What are the key issues facing organisations in your sector over the next three years? What course of action would you recommend to such organisations? (300 words maximum)
I work in the pharmaceutical sector. Traditionally one of the bulwarks of innovation, the industry is in danger of hitting a serious innovation glut in the near future.
The ‘Patent Cliff’ is coming: twenty blockbuster drugs with about $250bn in annual sales are going off patent by 2016. Once off patent, a drug loses almost 90% of its market share to cheaper generic versions. To make matters worse, there are few new drugs in the pipeline that can replace this scale of losses. Anticipating significantly lower revenues, big pharma players are cutting their R&D spend, which further decreases the pace of innovation and drives the trend cyclic.
The expected drop in drug prices is indeed a boon for consumers in the short term. However, the reduced innovation that follows could be significantly detrimental to public health in the long term. It is therefore essential to identify strategies that incentivize innovator companies to continue discovering and selling new drugs.
I believe that it is not advisable for innovator drug companies to compete with generic players on price. I believe that innovators must instead compete on the value offered to consumers. To do this, they must first view themselves as players not just in the pharmaceutical market, but in the bigger health care market.
Big pharma companies have the capability and resources to bring together multiple aspects of health care that generic companies cannot match. For instance, innovators can bundle their drugs with patient-centric therapy monitoring and reporting systems, and build communities for awareness and information sharing. By providing such value-added services, they can brand themselves as health lifestyle providers rather than just drug makers.
With such positioning innovator companies can command higher margins, which can then be invested in increased innovation, which in turn would drive a cycle of increased profitability.
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