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The features of the pharma industry

The features of the pharma industry

(By Massimo Michelini, Part-time MBA)

23/11/2015

Innovation, Research and Development, Life Science, Biotechnology, Quality of Life, Patients Care. These are the keywords that best describe one of the most particular and challenging industries: Pharmaceutical. This was the topic covered during the first Industry Focus Workshop organized for the students of the MBA part-time program. It represented a unique moment to understand and focus on the logics and mechanisms that rule the Pharma industry.

The analysis started with the precious contribution of Paolo Daniele Siviero (Principia SGR, AboutPharma) who shared with the students his deep experience in this field, by discussing about the main aspects of medical-related matters.

The features of the pharma industry First of all, what distinguishes the Pharmaceutical industry is basically the crucial role of the R&D department. It is a matter of fact that innovation is increasingly and more effectively coming from external sources (66% of the total R&D investments) like in-licensed (55%), acquisitions (40%) and joint venture (5%). In addition, projects should overcome several steps from the in-vitro/in-vivo phase (pre-clinical), to safety-provide tests (on humans), tolerability tests and efficacy phase (superiority or not inferiority test), before the launch in the market. This process usually takes at least 10 years to be completed and only 1 out 25 projects sees the end of the tunnel and can be placed in the market. Companies that operate in this field have an extremely high risk rate and try to foresee and mitigate it via different tools, like the Drug Development Decision Tree, that helps to depict the expected NPV of the R&D investments. In addition, the New Medical Entity has to be subjected to Marketing Authorizations (Regional) and Market Access specifications (which are Country specific). All of this makes the Pharma market one of the most regulated and challenging markets.

The features of the pharma industry Another peculiarity of the medical market is the definition of the Customer and the Product itself. The main business in fact, is represented by the hospital-related market and the OTC product distribution is only a small part of the business. Government is the main client the companies have to refer to, because of the mechanism of reimbursement. As far as the products are concerned, the only product category that no companies invest on are antibiotics. People in fact are becoming more and more antibiotic-resistant and new R&D projects arise year by year. For that reason, only the public sector could afford this kind of investment, for public safety purpose

The last and maybe the most controversial aspect of the Pharma market feature is the determination of the Price. The topic animated the debate, in particular during the roundtable where Francesca Patarnello from Amgen, Francesca Caprari from Sanofi, Antonella Muci from Gsk and Andrea Chiesi from Chiesi Group attended. As discussed by the guests, price is a crucial topic playing a pivotal role in the success or in the failure of a product. Its determination is related to the value delivered to the patients as well as to the environment and is different from the conventional cost-accounting rules. The debate focused on the case of Sovaldis Cure for Hepatitis C, priced $ 900 in India and $ 84.000 in the US. Thus, the business and ethical question that arose was: how much should a single injection that is able to change the life of a person cost? This and other questions alike make this industry so interesting and involving, also beyond the boundaries of business.

The features of the pharma industry

To conclude, guests expressed the continuous need for talent in the Pharma industry, in order to bring innovation and disruption. Finally, all the speakers agreed on the future scenario of the industry: the battle will be played on Genetics, even though the goal is still far away.


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