Pharma 3.0


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Today’s pharmaceutical industry is facing strong headwinds. Cost containment initiatives by payers — governments and health care insurance organizations alike — have created a challenging business environment, with controlled pricing, promotion of cheaper generic alternatives, and greater obstacles to bringing innovative drugs to market. At the same time, the industry‘s investment in research and development is not providing the needed return on investment through more “blockbuster” drugs. For many years, these drugs — broadly defined as primary care drugs with more than US$1 billion in revenue per year — have been the centerpiece of the industry’s successful business model that we call “Pharma 1.0.” Compounding these challenges, regulatory requirements to ensure drug safety have grown more stringent, bringing increased scrutiny of marketing practices and creating higher hurdles for reaching the market. To help alleviate these pressures, the industry has, over the past decade, followed a strategy of diversifying into a “Pharma 2.0” model around product lines that are less exposed to R&D and market risks, such as generics, vaccines, over-the-counter medicines and medical technologies. While this approach is helpful in the mid-term, long-term sustainability will require shifting to a new business model, one that will address the real needs of the industry’s customers — the patients, payers and physicians — and contribute significantly to the ultimate goal: improving patient health. This requires shifting away from an arm’s length approach, one that has centered on delivering drugs to the health care system. Instead, it calls for an up-close focus on the patient, providing products and services specifically designed for health improvement. This new degree of engagement is what we call “Pharma 3.0.” In the Pharma 3.0 business model, which has been the topic in our two most recent reports on the pharmaceutical industry — Progressions: Pharma 3.0 (2010) and Progressions: building Pharma 3.0 (2011) — the industry will collaborate with other players, such as information technology companies, medical technology companies, food companies and retailers, to deliver patient-centric products and services. Pharmaceutical companies around the world have started implementing these Pharma 3.0 patient-centric initiatives, mostly in the form of pilot projects. As of February 2011, we had already counted 220 such initiatives. These are collaborations and partnerships aimed at helping patients to manage their health, expand their access to products and services and address unmet medical challenges.

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