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Business Organization of R&D Activities in Big Pharma Companies - Essay Example

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As an organization grows in size and scale it is generally observed that it reaps economies of scale and improves its bottom line. In fact some organizations resorted to growth option with the sole objective of reaping such economies of scale. An exception to the principle of economies of scale has been presented recently in the R&D activities of large sized pharmaceutical companies where a large and growing size did not result in economies of scale and forced the concerned corporates to restructure their R&D operations…
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Business Organization of R&D Activities in Big Pharma Companies
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Download file to see previous pages Glaxo Smith Kline (GSK) has the strongest pipeline in pharmaceutical industry the globe over. This pipeline is achieved when out of millions of compounds screened about 250 make it to pre-clinical testing, 10 make it to clinical testing and only one gets approved for patient use. With these astronomical trial efforts involved, R&D activity needs to be brisk and fast at all stages to keep the pipeline growing. GSK's recent robust performance is threatened substantially by this very patent and pipeline uncertainties. Therefore the period 2004-06 will require the company to devise methods to emerge out of these uncertainties as competition mounts pressure throughout this period. In order to resolve its diseconomies of scale on formal innovation(each commercially released drug is equivalent to an innovation), GSK has restructured the company's R&D functions into strategic business units, styled Centre of Excellence for Drug Discovery(CEDD), breaking from an organic and holistic structure in order to hasten process of innovation. GSK appears to be attempting to keep its pipeline filled via this method.GSK followed this restructuring with another round when it introduced Medicine Development centers (MDCs).The main task of MDCs is to streamline decision making and maximize the global development opportunities for each product. The MDCs are responsible for product development from concept stage to manufacturing and marketing stages.MDCs enter into collaborations with CEDDs at an early stage thus integrating R&D, manufacturing and marketing functions. Because of the smaller scale of these units the decision layers in each activity has not only been reduced but has also become transparent and accountable.Intra organization communication is now specialized in competence functions and thus is quick and decisive. A web site on company information describes the organization structure and R& D activity at GSK to fit in the above description almost exactly
"The organizational structure of GSK is designed to make our company a model for excellence in the pharmaceutical industry - a new company that represents best practice in every way. GSK is a company with the size and scale to invest in the tools we need to succeed, and to drive that success going forward. To achieve that goal, GSK is organized as a flexible company, capable of responding quickly to a rapidly changing marketplace. Organized globally to coordinate activities and gain the benefits of size and scale, the company is built on smaller, customer-focused units, dedicated to delivering medicines that relieve the suffering of patients around the world. The new and innovative model for R&D, the focused structure of our pharmaceutical business throughout the world and the organization of our global services such as IT and Procurement are some of the highlights in the approach which will lead our success.
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