Biopharma's Productivity Problem - and How to Fix It
December 02, 2014
Demand for increased productivity in the biopharmaceutical industry has never been higher. As margins shrink and the cost of development continues to rise, biopharma leaders are laser-focused on finding areas to add efficiencies and improve results. Yet the industry’s long held resistance to change makes it difficult for project teams to make significant improvements.
In an effort to avoid the upheaval that comes with major change, many companies tend to focus first on minor adjustments that cut cost and waste from existing processes. These improvements are fine, but there are limits to how far they can go. If they want to see more dramatic improvements, biopharma companies need to embrace models of change that drive increased value across their product development lifecycle.
In the world of biopharma, even an incremental improvement in efficiency can translate into billions of dollars in value – if you create the kind of environment and partnerships necessary to achieve the results. Efficiency value drivers linked to assumptions around study design, technology platforms, and operational control, impact drug development efficiency by removing years of cumulative drug development time, versus industry benchmarks.
Imagine, for example, that you implement efforts to reduce the time it takes for one drug to get to market by seven percent. When applied to an entire portfolio of products, that change could cut more than 1000 months from your overall drug development cycle time. And, assuming you achieve the same rate of approval per drugs submitted, that translates to a 1000 more months of sales potential for the portfolio and perhaps also better market positioning for the drug as the first to market.
The trick is figuring out where incremental value can be achieved, and what changes you need to make to achieve that value.
The Four Pillars of Incremental Value
There are four essential categories where incremental value can be garnered:
Unfortunately, many companies get stuck in the efficiency cycle. They cut 10 or even 20 percent from their time and costs — which is significant — but they fail to take the next step toward improved productivity. Yet that is where the real value can be gained.
Shaving 20 percent off clinical programs that cost an average of $100 million will net $20 million dollars in savings per project, which is great. But compare that savings to the value you can derive from improved productivity.
If you focused your energy on cutting the overall cycle time on your development portfolio for a successful compound which let’s assume takes 10 years to develop from start to finish - a 5 percent time saving would equate to an extra 6 months on market and in some case could determine whether the drug is an early entrant and its market positioning.
Improved productivity on the other hand, which is realized through applying joint knowledge and experience could improve success rates and inherently limit wastage early on and importantly increase the number of assets that reach market. If think about today’s norm, where it’s not unusual for successful drugs to generate sales in the billions across their patent lives, an extra compound across the finish line is likely to significantly push the needle in company’s valuation and determine whether it can survive under a competitive landscape in the long term.
The lesson is that you can’t just focus on lowering costs. The most dramatic value is gained by increasing outputs to improve your overall probability of success and hence the profitability of the originator.
How to start
Once you know what kind of value you want to achieve, you need to set a path. While some companies have the culture and resources in-house to reinvent the way they manage research and clinical trial programs, most others rely on external partners to help them streamline their methods and improve their processes.
These partnership models allow biopharma to tap into the expertise and infrastructure of established industry leaders to drive change and free them to redirect their own efforts toward their internal value-driven goals. This improves their agility, enables them to change direction more effectively, and ensures that they get the most benefit and productivity from all of their human, product and capital resources.