Pharma industry success dependent on product lifecycle mngmt

BANGALORE: Product Lifecycle Management, a holistic approach that addresses integrated operations such as marketing and sales, is one of the most important priorities for the pharmaceutical industry today, according to the fourth annual Vision & Reality report from Capgemini. More than 90% of senior executives believe that product lifecycle management is important for their future prosperity, with 60% saying its importance will increase significantly in their organizations over the next five years.

This increased focus stems from concern over the failure of research and development activities to maintain a steady stream of new blockbuster drugs. This leaves pharmaceutical organizations facing a dangerous combination of high costs and falling revenues as drugs fall out of patent protection. Capgemini analysis reveals that approaching one hundred and fifty NMEs will be required, in the US alone by 2007, to plug the drug pipeline shortfall. This situation is unlikely to be resolved in the short term. Many industry observers believe the only way pharmaceutical companies will survive and prosper will be through a more sophisticated approach to lifecycle management that maximizes profitability throughout the product's lifespan.

"The importance of this issue should not be underestimated," said Paul Nannetti, Global Life Sciences Leader at Capgemini. "The pharmaceutical industry's success to date has been built on a consistent flow of high earning innovative products. However, as the industry faces up to the challenge of weaker R&D pipelines, and likely reduced returns from new products, there is an imperative to drive greater value from existing portfolios. It is therefore not surprising that this year's research reveals that product lifecycle management is an important, if not the single most important priority for the industry."

In addition to declining R&D productivity, pharmaceutical companies face increasing competition from other branded products and from generics. For some drugs, market exclusivity is less than one year with "fast followers" often entering the market to capture a greater share of sales. By 2003, the global generics market was estimated to be worth $27 bn. While this may seem modest compared to the total pharmaceuticals market of more than $400bn, due to price differentials the generics market share in prescription terms is much greater than the value comparison suggests. In countries such as the UK and the Netherlands, generics account for over 50% of pharmaceutical prescriptions.

However, despite the recognition of the importance of product lifecycle management now and in the future, only 19% of executives believed their companies were currently doing an excellent job in successfully implementing lifecycle management strategies. Thirty five per cent of respondents believe their companies' efforts rate no better than average, while more than 15% believe they do a poor or very poor job.

Major challenges include the fact that lifecycle strategies are often developed from functional perspectives rather than across the organization as a whole and that overall responsibility is not clear. The development of appropriate metrics is also a hurdle with many companies having no specific measures or key performance indicators in place for lifecycle management. Strategies are also often adopted too late with imminent patent expiry acting as the trigger for action.

In terms of strategies for lifecycle management, indication expansion has been clearly favored in the recent past with 63% of executives citing it as having had a strong impact on profitability for their companies. Looking to the future, indication expansion will continue to be an important factor (with 31% of executives stating they expect it to become increasingly important), but executives expect in-licensing and alliances to become the leading strategies with 45% stressing their increasing importance.

Such strategies seek to bolster pipelines and also contribute to the creation of therapeutic franchises and establishment of market leadership positions in key areas. The research also looked at strategies that were falling from favor. Forty percent of respondents felt that Rx-to-OTC switching would become less important in years to come, suggesting disenchantment with OTC switching, following costly exercises that have delivered low returns.

As part of the survey Capgemini also canvassed the opinions of over 8,000 physicians across the globe about their views on the pharmaceutical industry's approach to product lifecycle management. A key finding of this research was that a significant majority of physicians were keen to become more involved in the development of the industry's lifecycle management strategies. Of the lifecycle management practices that physicians most preferred, indication expansion was identified as the most favored practice. However, the physicians surveyed were unhappy with strategies such as co-marketing and Rx-to-OTC switching.

"A rigorous and focused approach to lifecycle management is in its infancy in the pharmaceutical industry and there is much to learn from more consumer-oriented industries," said Terry Hisey, Capgemini's US Leader for Life Sciences "To move forward, companies need to take a more integrated approach to lifecycle management that has a strategic view across the organization, rather than taking a tactical view from individual business units such as R&D and marketing."

Alasdair Mackintosh, Vice-President in the Life Sciences Practice, stated "Companies need to establish clear ownership for lifecycle management with small powerful teams ideally reporting direct to the board. Planning ahead and starting early are also crucial with lifecycle management moving to being proactive rather than a last-stage attempt to fend off generic competition. Such changes are not easy and require a different way of thinking and a different way of working across the organization. Companies that choose to address these challenges will create opportunities for competitive advantage by producing products capable of enjoying longer more profitable lives."