digit global
market share.
Within this new arena, we're seeing a division into 2 cohorts: a
couple of "super-size" companies and then a second group of
companies that are not super-size but which have the mass and
resources to be strong competitors on a global scale. My own
company, Pharmacia, is in this second group.
For all these big players, however, there is a common driver of
consolidation: the need to be able to operate on a global scale and
in a globalized environment. While there is discussion of the impact
of globalization in virtually all industries today, I believe that ours is
one where globalization is most dramatic. As many of you will
know first hand, research and development must now be conducted
across multiple sites and geographies to take best advantage of
human talent and new technologies. The growing cost of discovery
in turn calls for capabilities to develop and launch big, global
products whose sales will help pay for that discovery investment.
This in turn calls for large global sales forces to deliver those
products to a global array of customers. These drivers together
explain the dramatic increase in size and scale required by the new
environment in all 3 key areas of our industry: R&D, sales, and
marketing.
Another decisive factor in the new competitive environment is the
growing importance of the US market. Every successful
pharmaceutical company must have a part of the United States�it
is the must-win market. One critical reason is that the US stands
today as the only major free market for pharmaceuticals.
Physicians, as well as patients, expect, and get, quick access to the
newest medicines. The US is also an innovation-friendly
environment.
You will recall that not long ago, many European communities were
rejecting pharmaceutical biotech investment�and the investment
jumped to the United States. In recent years, we have also seen a
steady migration of big pharmaceutical investment to the United
States�again, because the environment is friendlier. Less than 30
years ago, Europe was the center of the pharmaceutical industry.
Today, the United States is the undisputed leader.
The third factor I would single out in the new environment is the
intensifying competition for customer. Customers, whether they are
government health care systems, individual physicians, or managed
care organizations in the US, have one thing in common. They all
are the focus of an unprecedented drive by the major players in the
industry to win business and loyalty.
In the face of all of these pressures, the fourth characteristic of the
competitive environment that I would single out is what I call
"survival of the fittest." Although the creation of innovative new
medications has never been easy, I think we can agree that the
more obvious targets have now been exploited. The companies in
the pharmaceutical industry that survive will therefore be those with
global excellence in 2 areas:
In global R&D, where only first-tier teams will have the competence
and the resources to discover and then develop the increasingly
elusive breakthrough compounds.
In global marketing, where only first-tier organizations, working
across borders, will have the skills and resources to properly
position, brand, launch, and maximize major global products.
Those, then, are some of the key competitive challenges I see for
our industry. And if those are the challenges, what are the
responses?
To succeed in this new environment, I believe the pharmaceutical
industry must respond boldly with what I would describe as a set of
new business paradigms. The first paradigm, I would suggest, is a
shift from a focus on traditional therapeutic areas. For the future,
therapeutic area focus needs to be replaced by a focus on the
following:
Technology platforms
Key products
Key markets
Seamless product flow
Powerful partnerships
The emphasis on therapeutic areas in the past, I believe, needs to
transition to a more contemporary model.
In the research arena, I am convinced that the more successful
companies will be those that can build their competencies around
technology platforms. Technology platforms are the combination of
technologies and scientific competencies that allow us to apply
fundamental science competence to a wide range of disease areas.
One example from my own company, Pharmacia, is the unique
competency we have in our Sugen biotechnology unit. Through our
scientists' ability to understand and manage cell signaling, we are
developing medicines that are effective across disease categories,
ranging from cancer to diabetes.
Another example is our COX-2 inhibition platform. Our first product
from this new family of compounds is our Celebrex treatment for
arthritis. We've now shown that Celebrex is also efficacious against
precancerous lesions. There is also hope that our COX-2 inhibitors
may even prevent Alzheimer's disease. You can see how this
approach is so much broader than the therapeutic area concept.
Through this technology platform focus, I believe in the future we
will be even more effective in creating treatments that meet
customer and patient needs.
When we take an external focus and ask how we can be most
relevant to customers, we also see a new dynamic for individual
products. In the highly competitive market that I described,
companies must begin to focus most of their resources on a smaller
group of individual key products�products that are of exceptional
value to their customers and to their patients. In this approach,
companies will not only build focus on therapeutic areas but will
develop and sell products that respond to specific customer and
patient needs.
A similar philosophy extends to marketing activity. As I noted, the
United States has become the must-win market for every
pharmaceutical company. In addition, there are just 6 or 7 other
critical markets, including Japan and key countries in Europe�one
of the most important of which is Italy. By focusing on these key
markets, successful pharmaceutical companies will be focusing on
the most important customer groups globally. This does not mean
ignoring other markets. But it does mean strategically concentrating
resources and top management attention on success in the key
markets. Again, this is very different from our industry's approach
in the past, which focused on therapeutic areas across geographical
regions.
The fourth new paradigm for success is the need for a shift from
silo-based working processes in our industry to what I would call
the Seamless Product Flow Process. Typically in pharmaceuticals,
the research, development, marketing, and sales organizations are
focused inward on their respective functional and business
processes. In other words, they operate in silos. But this silo
approach means that when it comes to moving compounds from
the laboratory to the patient, enormous value gets lost in hand-offs
as a product gets tossed from one silo to the next.
By taking a seamless product flow approach, we can turn this
conventional process inside out. Seamless product flow is a model
for collaboration and co-ownership of the pipeline by R&D, by
Marketing, and by Sales�from the laboratory bench right to the
patient. In this approach, the specialist areas within R&D, such as
biology, chemistry, and other sciences, work together
cross-functionally toward common goals. Marketing executives are
also involved in the early decision making in R&D. Meanwhile, the
R&D teams are involved in the marketing phases. They add value
by continuing to refine and improve existing products. This
approach drives customer and patient needs right back into the
earliest R&D process. It optimizes the speed and innovation of
product flow. The result is truly customer-focused product
development built on R&D that is very focused on the unmet
medical needs of patients.
Our new hospital-based antibiotic Zyvox is a result of this kind of
approach. Zyvox is the first of an entire new family of antibiotics to
be discovered in more than 30 years. By developing this medicine
through a seamless product flow process, we set a record in speed
to filing with the FDA. We've launched in the United States and are
completing our registration and launch preparations in other key
markets.
The fifth success paradigm I would highlight for the pharmaceutical
industry is the power of partnerships. Today, no company in our
business, however large, can operate as an island. I am certain that
to accelerate innovation in the future, we will need to unlock the
power of business partnerships in numerous dimensions. This is
because no single company will have the R&D innovation or the
marketing skills to optimize all of its best opportunities. So we will
see successful global pharmaceutical companies like mine engaging
in a vast array of partnerships�from research deals with biotech
companies to comarketing and copromotion agreements with other
big companies.
I have spoken so far of some new paradigms for success of the
pharmaceutical industry's internal strategies and processes. I'd now
like to turn to an even more profound paradigm that I believe is
radically transforming the environment in which we will need to
operate. This involves the end-user of our medicines�patients.
The patient of the past was essentially passive. Being a patient
meant being a recipient of care. But now, that patient of the past is
rapidly transforming into a very new and different person. He or she
is fast becoming an empowered consumer. In the past few years,
there has been tremendous attention on the empowered health-care
consumer in the United States. This revolution is now expanding to
Europe. Despite all the attention on the new health-care consumer,
however, my sense is that the dynamics of this new paradigm is
not well understood.
The concern of the new health-care consumer is minimize the risk
of illness and to maximize the potential for wellness. This is
different from the usual consumer paradigm of customers making a
choice among optional purchases. For health-care consumers,
health is not an option. This perspective makes a great difference to
how we, as an industry, respond to the empowered consumer
paradigm.
First, let's consider what is driving the growth of this new
phenomenon. I would identify 4 drivers of change: The first driver is
health information and awareness. There has been an explosion in
information available to ordinary citizens on health matters. The
Internet is still in its infancy, yet already it is creating an enormous
borderless network of health-care information. By 2003, 80% of the
adult population here in Italy will be Internet users, and health care
is the "most clicked" subject on the web. Of course, it is not just
the Internet. All other channels, from women's magazines to
television talk shows, are increasingly focused on health.
The second driver is cost sharing of health care by consumers. In
every developed economy, we are seeing some form of direct
payment by consumers. As always, when individuals are paying out
of their own pocket�instead of through the government via
taxes�their interest in choice and their level of engagement rise
fast. They begin asking, "Is this the right decision?" "Is this the
best product for me?" "Should I get another opinion?"
The third driver is the empowered baby-boom generation. The
baby-boom generation is beginning to turn gray. In developed
economies, this group has large discretionary income. This group is
accustomed to freedom of choice in key decisions. They will be
expecting choice and involvement in their health-care decisions, and
they will be willing to pay to sustain wellness.
The fourth driver is the power of medical innovation and
technology. We will be seeing an unprecedented era of medical
breakthroughs in the coming decades�from the work of all of you
here. Many of these breakthroughs will increase the control that
individuals have on their health. For example, the genomics
revolution will give people the power to prevent or cure diseases
based on their personal genetic profile.
Two examples illustrate the way in which these 4 drivers are
turning health care into a consumer-driven sector. One is the AIDS
epidemic. In the developed world, well-organized patient and
patient-support groups have had as much influence as the medical
community on the direction, scope, and pace of AIDS research and
treatment. Another is breast cancer. Once a hidden disease, it has
become the cause of powerful patient interest groups who
successfully lobby the US and other governments for research
spending and awareness campaigns. Meanwhile, millions of women
are educating themselves on the disease and asking their physicians
about treatment options and specific medicines. These 2 examples
demonstrate where, over time, the entire health-care arena will find
itself.
In responding to this new paradigm, there will need to be a
fundamental shift in attitudes, particularly by governments. That
shift must be from health regarded as a social cost to health
regarded as a social benefit. This is a change that will be driven by
consumers themselves�behaving as citizens and as voters. As you
know, there is pressure across the developed world to slow or stop
the growth in health-care spending. This pressure is led by
governments, whose budgets are constrained. But if you ask
individual health-care consumers whether they would want to
spend more on health and wellness, their answer is yes. So there is
an urgent need for a realignment of attitudes toward the total
spending of developed economies.
We are seeing efficiencies and savings in many areas of life,
including very significant reductions in the real cost of food,
clothing, and shelter. Disposable incomes continue to rise. The
question therefore needs to change from "How do we slow
health-care spending?" to "How valuable is wellness to
consumers�and how do we make health-care delivery more
efficient?" In answering this question, I believe we will see citizens
in developed countries demanding a big increase in the share of
wealth devoted to health. At the same time, they will pay much
more attention to the efficiency and effectiveness of health care.
They will find that pharmaceuticals are by far the most
cost-effective means of delivering wellness. Just as one example:
our innovative new hospital antibiotic Zyvox can be administered
orally, as well as intravenously. So it allows patients to leave
hospitals early and to continue treatment at home�saving
thousands of dollars in hospital stay costs per patient.
In this new environment, the empowered consumer will demand
and gain important rights. The most important right will be the right
to choice. The right to choice of caregivers, to choice in treatment
options, and to choice in the size of financial investment each
individual makes in health. But there will also be new
responsibilities. The most important will be the responsibility for
cost sharing�whether it is with their employer, or the government,
or an insurance program. Through cost sharing, consumers will also
have personal incentives for disease prevention and health
maintenance. In this new equation, the customer relationships of
our industry will experience a sea change. The most fundamental
change will be the transformation of the patient into a co-customer.
By this I mean that the physician and other caregivers who have
been our traditional customers will remain in their roles. They will,
however, be joined by their patients, as consumers�empowered
consumers who will demand an equal role in health-care decision
making.
In this new situation of the co-customer, I believe there will be 3
guiding principles pharmaceutical companies will need to follow:
Work with physicians, not around them. There will be a temptation
to go directly to the consumer as a sole decision maker. But we
must not forget that it is physicians who diagnose disease and
write the prescriptions! Consumer power creates new customers,
but it does not replace our existing customers.
Build alliances with the health-care consumers as citizens. There is
enormous potential for the pharmaceutical industry to have a
common agenda with consumers, who are also voting citizens. The
most significant common ground is the right of consumers to
health-care choice. Here in Europe, I believe, this right to
health-care choice, versus government-imposed restrictions, will be
one of the most important issues on the policy agenda in this
decade. We have every opportunity to build bridges and to be seen
as allies with consumers on this critical matter.
Build long-term relationships with consumers as individuals. We
must treat consumers as we aim to treat physicians and other
customers in health care. That means building enduring
relationships of trust. This is particularly important because, as I
noted, health is not an optional choice for people. They are not
buying shoes or a soft drink. They are investing in their most
important asset�personal wellness and life quality. Therefore
successful companies in our industry will be ones that are seen to
understand the individual needs of health-care consumers.
Successful pharmaceutical companies will deliver not only
medicines but also value-added information and other services. In
this respect, the Internet and the "network economy" will truly be
the enablers of a new kind of relationship between health-care
companies and health-care consumers.
I would like to comment on one final subject. I believe we confront
a new imperative for policy and issues leadership by the
pharmaceutical industry. If we are to expand and build trust among
health-care consumers and gain their support as citizens, we must
do much more to gain recognition of the contribution we make to
health. We must win public recognition that pharmaceuticals are the
most cost-effective element of health care. We need to get out the
message that we are entering a new golden age of medicine�an
era when our industry may well deliver cures for terrible diseases
such as Alzheimer's and cancer.
We must also demonstrate our commitment to addressing broader
health-related issues. This is especially important because the policy
environment today is often unfavorable for the pharmaceutical
industry. For example, here in Europe we see an environment in
which government bureaucracies impose arbitrary pricing of drugs
and restrict the access of patients and doctors to drugs. This means
that, in various ways, patients are often denied the fruits of the
research that all of you deliver. Government interference also
results in irrational pricing. Older, less effective drugs can cost more
than they should, while innovative new compounds do not receive
the premium that they deserve. Meanwhile, in the United States,
politicians are attempting to blame the pharmaceutical industry for
failures of the social safety net.
Once again, I return
to the importance of the empowered consumer,
who is also a citizen. I am convinced that if the pharmaceutical
industry can be constructive leaders in addressing key health-care
policies and issues, our equity with consumers will rise. And
because consumers are also citizens who vote, we will develop a
natural constituency for our legitimate policy and business goals.
I've developed my own first draft of an industry agenda for policy
and issue leadership. My draft agenda has 3 items:
Create social consensus in the developed economies that health
care should be provided via competition and choice. In this effort
our principal allies should be the consumer citizens we ultimately
serve. A critical element of this consensus must, of course, be
agreement on the provision of an effective safety net for the
disadvantaged.
Take the lead on a set of public education and health improvement
campaigns that will really make a difference to human health. Here
are some candidates:
Reducing or eliminating smoking-related disease. By helping to
successfully combat this disease, our industry would help to save
millions of lives. We would also help to save billions of dollars in
health-care and other smoking-related costs�costs that will fall
with particular vengeance on developing nations, such as China,
during this century.
Combating obesity. Obesity is becoming a health scourge in
developed economies. By reducing obesity, we will also be reducing
a host of related diseases�from diabetes to circulatory diseases to
cancer.
Educating on bioethics. As we enter the era of genomics, public
education on bioethics, starting with primary schoolchildren, will be
one of the most important contributions our industry can make to
informed policy decision making.
Engage in creative responses to the health crises of the developing
economies. This is an enormous task and one in which we must be
very careful in defining the role we can play and the contribution
we can make. But I am also convinced that, approached properly,
we will benefit from thinking, and acting, big�on this big problem
of our time.
In conclusion, let me leave you with a final observation. This
morning, I have ranged widely across what I described as the new
paradigms for success for the pharmaceutical industry. New
paradigms in how we conduct our business. New paradigms in how
we relate to the empowered consumer. And, finally, new paradigms
in how we relate to the societies in which we operate, through
issues and policy leadership.
Across all these dimensions I believe there is one unifying theme.
Today, our industry and the environment in which we operate are in
the midst of unprecedented change. In moments of great change,
you always have 2 options: You can be a leader of change or you
can be its victim. Everything I have said today can be summed up in
one simple message: Our industry can, and must, be the leaders of
change! Thank you.
--
Send mail for the `E-Drug' conference to `e-drug@usa.healthnet.org'.
Information and archive http://www.healthnet.org/programs/edrug.html
Mail administrative requests to `majordomo@usa.healthnet.org'.
For additional assistance, send mail to: `owner-e-drug@usa.healthnet.org'.