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Sep 04 2017

Pharma Companies Prepare for Partnering in Value Based Care

According to KPMG1, the biggest challenge facing pharmaceutical companies is to adapt their business and operating models to a rapidly changing marketplace.

There are a myriad of reasons why the market is changing so fast.

  • Pressure on pricing and accessibility of medicines
  • Shift from treatment to prevention
  • Political-Social and geographical needs
  • Regular and financial legislation
  • Technology advances possibilities and advances.

But now as the health industry undergoes significant change, return on innovation investments is declining for most traditional pharma companies. Growth through purely product innovation has slowed substantially. Profits are contracting and total shareholders returns have been declining during the past few years. The ability to continue serving existing customers and markets in a meaningful way is becoming increasingly difficult as customers and stakeholders expect more from their public responsiblity.

The concept of innovation needs redefining in a health ecosystem that demands and rewards new models for delivering value based care at lower costs across a broad patient population.

Pharma companies must get ready to compete in this new environment. Risk is being displaced by competitors that can show value their innovations achieve the same, high clinical standards but are faster, better, cheaper and more integrated into a care continuum that increasingly transcends demographical.

With all this change, there is opportunity. Pharma companies must focus more on service and business model innovations that meet new care demands rather than on incremental product volumes.

  • While clinical efficiency is a must, the true value in pharma today is a company´s ability to provide information, services and other assistance to customers (care-providers, insurance companies, patients etc) to solve additional problems such as improving diagnostics, reducing length of hospital stays, monitoring patients and keeping people out of hospitals.
  • Pharma lacks the formal processes to achieve their goals for new services and business models.
  • Pharma companies have been slower to apply new access to data, analytics and cloud technologies than other industries due to private security regulations.
  • Pharma uses to some degree technology but they are using it not to create new business models that center on clinical and consumer dynamics. The lack of transparancy and sharing data is a way ahead. 

To go forward moving forward they should: 

  • Be ambidextrous by creating an innvation operating model that separates breakthrough and radical innovation from the incremental innovation necessary to support the core business.
  • Collaborate to get closer to the patient by integrating into the patient experience, the larger health ecosystem and new payment models. Co-creation and developing new channels of information-interaction with stakeholders can be helpful for new partnerships in future.
  • Measure innovation in new ways by using forward looking metrics and connecting the dots for shareholders who need help in understanding the changing role and nature of innovation. 

Executives and board need to consider in what type of company they want to be and plot the optimal path towards this status. 

New leadership 

All this has consequences for succesful leadership and boarddynamics.

First of all it is nescessary to acquire and develop the talent to cultivate and build a strong multiple organisation. That encompasses a new set of competencies (daring courage, entrepeneurship, taking safe risk, Imagination, directed on trust and collaboration) required to navigate a value based health organisation. 

  • More focus on services and multiple stakeholdermanagement. Traditional sales teams will be changelled in their performance by cross selling services that meet the clients needs and managing multiple decision making processes by variable stakeholders.
  • Data-analytics and technology will be embedded in the core business of future proved pharma companies. CTO-CIO positions has to be represented in the board and executive teams for making the strategic path in fostering disruptive changes.
  • Learning agility in relation to high performaning teams will be key in beating compatitors in the future. Pharma organisations has to assess and develop their talents in defining change agents so that they are in place to meet the growing expectations being placed upon them and their leaders.

[1] KPMG Pharma Outlook 2030

KPMG

By Michèle Polspoel - Partner, Pharma-Life Sciences-Health

Horton International Benelux

 

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