Strategies in the Pharmaceutical Industry - Literature review Example

Strategies in the pharmaceutical industry – Literature Review 1. New Product development The development of drugs consists of several phases (Figure 1). Not all drugs are expected to complete the whole process, i.e. certain of the drugs will be excluded from the drug pipeline at an earlier or at a later phase of the drug development process (Nishimura et al. 2009). This phenomenon is explained as follows: since the initial idea for a drug appears ‘the compound of the particular drug needs to be identified’ (Nishimura et al. 2009, p.5); these actions are part of the Discovery phase of the drug development process (Figure 1). At a next level, the compound chosen has to be ‘tested for its toxicity in vitro and animals’ (Nishimura et al. 2009, p.5). If the toxicity of the compound is proved to be high, then the development of the drug stops (Nishimura et al. 2009). The exclusion of a drug from the drug pipeline can take place anytime up to the last part of the drug development process; for example, even if a drug has been made available to the public the firm involved can decide to withdraw the drug from the market (Nishimura et al. 2009). A drug that is proved to have severe side effects that had not been identified in the pre-clinical or the clinical testing is an example of the above case. Figure 1 – Drug development process (Nishimura et al. 2009, p.26) Firms operating in the pharmaceutical industry could secure the success of their New Product Development process by employing the ‘Critical Success Factors approach’ (Schuh et al. 2012, p.3). The specific approach promotes the idea that the chances for the success of a business strategy can be significantly increased if the strategy is designed based on a series of factors (Schuh et al. 2012). These factors, as presented in Figure 1a, can affect the design of the business strategy at lower or at higher level depending on the industry involved and the conditions in the business environment (Schuh et al. 2012). In any case, the use of these factors could help a pharmaceutical firm to secure the competitiveness of its new products, as possible (Schuh et al. 2012). Figure 1a – Critical Success Factors (Schuh et al. 2012, p.4) On the other hand, Figueiredo and Loiola (2012) explain that a drug development process is characterized by the continuous exchange of ideas; during the process many of these ideas are rejected while news can also appear. However, because the issues that need to be taken into consideration during the particular process can be many it should be wise for the managers working on such projects to screen each stage of the process as carefully as possible (Figueiredo and Loiola 2012, p.21). The economic aspects of drugs, as reflected in their Net Present Value (NPV), should be also taken into consideration by managers when developing an new product (Figueiredo and Loiola 2012, p.25). The common structure of a drug development process is presented in Figure 1b. Figure 1b – Product development process in the pharmaceutical industry (Figueiredo and Loiola 2012, p.25) In other words, firms in the pharmaceutical industry should align their New Product Development Process with the needs and the characteristics of their industry. This means that even if a common New Product Development Process is used (as for example the one in the Figure 1c), appropriate changes would be made so that the process is able to address all risks and challenges related to the development of new drugs. Figure 1c – New Product Development process (Yeh et al. 2008, p.138, as in Ziegler 2014, p.24) In addition, a pharmaceutical firm could introduce the ‘Integrated Product Development approach’ (Ziegler et al. 2014, p.26). This approach is simpler as of its structure, including only four phases, but more difficult to be successfully completed (Ziegler et al. 2014). The four phases of the above approach are: ‘Detailed Task Definition, Conception, Detailed Development Work and Prototype Design’ (Ziegler et al. 2014, p.26). 2. Drug pipeline The phrase ‘drug pipeline’ is used in order to show the drugs that are at the stage of development within a pharmaceutical firm; also drugs that a pharmaceutical firm intends to develop in the future are included in the specific category (Norris et al. 2014). The drugs included in the drug pipeline of a pharmaceutical firm can be many. It is necessary for the managers of these firms to set a series of criteria when having to decide which drug from those included in their firm’s drug pipeline will be promoted to the market (Norris et al. 2014). The following criteria would be valuable in taking such decision: a) the targets set in regard to each drug could become more feasible if a thorough examination of the ‘pathophysiology of disease’ (Norris et al. 2014, p.51) would be developed in advance, b) emphasis should be also given to ‘diversity and competition’ (Norris et al. 2014, p.51), as these terms are related both to the tools used in R&D and to the skills of people involved in the particular process, c) most of the health problems of patients are related to different causes; the drugs developed by each pharmaceutical firm should be appropriate for simultaneous use with other drugs, as this practice is unavoidable in ‘combination therapies’ (Norris et al. 2014, p.51). In practice, the drug pipeline has been related to the following phenomenon: most of the drugs included in drug pipelines tend to address diseases that are quite popular worldwide (Ponder and Moree 2012). In opposition, there are just few pharmaceutical firms that have chosen to address ‘neglected diseases’ (Ponder and Moree 2012, p.4); these firms have incorporated in their product pipelines drugs that can be used for controlling these diseases (Ponder and Moree 2012). It has been revealed that ‘the 72% of drugs used in such diseases are developed by just four firms’ (Ponder and Moree 2012, p.4). In other words, the size of the target market is often set by managers of pharmaceutical firms as a key criterion for choosing the drugs that will be incorporated in the drug pipeline (Ponder and Moree 2012). Figure 2 – R&D pipeline in the pharmaceutical industry (Ponder and Moree 2012, p.8) Pharmaceutical firms that are involved in such projects, i.e. in the development of drugs required for controlling neglected diseases, are likely to design their product pipeline in a particular way, focusing on most common of these diseases (Ponder and Moree 2012). The graph in Figure 2 shows the product pipeline used by such pharmaceutical firms; reference is made to drugs that will be distributed to poor people (Ponder and Moree 2012). 3. Innovation. In the context of the pharmaceutical industry innovation is often difficult to be promoted. Indeed, the industry’s firms have to respond to the pressures of governments for the increase of the industry’s production without violating law, which can be quite strict in the specific industry, and without limiting the time spent on clinical trials (Kim 2014). The challenges that pharmaceutical firms have to face when trying to achieve innovation could be possibly limited by using a theoretical model which has been already tested in practice: the ‘Efficient Innovation Model’ (Kim 2014, p.1) is an example. The above model is based on the following idea: in the pharmaceutical industry innovation can be successfully promoted only if appropriate strategies are employed and if the managers involved in the process have necessary skills (Kim 2014). The following ‘R&D strategies’ (Kim 2014, p.1) can be considered as effective in supporting innovation: ‘Outsourcing, Collaboration and Offshoring’ (Kim 2014, p.1). At the next level, the continuous expand of competition in the pharmaceutical industry has led firms to seek for strategies that can guarantee the development of innovative products: the Open Innovation framework is such strategy (Atterfors and Farneman 2012). However, if used in the particular industry Open Innovation should have specific characteristics: it should not be fully uncontrolled, as of the persons authorized to access the relevant schemes, a practice usually followed in Open Innovation projects (Atterfors and Farneman 2012). Rather, it should focus on the following two targets: a) the identification and the employment of highly qualified individuals and b) the availability to the public of Intellectual Property licenses that ‘do not bring any benefit to their owner/ firm’ (Atterfors and Farneman 2012, p.9). In any case, when promoting innovation a pharmaceutical firm needs to take into consideration the challenges and difficulties related to the local market, as these factors are able to affect the lifecycle of the firm’s products, as accepted by the ‘Product Lifecycle Theory’ (Atterfors and Farneman 2012, p.10) On the other hand, under certain terms innovation in the pharmaceutical industry cannot result to benefits, either for the firm or for the public (Jessup 2010). Such issue appears in the following two cases: a) when a drug has many similarities to existed drugs and b) when a pharmaceutical firm promotes innovation by ‘making small changes to existed products’ (Jessup 2010, p.2). In addition, it has been proved that innovation in the pharmaceutical industry, as also in other industries, can be promoted only through strategies that lead to the limitation of costs of production or to the increase of profits (Jessup 2010). A R&D strategy that does not result to one of the above outcomes cannot support innovation, neither in the long or the short term, as derived from the economic theory (Jessup 2010). References Atterfors, H. and Farneman, S. (2012). “The Role of Open Innovation: Focus on the Pharmaceutical Industry.” University of Gothenburg. School of Business, Economics and Law. International Business. Bachelor Thesis, pp.1-62. Available at https://gupea.ub.gu.se/bitstream/2077/29595/1/gupea_2077_29595_1.pdf Figueiredo, S. and Loiola, E. (2012). “Enhancing New Product Development (NPD) Portfolio Performance by Shaping the Development Funnel.” Journal of Technology, Management & Innovation, Vol. 7, Issue 4, pp.21-35. Available at http://www.scielo.cl/pdf/jotmi/v7n4/art02.pdf Jessup, A. (2010) “Health Care Cost Containment and Medical Innovation.” U.S. Department of Health and Human Services, pp.1-7. Available at http://aspe.hhs.gov/sp/reports/2012/costandinnovation/ib.shtml Kim, H. (2014) “Formulation of a Success Model in Pharmaceutical R&D: Efficient Innovation Model.” SAGE Open, Jan-March 2014, pp.1-9. Available at http://sgo.sagepub.com/content/4/1/2158244014527986.full-text.pdf+html Nishimura, J., Okada, Y. and Takatori, T. (2009). “Drug Pipelines and Pharmaceutical Licensing.” Hitotsubashi University, Office of Pharmaceutical Industry Research, OPIR Research Paper Series No. 45, pp.1-32. Available at http://www.jpma.or.jp/opir/research/paper_45.pdf Norris, S., Pankevich, D., Davis, M. and Altevogt, B. (2014). “Improving and Accelerating Therapeutic Development for Nervous System Disorders.” Institute of Medicine of the National Academies, pp.1-104. Available at http://www.ncbi.nlm.nih.gov/books/NBK169736/pdf/TOC.pdf Ponder, E. and Moree, M. (2012). “DEVELOPING NEW DRUGS & VACCINES FOR NEGLECTED DISEASES OF THE POOR.” Report for the BIO Ventures for Global Health, pp.1-45. Available at http://www.bvgh.org/Portals/0/Reports/2012_03_developing_new_drugs_and_vaccines_for_neglected_diseases.pdf Schuh, G., Riesener, M. and Arnoscht, J. (2012). “Critical Success Factors in Medium-sized Pharmaceutical Enterprises.” Paper presented in the 5th ISPIM Innovation Symposium - Stimulating Innovation: Challenges for Management, Science & Technology, Seoul, Korea on 9-12 December 2012, pp.1-15. Available at http://www.wzl.rwth-aachen.de/de/7a0c12a6e5cd2fd8c12574bb002a1f72/431915717_paper.pdf Ziegler, R. (2014). “Managing Integrated Development in the Pharmaceutical Industry: A Cross-Functional Approach to Development of More Efficient Manufacturing Processes.” University of St. Gallen,School of Management. Dissertation no. 4254, pp.1-141. Available at http://verdi.unisg.ch/www/edis.nsf/SysLkpByIdentifier/4254/$FILE/dis4254.pdf Read More