Business model choices for the new market
The pharmaceutical industry faces a critical need for change. The unsustainable trajectory of health care spending and a wave of regulatory reforms have triggered forces that are transforming the pharmaceutical landscape and introducing new complexities into the marketplace. Business models that were once highly effective now yield diminishing returns and may not be a good fit for a future market increasingly driven by data, health economics and comparative effectiveness. To make matters worse, many leading companies continue to wrestle with revenue gaps left by patent expiries—and a shortage of high-impact breakthroughs to replace them—making it hard to set a clear path for sustained growth and value creation.
Some pharma companies are trying to address these challenges with traditional strategies such as reloading product pipelines through mergers and acquisitions (M&A). Others are looking for growth “beyond the pill.” And many larger companies are taking a broader approach, pursuing a wide range of growth initiatives in the hope of hitting on something of significant value. However, our experience suggests these strategies are generally not delivering the kind of value shareholders expect. Companies that deviate from their core business in search of growth often add complexity without clear benefits. What’s more, many organizations have not yet done enough to address their operational inefficiencies.