Look to the future

The pharma industry's business model is "economically unsustainable" and more money needs to be moved from marketing to R&D, according to a new report on the future of the industry by PricewaterhouseCoopers (PwC).

The study, Pharma 2020: The Vision - Which Path Will You Take? says pharma companies' reliance on heavy marketing of a few drugs in order to generate huge sales meant that "the current pharmaceutical industry business model is both economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets".

Dr Steve Arlington, global pharmaceutical R&D advisory leader at PwC, and principal author of the report, commented: "The pharma industry will not be in a strong position to capitalise on opportunities unless R&D productivity improves. The core challenge for the industry is a lack of innovation. The industry is investing twice as much in R&D as it was a decade ago to produce two-fifths of the new medicines it then produced. It is simply an unsustainable business model."

According to Arlington, over the next decade, the industry must shift investment focus toward research and away from sales and marketing.

"Pharma's traditional strategy of placing big bets on a few small molecules, marketing them heavily into primary care with the aspiration of achieving blockbuster sales, will no longer suffice," he said.

"It must focus on the development of medicines that prevent, treat or cure. These must demonstrate tangible benefits and tackle unmet medical needs. Governments and payers must play their part and ensure the industry is rewarded for these efforts."

One of his suggestions was that patent protection for drugs could be extended.

The report's authors believe that by 2020 the supply chain will expand to accommodate a wider range of medicines and markets, which will mean the sales and marketing process will become more concentrated. As a result pharma companies will focus most of their efforts on the policy-makers and payers who increasingly determine which medicines are prescribed.

"By 2020, a single pan-European agency could replace national bodies such as UK's National Institute for Health and Clinical Excellence (NICE)," the report states.

Patients will play an increasing role in the sales and marketing equation, according to the report, as they pay more and more of their healthcare bills.

Pricing of drugs will also change dramatically. The industry will almost certainly be expected to price therapies that have live licenses conditional on further in-life testing on a sliding scale, with price rises tied to the extension of the license and quota of patients for whom a treatment can be prescribed, says the report.

The pharmaceuticals market is set to grow and is expected to more than double in value to USD 1.3tn by 2020. The increase is driven by soaring worldwide demand for drugs and preventative treatments. This is partly a result of increasing prosperity but also because of the rise in obesity and the ageing population.