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A critical makeover for pharmaceutical
companies: overcoming industry obstacles
with a cross-functional strategy
by Jo Pisani, Dr. Myrto Lee
Executive summary
This is a difficult time for global
pharmaceutical companies — so
difficult, in fact, that many are
reconsidering their business
models. The litany of concerns
that pharmaceutical companies
face includes payors tightening
up on cost management, strained
government healthcare budgets,
the need to understand and adopt
new technologies, and challenges to
their traditional pricing mechanisms
by empowered stakeholders, from
patients to payors. Moreover, the
regulatory maze in many parts of the
world is tough to navigate, with unique
rules and varied outcomes depending
on national policies, issues, and
bureaucratic processes.
Compounding the external obstacles,
however, is the internal culture of
most pharma companies. This is
an industry that has long operated
through disparate components — silos
that separated R&D, commercial,
production, and supply chain. And,
in turn, these walled-off parts of the
organization have been disconnected
from the external-facing parts,
which are responsible for managing
relationships with regulators,
policymakers, the medical community,
and the rest of the industry. These
silos can obstruct patient access and
breed inefficiency and waste. They
affect drug approval time and pricing,
influence support for specific drugs by
the medical community, and seriously
hinder financial performance.
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world monitor
It is time for pharmaceutical
companies to restructure their
operating models in a way that brings
all of these interdependent functions
together. To accomplish this goal,
they should build the organization
around what we call critical teams.
These teams should be directly
responsible for gathering information,
developing insights, and drawing up
strategic plans about the facets of the
pharmaceutical business that are often
overlooked in the formal organizational
structure: namely, regulatory affairs,
pricing and market access, government
affairs, and medical affairs. These
four categories are the subteams of a
pharma company’s critical team.
Rather than having knowledge about
these aspects of the business model
buried in other pharmaceutical
functions — an inefficient and
ultimately unsatisfactory approach —
the critical team would be independent
but cross-functional, working closely
with R&D and pharmacovigilance;
sales, marketing, and key account
management; and supply chain. A
primary task of the critical team would
be to make sure that each function is
aware of what the others are doing
and benefits from the knowledge of the
team.
As a concept, critical teams are not
new; most pharmaceutical companies
already rely on experts in external
healthcare industry activities for ad
hoc strategic advice and direction. But
that does not go far enough; it fails
to apply the critical team as a bridge
across key functions. Thus, the ability
of the team to effectively advance the
needs of the entire organization is
significantly diminished.
This report offers a detailed framework
for implementing a successful critical
team strategy. It provides an analysis
of the pharmaceutical landscape
through the lens of critical team
activity, allowing management to
reflect on how connected and effective
the company’s current critical team is
and how the organization can improve
its capabilities by fully leveraging its
team.
Disruptive times
The global pharmaceutical industry has
long been known for unpredictability.
Returns on investment from research
efforts are volatile, and payor pressure
and the vagaries of regulatory
decisions often add to the uncertainties
of the sector. Still, it would be difficult
to find a period in the past when
pharmaceutical companies faced a
more challenging and disruptive time
than they are experiencing now — a
time, that is, when drug companies
have no choice but to reevaluate their
business model to survive.
Consider the range of global trends
affecting pharmaceutical businesses:
• Aging population. In Western
Europe, about one in five people
are age 65 or older. By 2030, that
proportion will climb to one in four.
As populations age, payors are
forced to reconsider how to pay for
the treatments needed by an older