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Darwin's Medicine blog

Professor Brian D Smith is an authority on the pharmaceutical industry and works at SDA Bocconi University and Hertfordshire Business School.

History rhymes: modern globalisation trends mirror the past

Recent events are an echo of the late 19th century
old world map

As I write, AbbVie's CEO Richard Gonzalez is flying to London to persuade Shire shareholders to accept an offer that Shire's board has rejected three times. He will argue that the merged company would be able to better exploit Shire's drugs for rare diseases and neurological disorders. But, as part of a bigger picture, the AbbVie/Shire dance reminded me that what is going on the industry today has echoes of another time. As usual with this column, let me give you the academic background before I turn to the practical implications. 

When Mark Twain famously said that “history doesn't repeat itself but it does rhyme” he was, like Nietzsche and others before him, suggesting that we might learn about the future by considering how historical patterns recur. I suggested this recently when I facilitated a 'blue skies thinking' meeting of the executive management group in a big pharma company. At first, my audience was sceptical. When, they asked, have we seen globalisation, huge technological leaps, massive demographic change and other trends occur together at the same time? They made a good point. The convergence of those trends and others seems without precedent. And indeed we can't truthfully say that current events in the industry are “history repeating itself”. But we can hear it rhyming.

100 years ago Pasteur and Koch developed germ theory and organic chemistry was where genomics is today

In the early 21st century, we're seeing globalisation as trade and companies transcend borders. But in the late 19th century, we saw analogous trends. The US opened up, Germany and Italy unified. European empires, especially the British, created a global trading network that gave rise to the first multinationals. Today, our understanding of how disease and wellness work is taking great leaps forwards but 100 years ago Pasteur and Koch developed germ theory and organic chemistry was where genomics and systems biology are today.

In that historical period we now call the second industrial revolution, communications technology leapt forward as steam trains and ships and telegraphs and telephones became ubiquitous, allowing businesses to be controlled over continental distances. It's not hard to see parallels with our connected world. And at the same time, the sociologist Weber recorded 'The Age of Disenchantment' as the public began to move its faith from superstition to science. To me, that is echoed in today's 'Death of Deference' towards the medical profession. And, as I've written about elsewhere, there are many other parallels between the age that my grandmother was born into and the world in which my daughters are growing up. Even the payer pressure we see today is a reflection of the emergence, around the turn of the 19th and 20th centuries, of early social welfare programmes. The details are very different, of course but, in a surprising number of ways, today rhymes with that earlier period. 

The apothecary's extinction
But does poetry matter? Is it significant that today has parallels with a century or more ago? Well I think it does because that was the time the pharmaceutical industry as we know it today began to evolve. Prior to that time, the apothecary was the dominant business model but, by around 1930, the apothecary had become extinct in the west or, more accurately, had speciated into the OTC company, the retail channel and the research-based pharma company. A careful study of that period tells us that the changes in the technological and social environments forced a spurt in the evolution of our industry's business models. 

And that brings us to the practical application of these ideas. If in a second industrial revolution those environmental changes led to the extinction of the dominant business model and its replacement with two or three new ones, we might expect parallel developments today. And indeed that's what we're seeing. AbbVie/Shire is an example of the evolution of a specialised and technologically advanced business model that, in my other work, I've called the 'Genius'. Similarly, the consolidation of generics is part of the emergence of the 'Monster Imitator' model. And the practical upshot of this? History rhymes, evolution spurts, our industry is speciating and current business models are endangered species. Of course, you may not think all this applies to you. The apothecaries didn't think it did either. 

Article by
Professor Brian D Smith

an authority on the pharmaceutical industry and works at SDA Bocconi University and Hertfordshire Business School. He welcomes comments and questions on this column at brian.smith@pragmedic.com

20th August 2014

From: Sales

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