The New Normal: The Changing Face of Pharma - Pharmaceutical Technology

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The New Normal: The Changing Face of Pharma
When the business environment returns to "normal," our industry may appear quite different.


PTSM: Pharmaceutical Technology Sourcing and Management
Volume 5, Issue 4

More drug development in emerging markets. Major and mid-size biopharmaceutical and pharmaceutical companies are moving rapidly to establish R&D operations in emerging markets, especially India and China. This strategy is not chosen because of cost alone, although labor and capital cost differences have certainly been a factor. The move also reflects the large market opportunity presented in those countries as their middle classes and national wealth grow. North American and European CMOs and nonclinical CROs seem to be slow in embracing this reality and are leaving the opportunity open for competitors based in those emerging markets.

Lower drug prices. Healthcare costs are a big issue in every nation, and the political and economic pressure for lower costs will only intensify as expectations rise, populations age, and the recession drags on. Major drug companies are responding to these pressures at both the high end (oncology drugs and biopharmaceuticals) and the low end (generics), but cost reduction will be a constant theme throughout industry. As critical components of the value chain, CROs and CMOs will be forced to work as hard as their clients to identify cost-saving opportunities and to pass those savings on to their clients if they want to keep the business.

More outsourcing. There is no question that outsourcing will be a critical element of every biopharmaceutical and pharmaceutical company's business strategy going forward, and the extent to which companies outsource key activities will only grow. The trend among big companies toward handing off functions previously considered core competencies, including toxicology, clinical data management, and manufacturing, is likely to accelerate in the coming years. As I argued in this column in January, however, the trend is likely to favor CROs and CMOs with the greatest capabilities and financial strength.

These industry changes have been apparent for some time, so I'm hardly going out on a limb here. The key point is to recognize that these changes are vast and they are occurring concurrently and interactively. In addition, the industry these changes are creating will look far different from the one most CROs and CMOs were built to operate in. Executives need to prepare their companies to respond to a different group of players with new needs.

There is one more thing I can safely predict about the "new normal" that is upon us: no matter what shape these changes take over the next few years, we'll need to be thinking about an even newer "new normal" by then.

Jim Miller is president of PharmSource Information Services, Inc., and publisher of Bio/Pharmaceutical Outsourcing Report, tel. 703.383.4903, fax 703.383.4905,
http://www.pharmsource.com/.


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Source: PTSM: Pharmaceutical Technology Sourcing and Management,
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