Pharma and its Innovator’s Dilemma

File under: Global Pharma Marketing, Healthcare innovation, Mobile Health, Pharma innovation

A recent conversation with a friend in the pharma industry validated my thoughts and concerns about the systemic challenges that pharma is facing. The pivotal insight came from my friend’s comment that he wants his next job to be “not just about pills,” but a job that takes on a broader role in healthcare, one that’s more focused on patient outcomes.

This personal revelation was a bit surprising given the fact that my friend’s entire career has been pharma marketing. Promoting drugs is his area of expertise. So why did it take a career “transition” phase to bring about this personal commitment to the need to broaden pharma’s mandate?

innovation highwayWhy not innovation?
The challenges and obstacles that senior-level pharma executives face are extraordinary, especially when it comes to innovation and moving the industry forward. Pressure from Wall Street, business partners and investors who are focused on revenue growth and short-term profitability makes it incredibly difficult for top executives to think outside the box or consider what’s next for the industry or their company.

Every day, pharmaceutical companies large and small are managed to meet performance and revenue expectations. My friend observed first hand how even the long-term planning process (5 to 10 year horizon) doesn’t give senior executives the flexibility to discover and engage in innovative opportunities that might allow them to consider new offerings or business models.

Hearing this kind of report from a pharma insider was discouraging. To think that these large, successful companies with a strong balance sheet are so hamstrung by the status quo and current financial expectations…it’s the classic innovator’s dilemma.

What business are we in?
Forward-thinking pharmacos are beginning to position themselves as being in the health business and not just the pill business. This is one way that the industry might be able to manage this transition and not be left by the wayside on the innovation highway.

Taking a tip from health insurance companies, pharmaceutical companies could create their own incubation ecosystems, in-house but only an arm’s length away, that work under a different business model focused on learning and pilots instead of the bottom line. Billions of high-risk dollars are invested in R&D every year. Perhaps a few million should go into business model innovation.

The day of reckoning
What will be the tipping point to trigger the change? Pharma is big, so it’s not in immediate danger of losing ground or going out of business. But it needs to be alert. While the ACA provided the health insurance industry with a day of reckoning that forced major overhauls throughout the industry, pharma dodged most of the reforms.

Yet the healthcare reform cuts and changes caused health insurance companies to think outside the box and to start innovative programs within their companies, which is exactly what pharma needs to do.

There’s so much vested interest in the current pharma system, maybe what it needs to embrace change is a shakeout. When pharma faces its day of reckoning, will it be ready?

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  • Dr. James J. Gillespie

    Great commentary David. I particularly like your idea of pharmaceutical companies creating their own incubation ecosystems –very innovative thinking. –James