‘The Key Challenges: Life Sciences and Healthcare 2020’ is the latest report from Cornerstone International Group based on a global survey of stakeholders from across the life sciences healthcare (LSH) industry. The following is an extract on strategy. Click here to read the full report.
Compared to other businesses, strategy in LSH is characterized by heavy fragmentation and the length of product-cycle on one side and by unbalanced pricing practices on the other.
Global Fragmentation Registration regulations at the national level generate fragmentation of the global market. “Glocalization” is a must for global companies. According to a strategist of a large MNC: “Just look within Europe. Behaviours of prescribers are totally different, according to how the system works. In Germany, a Doctor is paid by patient visit, so he or she wants to see the patient frequently and will look for drugs that enable short-term monitoring. In Spain, the Doctor is paid by the working day, so the next visit will be six months later. You need to be very local”. For the same disease and same mature drug, Germany will use a monthly dosage, while Spain will favour a six-month dosage. “How can you build a global standard and strategy?”
The Product Cycle
The product cycle is very long in LSH, but interaction with public policies is creating volatility in planning: “50 percent of products launched in a supermarket will die within one year. In LSH, you need ten years to plan a project. Will my successor see the result of my work? The global leader needs to arbitrate long & short term. And to find the equilibrium is very difficult”. This explains why predictability of the regulatory framework is paramount for LSH leaders. One Ukraine CEO complains that every few months there is a new Government, new certification rules, new patent protection laws etc. “Everything is always changing”.
Regulation, key to ensuring safety, also limits innovation, not only in the industry but in the field of medical insurance. “Regulation for insurance is relatively homogeneous globally but for health data it is very heterogeneous. It is very complicated as rules are totally different from one country to the other. For example: the use of genetics data by insurers is very different between the two neighbours US and Canada, so you can imagine how much worse it is with other countries”…
Another conflict is between the needs of massification and personal care. For example, in the diagnostic industry, consolidation is going on with the merging of test laboratories and growing size of equipment. “But at the same time, patients want more care, more time and more details about their personal situation. Ideally, we would like to have the test performed with each individual GP. We would test at the point of care. And we need technologies that read the diseases with patient genetics…”
This fragmentation in terms of registration and regulation is simplified in practical terms by the fact that 75 percent of the global market is driven by the US, EU and Japan. Global companies focus pragmatically on three regulatory agencies and venture very late in the rest of the world.
Another very important strategic consideration is the pricing scheme, which is also organized on a national basis. With almost systematic International Reference Pricing (IRP), there is far greater fluidity in information and practices than in the regulatory field. But here, too, the market is not really global.
The US has the highest prices and by far. So companies target the US and invest there in order to develop innovation. EU and Japan are part of the second wave of deployment, if local market access policies are supportive. Beyond, some emerging economies like China try to challenge the status quo. It has succeeded in revamping its industry regulations in the last few years, but its Pricing & Reimbursement (P&R) regulations are preventing the early launch of products. “They had the chance to be part of the second wave, it looks like now China is going back to the third wave” comments a Western Pharma Executive.