World Monitor Magazine April 2017 - Page 116

additional content A critical makeover for pharmaceutical companies: overcoming industry obstacles with a cross-functional strategy by Jo Pisani, Dr. Myrto Lee Executive summary This is a difficult time for global pharmaceutical companies — so difficult, in fact, that many are reconsidering their business models. The litany of concerns that pharmaceutical companies face includes payors tightening up on cost management, strained government healthcare budgets, the need to understand and adopt new technologies, and challenges to their traditional pricing mechanisms by empowered stakeholders, from patients to payors. Moreover, the regulatory maze in many parts of the world is tough to navigate, with unique rules and varied outcomes depending on national policies, issues, and bureaucratic processes. Compounding the external obstacles, however, is the internal culture of most pharma companies. This is an industry that has long operated through disparate components — silos that separated R&D, commercial, production, and supply chain. And, in turn, these walled-off parts of the organization have been disconnected from the external-facing parts, which are responsible for managing relationships with regulators, policymakers, the medical community, and the rest of the industry. These silos can obstruct patient access and breed inefficiency and waste. They affect drug approval time and pricing, influence support for specific drugs by the medical community, and seriously hinder financial performance. 112 world monitor It is time for pharmaceutical companies to restructure their operating models in a way that brings all of these interdependent functions together. To accomplish this goal, they should build the organization around what we call critical teams. These teams should be directly responsible for gathering information, developing insights, and drawing up strategic plans about the facets of the pharmaceutical business that are often overlooked in the formal organizational structure: namely, regulatory affairs, pricing and market access, government affairs, and medical affairs. These four categories are the subteams of a pharma company’s critical team. Rather than having knowledge about these aspects of the business model buried in other pharmaceutical functions — an inefficient and ultimately unsatisfactory approach — the critical team would be independent but cross-functional, working closely with R&D and pharmacovigilance; sales, marketing, and key account management; and supply chain. A primary task of the critical team would be to make sure that each function is aware of what the others are doing and benefits from the knowledge of the team. As a concept, critical teams are not new; most pharmaceutical companies already rely on experts in external healthcare industry activities for ad hoc strategic advice and direction. But that does not go far enough; it fails to apply the critical team as a bridge across key functions. Thus, the ability of the team to effectively advance the needs of the entire organization is significantly diminished. This report offers a detailed framework for implementing a successful critical team strategy. It provides an analysis of the pharmaceutical landscape through the lens of critical team activity, allowing management to reflect on how connected and effective the company’s current critical team is and how the organization can improve its capabilities by fully leveraging its team. Disruptive times The global pharmaceutical industry has long been known for unpredictability. Returns on investment from research efforts are volatile, and payor pressure and the vagaries of regulatory decisions often add to the uncertainties of the sector. Still, it would be difficult to find a period in the past when pharmaceutical companies faced a more challenging and disruptive time than they are experiencing now — a time, that is, when drug companies have no choice but to reevaluate their business model to survive. Consider the range of global trends affecting pharmaceutical businesses: • Aging population. In Western Europe, about one in five people are age 65 or older. By 2030, that proportion will climb to one in four. As populations age, payors are forced to reconsider how to pay for the treatments needed by an older