Should pharma companies transition from developing, manufacturing and pricing “drugs” to promoting “health”?
James Strachan |
"The greatest danger in times of turbulence is not the turbulence – it is to act with yesterday’s logic.” ~ Peter Drucker
I’ve been thinking about this quote recently, and “turbulent” seems like a fair description of the pricing environment facing the pharmaceutical industry today, as governments the world over move to cut healthcare spending – particularly on drugs.
For example, Canada recently announced the biggest reform to its drug price regime since 1987: dropping the US and Switzerland from the Patented Medicine Prices Review Board’s (PMPRB) list of countries with which it compares domestic prices (1). Across the border, the Trump administration has taken the first steps towards allowing drugs to be imported from abroad with its “Safe Importation Action Plan” (2). While in China, Pfizer’s Upjohn business plummeted 20 percent largely due to the country’s volume-based procurement system, which began earlier this year in 11 Chinese cities (3).
How should the industry respond? One option, adopted by Pfizer, is to – almost literally – run for the hills. Earlier this year, the company announced that it would be hiring 600 additional people to drive growth outside the aforementioned Chinese cities (4). Industry bodies will also play their part, lobbying politicians and releasing statements about the “threat to innovation.”
But in the context of a global restructure of the drug market, which I think is what we’re now seeing, the industry will soon run out of hills. Today’s turbulence will require “new logic” – and perhaps a new kind of pharma company.
And when sickness is the norm – three out of four adults in the US are overweight or obese and almost half have pre-diabetes or diabetes, as a recent New York Times blog pointed out (5) – we may see a transition from developing, manufacturing and pricing “drugs” to promoting “health.”
Parts of the equation may be value-based payment contracts, open-business models, or partnerships with patient groups – all of which are on the rise (6). But, as others have argued (7), the full solution will take the various healthcare market fragments – prevention, screening, diagnosis and treatment – and combine them to promote overall health.
It’s hard for anyone to predict what that might look like exactly; the job of the next generation “pharma” company will be to define the new logic for themselves.
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- Reuters, “Canada enacts drug price crackdown, in blow to pharmaceutical industry” (2019). Available at: https://bit.ly/2MQ4bhP. Last accessed August 28, 2019.
- FDA, Safe importation action plan” (2019). Available at: https://bit.ly/2Zn4pk9. Last accessed August 28, 2019.
- Fierce Pharma, “Is Pfizers established drugs decline in China the canary in the coalmine?’” (2019). Available at: https://bit.ly/2HioDoe. Last accessed August 28, 2019.
- Bloomberg, “Pfizer tries to outrun China drug policy with rural sales push” (2019). Available at: https://bloom.bg/2Zj3uFk. Last accessed August 28, 2019.
- Eye for Pharma, “Deliver patient-centered outcomes to be a trusted partner” (2019). Available at: https://bit.ly/2MHDexE. Last accessed August 28, 2019.
- New York Times, “Our food is killing too many of us” (2019). Available at: https://nyti.ms/2NBHCxR. Last accessed August 28, 2019.
- John Singer, “How to refine strategy and compete on outcomes” (2018). Available at: https://bit.ly/2kuCPSO. Last accessed August 28, 2019.