Pharma 2020: Challenging New Business Models

In a new report Pharma 2020: Challenging New Business Models PwC examines the future of the pharmaceutical industry. It describes some of the key trends now emerging and its implications for the industry. The focus of the report is on open business models and the authors concludes like many others that the traditional fully integrated business model, often referred to as the blockbuster business model, is under huge pressure and, will not work.

Collaborative networks
The report has an interesting discussion on emerging collaborative networks and the authors envision not only collaborative R&D models, but various other permutations, including networks focusing on different therapeutic areas and covering everything from R&D through to sales and marketing, networks focusing on different enabling technologies and networks focusing on the management of outcomes in specific patient segments. To summarize the discussion "the key social, economic and technological changes currently taking place in the pharmaceutical and healthcare arena will all necessitate the development of multinational, multidisciplinary networks drawing on a much wider range of skills than Pharma alone can provide".

The authors see two pharmaceutical business models emerging; both based on that companies are becoming more collaborative with other industry players:

The Federated Model is based on a network of separate entities that share a mutual overall goal such as the management of outcomes in a given patient population. It can also share funding, data, access to patients and back-office services. The model enables each player to build a specific area of expertise and might encourage greater cross-fertilization and deliver bigger improvements in performance without forfeiting any flexibility. How the cake should be sliced between the different participants in these networks is essentially more complex than the co-development and co-distribution agreements that are being used today.

The Fully Diversified Model is based on that the pharmaceutical company expands from its core business into related products and services through collaborations, in-licensing or mergers and acquisitions. For me this model is very similar to what pharmaceutical companies have been doing for years.

The authors believe that the federated model will ultimately dominate, primarily because it is quicker and more economical to implement. They also conclude that "The transition will not be easy, for collaborative business models are far more complex than the integrated model that has previously prevailed".

Download the full report here.

Further reading:
What is core in your business model?
The Blockbuster Business Model
Open business models