Pharma and Biotech Industry: The need for new monetization approaches
A recent Simon-Kucher & Partners’ study shows: Many companies in the pharma and biotech industry still lack early involvement of P&MA in their R&D process. There is a growing need to be open to new business and revenue models to compete in the market.
Bonn, March 05, 2018 – Achieving an optimal price for their products and securing broad access remain the key challenges for pharma and biotech companies, as shown in the recently published Simon-Kucher Global Life Sciences Study*. “The offer profile determines the prices and market access opportunities”, says Dr. Klaus Hilleke, Senior Advisor in the Global Pharma & Biotech Practice at Simon-Kucher. “But companies rarely consider pricing & market access (P&MA) involvement in the development process early or comprehensively enough.”
The results of the study underline the least successful activities according to managers; “considering the needs of payers and other decision makers early on” and “involving the P&MA team between phase I and II”. The key reasons for not implementing these methods, and the subsequent lack of success, were identified as strategic misalignment between senior management (40 percent) and the lack of internal knowledge, capabilities, and P&MA resources (24 percent). “Top management support of and involvement with P&MA is essential for success”, Klaus Hilleke notes.
Implementing new business models
Many companies are already changing their business models to become solution providers; to not only provide drugs but also offer more services based around the drug, such as diagnostics and adherence programs, and to enter into partnerships with service providers or public institutions. However, the study reveals a gap between theory and practice: “While the surveyed companies name further integration of drug-diagnostic development as the most important aspect, less than 50 percent actually invest in such programs – whereas 80 percent are engaged in drug-device and drug-service development programs”, explains Dirk Kars, Senior Partner in the Global Pharma & Biotech Practice at Simon-Kucher.
The gap is even wider when it comes to Big Data capabilities. While 80 percent of respondents emphasize that Big Data analytics is highly important for future business, only 60 percent have actually started initiatives and only 25 percent of respondents view their current activities in this area as successful. Dirk Kars: “The main reason for this failure is a lack of internal capabilities, most likely caused by a lack of funding.”
From “per-unit price” to new revenue models
With ever-increasing pressure on prices and a trend toward new business models, the majority of companies (70 percent) understand the need to devise new revenue models to better monetize innovations in the future. The study shows that companies prefer result-based payments (60 percent) over public-private partnerships (47 percent) and annuity payments (32 percent). Still, in terms of payment models payers often prefer a traditional per-unit price with a discount. Another challenge is the lack of appropriate infrastructure capable of measuring individual results.
Dirk Kars: “There is no ‘one size fits all’ approach when it comes to new business and revenue models. But companies need to be open to new market conditions and to innovative pricing schemes. Digitalization will be crucial in integrating all aspects and bring true value to the marketplace.”
*About the Simon-Kucher Global Life Sciences Study 2017:
The objective of the Simon-Kucher Global Life Sciences Study 2017 on “Monetizing Pharmaceutical and Biotech Innovations” was to identify key trends, challenges, and success factors for monetizing pharmaceutical and biotech innovations for pipeline products as well as for in-market products. A quantitative online survey was followed by a larger number of qualitative in-depth discussions. 65 industry experts participated in the study.
The study is available on request.
Simon-Kucher & Partners, Strategy & Marketing Consultants:
Simon-Kucher & Partners is a global consulting firm with more than 1,100 professionals in 34 offices worldwide focusing on TopLine Power®. Founded in 1985, the company has more than 30 years of experience providing strategy and marketing consulting and is regarded as the world’s leading pricing advisor.