Operations management: Roche Pharmaceuticals - Research Paper Example

? OPERATIONS MANAGEMENT: ROCHE PHARMACEUTICALS Chapter Introduction and Background History Roche Pharmaceuticals is a global organization focusing on research of various drugs, diagnostics, healthcare, treatment and beyond. The company’s healthcare services are one of a kind. For Roche, illnesses can be detected and prevented. And for patients, treatment should be personalized. The company has been into intensive research and development and has various patented drugs for the different illnesses such as cancer, HIV and various strains of influenza. (Roche Global Website) Some of Roche’s health endeavor is focused on diagnostics and discovery of drugs for cancer and transplantation. They have also concentrated their efforts on several sicknesses that are viral, and sicknesses of the autoimmune and the nervous system, among others. When it comes to revenue, Roche is considered the number one pharmaceutical company. Revenues delivered since the company has gone global have been staggering. The company’s financial standing improved considerably in 1996 with sales rising up to CHF16 billion; CHF10.46 billion came from pharmaceutical sales. By that time, Roche had already more than 50,000 employees, all focused on the four departments, with 6,000 assigned to R&D. Research and Development is its primary strategy that has enabled this organization to soar to greater heights. (Boutellier et al. 307) The company saw the light of dawn in 1896 when Fritz Hoffmann-La Roche founded the company for the primary purpose of selling drugs important for common illnesses and for sicknesses not seemed curable at that time. Roche’s guiding principle was to manufacture quality drugs for various illnesses and sell them throughout many parts of the world. (Roche Global Website) Their production plant was first started in Germany but then Roche and his new partner realized they had to expand internationally. They did this initially in Europe then established subsidiaries in the United States. The company encountered financial difficulties because of the war and the revolution. Roche overcame those challenges and soon started to renew major operations. Roche has a group holding named Roche Holding Ltd. Its operations extend up to 150 countries. It holds alliances with partners for research and development and other areas of interest in the field of health care and pharmaceuticals. Roche acquired companies like BioVeris Corp., a company also involved diagnostics. This move helped Roche to hold a competitive edge in immunochemistry segment. Chapter 2 Sources of Information and Methodology Methodology consisted of review of the literature from the vast sources of books, journals, databases and other online sources. There is a considerable amount of information that can be gathered from books. Roche Pharmaceuticals has been the subject of studies and researches by various authors and experts in the field. Their researches and stories, on how Roche made its humble beginnings and how it has survived through the rough and tumble ways of business in the pharmaceuticals, have been a fascinating source of information for this paper. The books and journals are analyzed and the information on Roche Pharmaceuticals is compared to the existing knowledge about operations management. It can be theorized here that Roche Pharmaceuticals has utilized knowledge management and organizational knowledge from its vast experiences as the number one pharmaceutical in the world. The kind of knowledge management that it has inculcated to its thousands of employees has made the organization a top and successful global organization. The data and information on Roche Pharmaceuticals are sourced from reliable authors. Books are more reliable because of their primary data provided for the company. These are compared and recommendations are provided. Chapter 3 Operations Strategy and Competitiveness Knowledge Management The one strategy that brought success to Roche is its application of knowledge management. Knowledge management has made it successfully handle the cost, quality and the different improvements for the organization and its branches overseas. Knowledge management is significant in Roche’s global operations and in the study of innovations and adoption. When we say knowledge, we usually understand this to mean theoretical knowledge or practical knowledge, but it also includes experience and skills. Knowledge and knowledge management are significant developments in the new globalizing environment. Competitive advantage among organizations is more pronounced with the knowledge people possessed, or what is termed, ‘people-embodied knowhow’ (Rodriguez and de Pablos, 2002, p. 174). Firms are focusing on what their people know, and invest much on intellectual capital. Incentives to Employees When the company expanded its operations in the United States, the strategy became centered on people. Roche values employees as it values its customers. One example is Elmer Bobst, an American who was appointed in charge of a small but growing subsidiary in the United States after the First World War. The strategy that Roche developed was to provide an incentive to Bobst – five percent of Roche’s sales. As the company’s premium increased so did the wealth of the man in charge of the company. (Wilkins, 2004, p. 546) Activities of Roche Roche has divided its activities into different divisions, all focusing on pharmaceuticals, prevention and treatment of various sicknesses. They have an innovative of treating people, what they call personalized healthcare. Roche has subsidiaries in various parts of the globe, especially in North America, Europe, and Japan. They have focused on research and development which paved the way to its leadership in innovative healthcare. Roche introduces its drugs to the different parts of the world. Then it conducts clinical trials to these countries. From this strategy, the company is able to determine the safety and effectiveness of its medicines. The drugs are tested to a variety of peoples and races. This makes them effective because they are able to acquire knowledge and compare the effectiveness of the drugs to a wider audience. Roche also tries to avoid rejection from the governments that it is dealing with. One way of doing this is to eliminate drugs that are not too effective and tested. (Gibson, 2003, p. 153) Diversified Operations Roche has diversified its operations. In the early years during its founding, it noticeably focused on drugs, discoveries and new inventions and selling them to the world. But as part of its present operations strategy, it has diversified to treatment of various illnesses and personalized health care. This is also one way of dealing with the so-called ‘patent cliff’. Patent cliff refers to the time when big drug companies lose their exclusive rights over certain patented drugs. This could cost billions of dollars for big companies. And it has been predicted that this may happen in the years 2002 to 2013. (Management Centre Europe 2) Roche, as a producer of patented drugs, has solved this problem of patent cliff. Since their products and services are diverse and multiple, the threat of patent cliff is eliminated. As mentioned, patent cliff could cost of billions of dollars in revenues since pharmaceuticals would have lost income from patented drugs. Roche is not dependent on a few drugs. Their R&D is continuously finding new drugs for even new illnesses. Roche always thinks globally over the long term. Its operations are geared towards its many subsidiaries including partnerships with different groups or organizations that are of the same business. It produces drugs for illnesses which are not yet fully developed in other countries. These are cancer drugs and drugs for autoimmune, metabolic disorders, or for transplantation. Developed drugs and treatment techniques include drugs for breast and gastric cancer and the different types of hepatitis (Global Website). Roche has major holdings in companies like Genentech and Chugal of Japan. (Plunkett 6) Research and Development (R&D) Roche provides a big budget for R&D; it has provided a billion pounds for R&D. The budget goes to research for new drugs for cancer cure, and also to focus on diagnostics. This is an operational and competitive strategy. When it introduced the drug Valium, Roche’s sales tremendously rose and it became one of the largest, if not the largest, drug companies in the world. Gaining high profits for drugs and diagnostics enabled the company to put more emphasis on research and development. Subsidiaries were opened in different countries. (Pycraft et al. 147) Researchers and scientists are allowed to work and proceed at their own pace and with much freedom but according to several scientific procedures. Roche management sees to it that candidate drugs are well tested and introduced to the market segment with efficiency and the soonest possible time. Centers of excellence were formed and integrated disease units (IDU) were added to provide appropriate and excellent functionalities for the R&D team. IDUs were also provided autonomy and freedom in their work but they report to the Research Board. The Target Market The target market for Roche is large. This includes patients, physicians, health care professionals, the pharmaceutical industry, and other organizations providing health care. The patients are the entire population and it extends up to the young and the aging population. Roche can reach many areas and as many people as possible with the help of new technology like the Internet. Roche addresses this wide market by providing outlets and branches in the countries it has subsidiaries. In facing the many challenges of this wide market, Roche uses knowledge management to ease the tension and the bulk of demands from patients and customers. Knowledge management is aided by Information Technology and the Internet. Roche communicates to its employees, managers and branches through the Internet and other effective mobile devices. Its Global Website also provides information to the millions of customers and subscribers worldwide. (Roche Global Website) Personalized Healthcare According to its website, Roche has been introducing the ‘personalized healthcare’ practice to patients which is the main thrust of its strategy and strength. An example of the personalized healthcare of the company is a personal care and diagnostic. First, when a patient enters and asks for help from Roche, his personal physician attends to him/her and studies the problem or sickness. Sickness is diagnosed. There is a physician-patient personal interaction wherein the physician informs the patient of the nature of the problem and recommends the possible solution to the sickness. Drugs are available any minute and so with treatment and personal care. This is the way of the Roche personalized healthcare. As to knowledge management concerns, they have a whole range of databases borne out of years of experience and continuous learning and innovations by the various employees and professionals who come from the cream of the crop of the medical profession. One critical success factor attributed to the company is out-licensing. Out-licensing is a strategy in which Roche grants a license to another company in a particular country to do the business for Roche. This particularly pertains to drugs. With this kind of strategy, Roche has been able to introduce drugs to the market. One example is Roche’s out-licensing rights granted to the company Actelion which helped Roche in selling some of its products. Tracleer® has been added value because of this agreement by Actelion and Roche. (Reepmeyer 124) Chapter 4 The Design of the Supply Chain and Operations Model Roche still strives to be the top pharmaceutical company in the world. This is one of the strategic plans being sought by the top corporate board. The Executive Committee is responsible for major decisions. The Committee is not only concerned with the business side of the organization, but it sees to it that Roche products and services are delivered to benefit humanity. Roche has introduced drugs effective for different illnesses, and have also patented and sold a wide range of instruments for laboratory testing and methods for diagnosing diseases. They design their products through knowledge management, the organization’s database, and the expertise of their physicians, pharmacists, scientists and healthcare professionals. Information Technology has a big role in the design of their products. They don’t only design drugs; they also design healthcare and this is known as personalized. Like any other global organization involved in R&D, Roche relies on new technology and the knowledge and expertise of its pool of expert researchers and scientists. They invest much on new technology and see to it that this technology can aid in the discovery of new drugs and treatment. One example is Roche’s Biomarker, an instrument used for personalized healthcare. Biomarkers are used to measure a patient’s illness as against the normal biological state. (Roche Global Web Site) There are various biomarkers used in the industry and these have a wide range of purposes. The types of biomarkers according to use include biomarkers to measure a patient’s risk to acquire and develop a certain disease; biomarkers to measure the toxicity of a particular compound; biomarkers to measure prognosis of a disease pattern; biomarkers to measure a patient’s response to drugs allowing the attending patient to provide the necessary drug prescription; and biomarkers that provide monitoring and information whether the patient is responding to the prescribed drug or whether the disease is again emerging. (Roche Global Web Site) How Drugs are Designed and Made Roche designs drugs that can bring sustainable improvement to patients’ health. The design of drugs requires much time and efforts, and a lot of practice and resources that challenge the knowledge and expertise of their scientists and researchers. Working like spy agents, these researchers have to take into consideration various factors to produce new drugs. First, the design starts from an idea. The disease has to be studied and meticulously examined as to its symptoms and characteristics. There must be substances that provide the impetus for the disease’s existence. They design the drug according to the disease’s findings and characteristics. Drugs and tested a multiple times, developed and tested of its efficacy, then introduced to the public. Drugs which provide the best treatment possible are afforded more study and investigation before being introduced to the public. In the research of new drugs, Roche invests approximately CHF1 billion, exerting 7,000,874 man hours, with 6,587 experiments, provided by 423 researchers, to produce only 1 drug which is effective and can save lives. (Roche Global Web Site – From Molecule to Molecule) The eight steps to discovering a drug: 1.) Finding the right molecular structure – Roche’s scientists create compounds in the laboratory; 2.) Selecting the right compound – Roche scientists study particular drugs and determine how each affect a biological trait; 3.) Introducing new treatments – Roche scientists use animals to determine the effectiveness of new drugs. Experimenting on animals is the safest way to determine how effectiveness of a particular drug. 4.) Clinical trials – Once a drug has passed preliminary tests in the laboratory, it has to be tested in four phases. A drug candidate has to be tested if it is safe in clinics where patient participants are assured of personalized care. Researchers are able to determine how the new drug and its elements behave inside the body. More information, particularly dosage, is obtained as the treatment is conducted. Researchers work with honest and effective patients in determining the right dosage for the drug. Risks associated with the drug are also identified. Further large scale testing is also conducted. When the drug is introduced to the public, more surveillance and monitoring are employed. (Roche Global Web Site – Research and Development) Supply Chain Roche products and raw materials are produced in-house and they don’t outsource their production particularly on research and development. Ingredients of pharmaceutical products are also produced in-house and from its manufacturing plants situated in various key cities in Europe and the United States. (Boutellier, Gassmann, and von Zedtwitz 308) The Roche Biosciences in Palo Alto worked on discovery of candidate drugs, developed them and formulated strategies for marketing. Japan, on the other hand, is the source of raw materials like algae and bacteria to screen possible compounds for experiments. (Boutellier et al. 309) Roche involves the project development meeting (PDM) which is in charge of business development of a project, how a project goes on to involve the different departments and the subsidiaries, and monitor and coordinate the different aspects of a project. This team is responsible for the development and success of a project from its infancy down to its full implementation. For example, in the development process of a drug, some regulations of governments affect the ongoing process of introduction, development and monitoring of the drug. Information, proper documentation, and other activities have to be coordinated and done to allow the clinical trials to be successful. The team does all the activities and requirements. Results are properly recorded and sent back to the PDM and the Research Board for more action. Works Cited Boutellier, Roman, Oliver Gassmann, and Maximilian von Zedtwitz. Managing Global Innovation: Uncovering the Secrets of Future Competitiveness, 2008. Leipzig, Springer. Print. Gibson, Rick. Chapter IX: Knowledge Management Support for Decision Making in the Pharmaceutical Industry. Decision Making Support Systems: Achievements and Challenges for the New Decade. By Manual Mora et al. United States of America and the UK: Idea Group Inc., 2003. 153-154. Print. Global Website. Personalized Healthcare. Roche, 2011. Web. 26 September 2011. Management Centre Europe. Re-Inventing Pharma. The Executive Issue 37, 2011. Web. 27 September 2011. Plunkett, Jack. Plunkett’s Engineering and Research Industry Almanac 2008 (E-BooK). United States of America: Plunkett Research, Ltd., 2008. Print. Pycraft, Mike et al. Operations Management. South Africa: Pearson Education, 2000. Print. Reepmeyer, Gerrit. Risk-sharing in the Pharmaceutical Industry: The Case of Out-licensing. New York: Springer Science+Business Media, 2006. Print. Rodriguez, J. & de Pablos, P. O, Strategic Human Resource Management: An Organisational Learning Perspective. Retrieved from: International Journal of Human Resources Development and Management, Vol. 2, Numbers 3-4/2002. 27 September 2011. Web. Wilkins, Mira. The History of Foreign Investment in the United States, 1914-1945. United States of America: President and Fellows of Harvard College. Print. Read More