Thursday, April 05, 2012

What's Right Rx for Pharma Industry's Survival?

Two commentaries caught my attention this morning. Both offered solutions to the drug industry's "fundamental problems."

Each solution, of course, defines the "fundamental problem" differently.

Solution #1 says the problem is the drug industry does not deliver "precisely what the world's health care systems need from it — therapies to materially advance the standards of care." The author blames top-heavy management populated with "protected dimwits and timeservers who fail to grasp the current dynamics."
"The management approach traditionally used by pharma also fails to hone the skills that the industry needs right now," according to the author (see "What pharma needs to evolve" here). "...it makes for a slow pace because, figuratively, everyone learns to raise his hand before going to the bathroom. Pharma, for example, generally frowns on setting up innovative, skunk works projects."
Solution #2 says successful pharma companies must drive revenue growth by acquisitions. Management is also to blame according to the author.
"The high-growth companies have clearly aligned their capital-deployment strategies with growth investments. They have done this instead of trying to achieve a balanced capital-allocation strategy that sacrifices reinvestment in exchange for greater dividends, buybacks, or cash accumulation" (see "The Prescription for Pharma Is Revenue Growth" here).
The first solution could be categorized as a "patient/customer" focused solution, whereas the second one can be said to be an "investor/stock holder" focused solution.

Which approach do you think can help pharma in the long run?

Which approach do you think can help pharma in the long run?
Patient-focused approach: improved health outcomes
Investor-focused approach: improved revenue growth
I'm wishy-washy: Both
I'm a pessimist: Neither
I have no friggin' idea!


  

1 comment:

  1. In some ways, both are the same. Big Pharma industry has talked about the acquisition of smaller companies almost as a way of outsourcing their R&D. Increasingly, the good ideas are coming from smaller companies, which Big Pharma in turn buys up as the ideas get closer to market.

    ReplyDelete