Control or Collaboration – Value Creation & Success Focus 
Posted by Carlos on May 12, 2017

 

The following commentary is from Mr. Tom Brya, Managing Director at Titenare GXL. Titenare is an international consultancy providing integrated, knowledge-based services and  solutions to pharma companies internationally. For further information, please visit www.titenaregxl.com.

The pharma business model is rapidly moving towards a PwC 2009 prediction, which said that the industry will become collaboration-centric. This was highlighted in a recent article in PharmaVOICE – April 2017.  

It’s frequently better to rent vs. build across many capabilities to develop, manufacture and launch a pharmaceutical product or device.  

Owning / hiring a full-time person for work that is transitional or with demand variability just wastes money, and worst still, creates “make up work,” which costs the organization additional time and resources.   

The collaboration common sense logic is powerfully displayed across:

(1) Growth of contract research organizations; 

(2) New creative collaborations for in-licensing or accessing promising innovative technology and products;

(3) R&D productivity via outsourcing in entrepreneurial environments;

(4) Completely virtual driven innovative organizations that are unchained from more bureaucratic settings; and 

(5) Early partnerships across payers, physicians, and patients.

No organization, small or large, can have the right resources at the right time all the time; not to mention the huge carrying costs. 

The nature of pharmaceutical or medtech product development, uncertain regulatory pathways, and commercialization almost mandate companies’ need to continue to improve R&D productivity, reduce costs, and de-risking outcomes.  

The biopharma industry is among the last industries to move to a more dynamic collaborative structure with significant outsourcing, as is already seen in other industries, such as autos, computers, and cell phones.

A common argument for controlling or owning human resources is that a dedicated resource is best to control your destiny. 

There is some comfort in that directly managing an internal resource can force focus on a single item if needed. 

While seemingly logical, the reality and an array of case studies demonstrate “collaboration” or outsourcing is very powerful tool to bring the right resource and the right talent at the right time to solve many of businesses key issues, limitations, and create incremental value.

Great collaborative success stories cross industries, and are readily seen in high-tech or other sophisticated industries outside of the biopharma space.  These range from critical supply chain / product needs such as:

(1) Apple’s iPhone entirely created with externally sourced parts and suppliers;

(2) The automobile industry migration from a vertically integrated business model designing and making everything from bumpers, engines, etc. to a collaboration /just in time business model;

(3) And the significant trend in the biopharma industry to embrace external research and development, which was once a “must control” competitive advantage.

As a result, the continued acceleration of Pharma companies entering into partnerships with governments, payers, academia, patient groups, as well as their own competitors, is expected to expand beyond the estimated 30% today of all such work.  

Take away points:

(1) Controlling or owning capabilities is significant risk, investment in highly limited capital, and cost factor for any business.

(2) Collaboration lowers cost over time, brings the right talent at the right time, and adds significant value.

(3) Virtual business models have outperformed “controlled” in many different settings.

Editor’s Note

It’s interesting that while we are proud of the amount of collaboration in our industry, we still lag behind the level of collaboration seen in other industries. In what is perhaps an extreme example, the batteries in the Apple iPhone are manufactured by Samsung, arguably their fiercest competitor. 

Will we ever see pharma collaborating at this level? One could argue that developing, manufacturing, and marketing a novel therapeutic is far more complex than a phone. But is it? DO we think this because it is actually true, or do we think this out of our own hubris?

We cannot answer this question. But what we can say is that our industry is under enormous pressure to lower prices (and, by extension, costs). Whether this is a justifiable argument or not, the fact remains that it is in our industry’s best interest to lower costs where possible, and outsourcing and collaborations are an excellent way to do just that. 

Thanks, Tom, for bringing this article to our attention, and for your comments. 

 

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