Pharma 2010: The threshold of innovation

If the pharmaceutical industry adopts a new business model based on "targeted treatment solutions," it will be able to achieve breakthrough growth. These integrated solutions will be used to diagnose, treat, monitor and provide healthcare support to the benefit of patients, payers, physicians and the industry itself. This report explores the limitations of traditional strategies for success and the impact global social, demographic and economic trends have had on the pharmaceutical industry. And we propose that pharmaceuticals rely more on biology rather than chemistry to treat specific diseases.

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By 2010, the pharmaceutical industry will not only make white powders; it will also sell a variety of products and therapeutic healthcare packages that include diagnostic tests, drugs and monitoring devices and mechanisms, as well as a wide range of patient services. Companies that learn how to develop "targeted treatment solutions" will deliver greater shareholder returns than ever before. They will be able to reduce the time it takes from target identification to launch from more than 10 years to between three and five and slash research and development costs by 75 percent.

But before any of this happens, pharmaceutical companies must dramatically change the way they do business.

IBM Business Consulting Services expects the pharmaceutical industry to grow 5.3 percent annually through 2010, far short of analyst forecasts of 9 percent. The industry can no longer rely on the U.S. blockbuster-based model to sustain growth. Additionally, the shift in the balance of power between the industry and its customers means governments, healthcare insurers and patients are now beginning to stipulate the sort of improvements they want and the prices they are willing to pay. In other words, healthcare payers -- not the drug makers -- are now defining the threshold of innovation.

Because not only genomics but also proteomics and metabonomics will enable the industry to understand and define diseases much more accurately, pharmaceutical companies will be able to develop "targeted treatment solutions" for patients with specific disease states, rather than making one-size-fits-all drugs for patients with similar symptoms but different diseases. These solutions will serve as the basis for diagnosing, treating, monitoring and providing healthcare support to the benefit of patients, payers, physicians and the industry alike. They are the foundation for the new business model -- and they will be the big moneymakers of the future.

To provide targeted treatment solutions, companies must change fundamentally. They must move toward a more biological -- rather than chemical -- means of treating disease. And they will be required to adopt and implement a new way to research and develop treatments as well as a new sales and delivery model.

This new product model will also require:

• The ability to forge much closer relationships with regulators, healthcare payers and patients
  
  
• Use of different sales and marketing techniques -- including outcomes-based pricing schemes, patient monitoring programs linked with electronic medical records and a smaller sales force that is trained to converse with specialists as well as general practitioners
  
  
• A more flexible and responsive supply chain

Even if the market for targeted treatment solutions is slow to get started, companies that learn how to make such medicines could triple their shareholder value by 2010. If the market for such medicines takes off more rapidly, they could enjoy almost double the growth the industry enjoyed in its heyday.

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