Pharma needs new business models, says PriceWaterhouse Cooper

A high level of innovation is needed to rehabilitate the ailing $800 billion pharmaceutical industry and two new pharmaceutical business models could help transform the competitive landscape in the coming decade, according to new report from PricewaterhouseCoopers (PwC). Both models emphasize greater collaboration with other organizations.

In the first, a federated model, a single company (not necessarily a drug company), develops a network of separate entities sharing mutual goals, such as the management of outcomes in a particular population, common supporting infrastructure, funding, data, access to patients and back-office services. PwC maintains that the interdependence will hold them together. For example, a federation created to address cardiovascular disease and composed of drug companies, clinics and diagnostics, would provide diagnosis and treatment as well as nutritional advisors and stress management services to prevent disease. The advantage is obviously innovative: one pharmaceutical company could participate in various federated networks in different therapeutic areas.

In the second model, a fully diversified approach, a drug company could expand from its core business and begin providing related products and services, such as diagnostics and devices, generics, neutraceuticals and health management, PwC says. Only the largest drug companies are expected to follow this path, PwC notes, but adds that recent mergers and acquisition suggest a move in this direction. this model would allow companies to reduce their reliance on blockbuster drugs and spread their risk by moving into other market spaces, the report says.

The report, Pharma 2020: Challenging business models, concludes that pharmaceutical companies must provide holistic solutions instead of narrow treatments to meet the demands from different stakeholders, including their patients. This means joining forces with academic institutions, hospitals and technology providers that offer other important services, such as compliance programs stress management, physiotherapy, health screening and stress management.