Drug firms told to adopt new model amid lapsing patents
Cliff Harvey C. Venzon
479 words
24 October 2011
BusinessWorld
BSWRLD
S1/8
English
(c) 2011 Business World Publishing Corporation.
PHARMACEUTICAL FIRMS should cope with patent expiries and other threats to product revenues by offering add-on services that improve compliance with dosage instructions and diagnose unserved patients, speakers said in a forum late last week.
This way, the results-based strategy responds to cash-strapped health care providers' demand for more cost-effective products and medical services, the speakers explained.
"There is pressure from health care budgets and payers of health care who do not want to pay for medicines that do not work," Glen T. Giovanneti, life sciences expert at Ernst & Young Global Ltd., said.
Pharmaceutical firms are now increasingly being made to prove that their products have a high effectivity rate and address common illnesses.
Companies should thus adopt the so-called Pharma 3.0 strategy in which a premium is put on the outcome of their products.
"When you are in that environment, the company would think: 'I need to be on the solution business, so how would I think of the solution in which the product is the component of it?'" he said, citing for instance a model that monitors whether the patient takes his medicines regularly. "This [compliance] strategy could reduce the health care cost..." he said.
He added that drug companies might also help by screening a certain population who might have the disease, and eventually come up with a solution.This is oppsoed to the Pharma 1.0 model 12 years ago when firms were focused on the "blockbusters drugs." However, after the drugs' patent protection expired, the industry was penetrated by the expensive dr u g s ' g e n e ri c counterparts.
He added that the prevailing model at present is Pharma 2.0, wherein companies are focused on making new products. This, according to him, is manifested through the diversification of pharmaceutical companies.
"The revenues are at risk today because patents are expiring. If you move to outcome-oriented from profitoriented business, I think you will going to maintain your profitability," he explained.
Stanley Y. Chang, Ernst&Young's Asia-Pacific and Greater China Life Sciences leader, affirmed this. "You don't want people to take your products in bad way, so you are going to improve them. Having Pharma 3.0 mentality is good in the company. It will give you more results in terms of consumer recognition and reputation, and that will [reflect] in your profits in the long run," Mr. Chang said.
Winston A. Chan, head of Ernst & Young's advisory services, said Pharma 3.0 is being slowly seen in the Philippines, citing partnerships among firms, the Health department and other organizations. "The nontraditional pharmaceutical companies are setting up all these. The fact that they have helped in the outcome management, they have helped to form the ecosystem in health management," he said.
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