Today's Pharmaceutical Industry Going Forward

No replies
wcrdadmin
Offline
Joined: 01/20/2010
TurmoilGovernance

In moving to Phase Three the gold ring goes to firms fastest in becoming the lowest cost provider. This means being fastest in deciding what not to do (in R&D). For example there are very few clinical trials found in a generic industry.1 There is little need for an NME2 discovery and development capability.

In the new generics industry you’ll need every ounce of effort to be focused on finding small market niches. Future generic companies will not be able to extract monopoly profits from the 6 month Hatch-Waxman Act exclusivity period.3 So we need a new model for a generics industry R&D funded with much slimmer margins: this will undoubtedly be reflected in a much slimmer R&D.

Here’s the game plan for firms transitioning to the new generics industry:

  • Analyze today’s generics industry for their best practices and people. What is it that gives certain firms an edge, a competitive advantage, when selling a commodity product. The answer is probably found on the commercial side, but late stage R&D may still be able to contribute (e.g., innovative packaging, process innovations, opportunistic findings (e.g. Zinc-IV Bag findings).
  • Line up activities needed for the transition to when the time comes to pull-the-trigger (e.g., develop an acquisition strategy)
  • Be much more aggressive in applying our formerly-designated Worst Practice of Early Kills+. This widespread management practice can be used to empty out the current R&D pipeline of its most dubious inhabitants, un-seizing capital tied up in today’s R&D pipelines.
  • Align a scaled-down R&D for NME’s to go after big, dumb U.S. Federal dollars. Government is willing to spend $200-$300K per year on medications that would not find a ready market otherwise. Get as much of this as you can while the Federal coffers last. Track and be ready to jump on FDA approval of tenuous ‘biomarkers’ for debilitating diseases: drugs based on these biomarkers will also receive U.S. Federal dollars.
  • Kill all ongoing ‘systemic’ fixes to R&D (i.e., infrastructure projects not directly tied to ‘going generic’). Illustrative R&D initiatives that give the illusion of ‘fixing’ big picture issues include new molecular sequencing technologies, standardization of clinical trial databases, new ‘translational medicine’ partnerships, etc.

Leverage the 30-70 rule for all remaining R&D expenses. This allows much greater control over the timing of R&D expenses, delaying the inevitable collapse of P/E ratios (and share prices) in the industry.

Fixing the pharmaceutical industry or individual firms seems no longer to be an option, so instead we help individual researchers survive despite the overall decline. We look for the Fab Five of today’s industries. These select few researchers become the basis for a new cottage industry that takes good science and nurtures it outside of existing organizational forms. This is very much a personality-based approach.

Get to the commodity stage faster. This is not so much to avoid wasting capital as it is to keep from tainting the well by dumping ‘old money’ and ‘old men’ into a new science. Today’s industry cannot change it’s organizational form and will be unsuccessful in its exploitation of this new science. Placing ‘bets’ in academia or smaller companies only devalues otherwise promising new science platforms. Instead, focus on shutting down R&D activities and freeing up capital stuck within old organizational forms, and divert this capital to find and grow the new organizational form needed for a post-pharmaceutical industry.


Editor's Picks for January, 2011

  • 1. Mostly in the generics industry these are small (12-15 patient) bioequivalence studies.
  • 2. New Molecular Entity – new drugs that are largely not knock-offs of existing drugs.
  • 3. First to market with the generic copy of a branded drug is granted six months of market exclusivity. The manufacturer gets six months to sell a generic (low cost) drug at branded prices. This Act was to encourage industry to manufacture low cost, low profit generics in order to lower U.S. healthcare costs. Since there will be very few branded products after the decline of the pharmaceutical industry, there will be very few monopoly profits coming from this exclusivity period. A possible exception might be found in biosimilars for the patent expiry of branded biologic products.