A Revolutionary Paradigm Shift in Big Pharma's Organisational Development

by Cristina Falcão

A paradigm is the conceptual framework upon which we build our world; it is built upon past experiences; if we are not willing to make shifts in our paradigms, we will remain stagnate in our growth; a paradigm shift is a change from one way of thinking to another; it is something that does not happen like self generation it is driven by change.

Culture change is not simply about how we see others and ourselves. It is about how the system works, i.e. how we do the work together, rather than how we work together. The paradigm shift is to understand how to act on the organisation as a system.

The most critical thing to understand about a paradigm is that, in a paradigm shift, everything goes back to zero. What does that mean? It means that whatever made us successful in the old paradigm may not even be necessary in the new paradigm.

What Has Changed? Everything – 2012 Portrays Big Pharma’s Future Scenario.

Governments around the world are grappling to arrive at solutions for health account deficits. Political pressures have increased during the economic crisis.

Personalised medicine means changing drug portfolios from primary care driven blockbusters towards specialties, where the medical need is so high that regulators are more ready to accept the prices. Evidence of the value that medicines bring to healthcare systems will be required to achieve access and funding in both developed and emerging markets. 

However, changing portfolios to address the changing pharma landscape is not enough; the pipelines are dry and R&D costs continue to skyrocket - the new paradigm is not about portfolios. Broadly, to raise innovation returns back to the level that prevailed in the era of blockbusters, pharma companies need transformational change.

The Hidden Cost of M&A.

Overcoming post-merger integration issues is a non-trivial task. There is a hidden potential cost of billions of dollars that is not seen on any P&L statement – M&A slow down the ability of organisations to execute because it takes years for companies to fully develop a combined culture, and sometimes it  does not even happen at all.

Furthermore, the growth of organisations will end up in more complex structures and processes that, over time, become a drag on the quality and speed of decision-making.

R&D Models.

Some companies are moving to downsize their R&D operations and diversify into market sectors that are less R&D intensive. 

Not only has the pharmaceutical industry gone through an acute phase of cost cuttingand downsizing but many pharmaceutical companies are now aggressively working to change their company's behavioral culture and R&D operations. Companies need to make strategically important commitments to new R&D models, which may be experimental models right now but have the potential to be new growth engines.

Commercial Approach.

Go-to-market capabilities are very necessary for a new commercial approach.

Pharmaceutical companies relied (over the past two decades) on a sales/marketing approach that was aimed at prescribers in the world’ largest markets— Europe, U.S. and Japan.

However, going forward implies  not just more significant cuts in traditional resources, but a focus on building distinctive new capabilities because  the Emerging markets are forecast to make up 30% of the global pharmaceutical market by 2015, and they have very different healthcare models for marketing authorisation, pricing, reimbursement and distribution.

The core of the paradigm shift in Pharma’s organisational development: the virtual Model and Continuous Manufacturing.

The virtual model. The popular phrase for outsourcing drug discovery nowadays is “virtual.”

Virtual pharmaceutical/biotech companies are knowledge-based organisations with a core management team, contracting out nearly all of the services they need for drug discovery, development, manufacturing, and marketing. In this way, a virtual company can reduce its fixed costs to around 25% compared to the 75% of a standard company.

The virtual R&D drug development model allows for a high degree of flexibility in being able to respond rapidly to threats and opportunities. In addition, it allows for a small group of individuals to work on a larger number of projects simultaneously.

Dismantling the functional staffing model and replace it with a more flexible human resource model is a viable answer allowing managing costs by limiting full-time employees, reducing fixed assets and clamping down on overheads.

Continuous Manufacturing.

Continuous manufacturing has been the norm in almost all manufacturing industriesbut in pharma, the profits coming from the established blockbuster discovery model have covered manufacturing inefficiency. However, the pressure on all parts of the pharmaceutical value chain has increased and, like any other department, manufacturing has to improve its outcome, reducing time, waste, and cost.

As manufacturing models embrace process analytical technology, big pharma has to reassess the way it produces drugs.

Only then big pharma can shake off the outdated model of batch processing and enter a new era of drug production. The switchover to continuous is without question more cost-effective than batch manufacturing.

The big challenge is the organisation of a new type of facility, which goes hand in hand with the investment in the complete new form of production equipment.

Novartis is currently finalising a lab-scale pilot facility, called 'Technikum', where only a few months ago MIT scientists produced one of the company's drugs in a continuous way for the first time ever.

Pharma IQ, a division of IQPC - 2012 All rights reserved.