|Open Innovation in Pharma|
|Written by Wendy Diller|
|Wednesday, 04 March 2009|
Sticker Schok May Open Innovation in Pharma
Proposals advocating "open" or "collaborative" innovation in pharma R&D are suddenly cropping up throughout the pharma industry in a variety of forums and iterations. J&J's head of global R&D Paul Stoffels talks about it, as does GlaxoSmithKline's Andrew Witty. Not that collaboration itself is news - business development is a mainstay of pharma strategy.
Read our previous article about open innovation.These new ideas, however, refer to collaborations in areas where pharma previously feared to tread--at the earliest stages of research, across several companies--and involve sharing of intellectual property. In the past, such ideas were unthinkable, but pharma companies are well aware their R&D models need an overhaul, if for no other reason than sticker shock: Innovator companies spend $90 billion a year on global R&D, but stand to lose $32 billion in cash flow over the next five years as key products go generic. No one expects that they'll be able to compensate for that loss - which means less money for R&D.
Enter the management consulting firm Bain & Co., which also strongly advocates moving the industry toward more collaborative research in this article just published in the most recent issue of IN VIVO. Recently the head of Bain's North American healthcare practice, Chuck Farkas, spoke to IN VIVO Blog about his group's thoughts.
In one of Bain's models, groups of companies would "pool" research and development assets within a disease area or class of compounds, sharing in some manner in the commercial success of any compounds that emerge from the collaboration. Another very different model calls for sharing IP, resources, and talent to identify the best mechanism of action to tackle a particular disease, after which each company would compete separately in the marketplace.
That latter kind of open innovation wouldn't necessarily limit the number of companies pursuing particular molecules and therefore wouldn't create systemic efficiency, but it could eliminate duplicate investment in early-stage work and improve productivity by enabling scientists who would normally compete to work together, Farkas explains.
Especially in the latter model, commercial execution would be paramount. Competitors would win on the merits of their science-but the balance of power would likely shift to those with the most cunning in the market. That's what happened in the consumer goods and certain sub-sets of the IT industries, where R&D pooling became a norm.
Today's pharmaceutical R&D model, which industry is gradually restructuring, was formed around a bubble that has burst, Farkas observes. Companies are "asking how to share more of the R&D" he says. "There is massive pressure to be far more rational in R&D."
Bain's ideas are part of a trend, of course, at least rhetorically. In a February 13 speech at Harvard Medical School, GSK's Witty advocated patent pooling-that is when patent owners agree to license their patents to others-and said GSK is doing just that with assets aimed at treating certain neglected tropical diseases.
The head of global R&D at J&J, Paul Stoffels, a Belgian physician, has also been writing about and speaking publicly on what he calls "open innovation," in which pharma companies network "across internal organizational disciplines and geographies" and externally as well "to share in both the benefits and costs of innovation."
The extent of their commitments isn't clear, however. Witty's remarks received considerable publicity-but GSK's program is directed at markets that don't generate much profit, for big pharma anyway. And J&J's minimal efforts involve small steps in niche markets.
But Farkas and others are adamant: the pressure of driving earnings as revenues fall "will force companies to look at dramatically different R&D models." And as they do, commercial competence--itself evolving in response to external pressure--will take on a whole new meaning.
Read our previous article about open innovation.Read also at Pharmaceutical Licensing Network
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