I recently attended the AAPS Annual Meeting in Chicago. I have attended ALL the previous AAPS Annual Conferences since its inception in 1986, so I have some perspective on how the environment has changed. It is in the last four or five years that I have noticed pharma shifting gears very rapidly. There are many reasons for this: due to the patent cliff and the global economic changes that began with the economic meltdown in 2008, pharma has really driven its definition of ‘Value’ by reducing R&D spend and shifting its external spend (outsourcing) significantly. Of course, cost is a major driver, no matter how you cut it. Companies like Pfizer are rightfully looking to improve bottom lines for the shareholder value and for Wall Street’s analysts. PFE stock has grown around 18% year to date and the forecasts by the experts are more encouraging. Pharma stocks as of late have become more ‘income producing’ rather than ‘growth’ stocks that we had seen in the 1990’s.

According to a recent McKinsey Report, there has been an economic shift, with emerging markets growing more mature as their middle-class population increases. China and India together contain 40% of the planets population. It is estimated that, in the next 10 years, 80% of the economic growth is expected from these emerging markets. Middle-class consumers in these markets now can afford to pay for medicines, which was not even thinkable 20 years ago. In order to remain competitive, U.S. and European CROs and now offer differentiated niche high value, quality products for pharma, and look for partnerships with emerging market countries such as Indian and Chinese CROs to offer hybrid, more cost effective models for the pharma to experiment with. (The reason, I used ‘experiment with’ is because the model is being tested, as we see it today. During the next five years, I think the model will a strong workout and will become the norm to do contracting businesses in the emerging markets.

I see various factors at play for the pharma companies in their “bucking down” state, which appears to be here to stay! For one thing, virtually all of them face or are in the midst of dealing with the patent cliff for major products. For another, patients are empowered; they are taking more control of the therapies they want and select. In addition, payers and patients are accelerating generic penetration from the brands to get value for money. As pharma companies react to these global shifts, they are improving the way they work internally and externally.

Here are some of the action scenarios and strategies at play at the pharma companies:

1. Improve R&D productivity
2. Find growth in emerging markets
3. Create more partnerships and alliances for contracting R&D and manufacturing
4. Enhance lifecycles of existing drugs through adapting LCM strategies
5. Adapt or in-license technologies to get an IP hook
6. Try to grow in areas such as Health & Nutrition, OTCs, Diagnostics, Animal Health
7. Grow R&D and the pipeline portfolio in biologics and vaccines versus in small molecule discovery

With all these strategies in play, there has been steady growth in companies that showcase at the AAPS Exposition, which cater these specialty service areas. Since pharma R&D is becoming more agile and creative, it is finding better ways to bring innovations to the market. The smaller biotech industry is finding it rather difficult to raise funds, especially in the preclinical stages of development. Once the compound meets the proof of concept post-Phase IIA, those compounds then become an attractive commodity for the big pharma to license in. Service provider companies, including excipient suppliers, are offering technologies for pharma that would allow solubility enhancement for their molecules that are water-insoluble and have difficulty in getting bioavailability. I see technology companies with enabling technologies, such as Bend Research and Tris Pharma, making huge headway in this direction.

Another trend I have been seeing as of late is pharma manufacturing and supply chain becoming potential sources to get profits/better margins through achieving better cost of goods. More investments in emerging markets are showing the necessary ROI for pharma companies. There are significant changes being brought about within sales and marketing, as the model is changing. The days of big pharma mergers and acquisitions are hopefully behind us. However, I still see many small and mid-sized companies scaling up to meet the demands of the current times. I see many of those on the horizon.

All in all I see more importance given to value implementation and consumer-centric marketing, which will bring premium differentiators to the table for the consumer/patient. Also at the end, innovation would keep the Pharma industry alive and humming again, if only it did not deviate from investing back into R&D! 

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Makarand (Mak) Jawadekar most recently served as Director, Portfolio Management and Performance at Pfizer Global R&D, until February 2010, when he opted for an early retirement after 28 years at Pfizer Inc. He currently serves on several companies’ advisory boards and also consults with bio/pharmaceutical companies for global outreach in emerging market regions. He can be reached at [email protected].