Can't Get to PharmaFuture From Here


Over the past few months several major consultancies have been playing the role of retrospective soothsayers by producing new measures of pharma's assorted difficulties and some ethereal advice on ways of turning around the situation.

One such exercise, described by its authors as an effort to develop "Pharma 3.0," actually contains some imaginative ideas, albeit cloaked beneath a lot of hot air and empty blue sky. For example, some of their points include the following.

* Pharma will have to engage in numerous businesses outside its traditional enterprises of prescription and over-the-counter therapies, devices & diagnostics. To do this they will have to manage multiple partnerships. Each partnership will be rather distinct from the others, including the fact that the partners of each venture will represent different industries. This will require that pharma accommodate to the cultures and approaches of several different industries, such as, IT, telecom, data management/analysis and, many others. Part of the demand on pharma in managing those partnerships will include fitting into the diverse business models of other industries and "speaking the language" of non-pharma companies. Even more importantly, pharma must develop a capacity for combining each of these diverse partnerships with its own, unique capabilities of pharmaceutical know-how to produce more cost-effective outcomes.

* Pharma will have to become more of a service business, capable of generating profits from delivering better outcomes to diverse stakeholders in health care. The profit models of those services will vary and all will differ from the models for pills and devices.

* US and EU-based pharmas will be less capable of fitting into this Pharma 3.0 model than those from Asia. That is because the pharmas in emerging countries don't have as much baggage to unload. The Asian companies never went through the blockbuster model and never based their growth on developing innovative therapies. Also, working within giant trading block entities is quite common for Asians but more unusual in the west.

* Existing pharmas are actually poor prospective partners for the other industries that will have to comprise these hypothetical, joint ventures, partly because the other industries feel pharma maintains a damaged reputation and potential conflicts of interest.

All of that may be true as far as it goes, but their transubstantiated vision doesn't go nearly far enough. Pharma would have to entirely remake itself, starting with its core mission of how it expects to generate a return on capital. All of its operating modes would have to change. For example, the industry's time horizon would have to accelerate from its current snail's pace, a result of the decade or more required to develop each new product. A pharma that serves as finance manager for a series of several, simultaneous partnerships would need to operate at an altogether quicker pace. Many other fundamental changes would be required, both concurrently and sequentially, but the consulting partners and their 30-year old, Ivy League, MBA minions offer no specific clues about how to accomplish them. Instead the report descends from its blue-sky future to a series of windy interviews with a few pharma insiders who offer little more than consultant-speak babble.

Another consultancy also tuned up its spreadsheets to produce an opus they term, "Pharma 2020." They start by discussing the major challenges facing the industry and here the MBA minions essentially just rehearse the well known facts such as the slowed pace for developing new products capable of improving care, and the concomitant resistance by payers to this growing stable of me-too's. Of course, being consultants, their "discussion" takes the form of a blizzard of charts, graphs, tables and trend lines when a few, simple declarative sentences could make the points more succinctly. Some consultants, it seems, think in PowerPoint rather than in words. Didn't Mitt Romney, fresh out of Harvard Business School, start his career as a consultant at Bain & Company before he led a private equity spinoff from it? Perhaps the cast of mind he developed there is one of the things that exasperate some Republican voters about him.

For pharma to reach the big rock-candy mountain of 2020, this second consultancy again offers a familiar stew consisting of smaller products rather than blockbusters, low-priced, high volume drugs, the Hollywood model (retrenching to core competencies instead of "end-to-end capability"), more partnering and focusing on the emerging markets.

When it comes to addressing exactly how pharma might implement these familiar strategies, the spreadsheet mavens at this second consultancy regress to totally pedestrian advice. They counsel pharmas to "take into account the needs of consumers in Emerging Markets," a suggestion that is both obvious and questionable.

Their other suggested tactics, such as replacing reps with IT/telecom as their promotional foundation in emerging markets, is at least sensible, if not exactly original. The same true-if-not-new description cannot be applied to another of their recommendations, the one related to hiring more talent from other industries.

Pharma has actually done a fair amount of this in the past by bringing in senior managers from companies such as Pepsi Cola, Becton-Dickinson and Heinz. For the most part, such efforts have produced miserable results. In one case the CEO obtained from non-pharma reduced his company's capitalization by more than 30% during his decade-long tenure. During that time he presided over a product offering that required spending several billion dollars to settle thousands of lawsuits, proceeding in the process to tarnish the name of what had previously been one of the country's most admired companies. Another CEO from outside pharma is still serving, so a full assessment of his work remains for a later date, although some of his pronouncements to date are pure drivel.

The hindsight of these consultants and their ability to discern details that reveal pharma's current plight are 20/20, while their directions for a path out of the woods are not nearly as helpful. This is partially understandable because the reports referred to here are really promotional materials intended to tease prospects into seven-figure engagements that the consultants suggest will replace their vacuous futurescapes with substance. In most respects, however, their work reinforces the cynical description of consultants as guys who can tell someone a hundred different ways to make love without knowing any women.

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