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What's next? Innovating the concept of innovation in the pharmaceutical industry

2009

For the longest time, innovation in the pharmaceutical industry was product-centered. Everyone knew what the product was and what it looked like – a pill. It was also clear which instruments contributed to innovation – technology such as high-throughput screening (HTS) in target identification and compound libraries in lead development, for instance.

Today, many of these fundamental assumptions no longer hold true. Both industry and society are forced to redefine their concept of pharmaceutical innovation. On a pragmatic level, executives need to answer important questions: What business model will ensure breakthrough innovations in the pharmaceutical industry of the future? What kinds of innovation will be acceptable to key stakeholders (payors, physicians, patients, politicians) and will society therefore be willing to pay for? What will the innovative pharmaceutical product of the future be – both physically and in terms of what it encompasses?

There are more fundamental questions for managers, too. How can we maintain our role as primary innovator in the healthcare industry? How can we provide breakthrough innovations even in these difficult times? As one manager we spoke to in the course of our research put it: "We may have all the innovation in medical science at our disposal, but that doesn't help us if we can't translate it into medical innovation that is being appreciated by our key stakeholders."

For the fourth year in a row, this study by Roland Berger Strategy Consultants provides a snapshot of current thinking in the pharmaceutical industry. The previous study, entitled "Pharma at the crossroads – Choosing directions in a changing healthcare world" was published in 2008. It looked at whether the industry's operating model is sustainable. This year's study focuses on the grass roots question of whether – and how – companies can maintain their high-risk, high-margin, innovation-based business model.

The study is based on the results of a survey of top managers from companies accounting for more than half of global pharmaceutical revenues. We also conducted more than 50 face-to-face interviews with Chief Executive Officers, Chief Financial Officers, Directors of R&D divisions and Commercial Executives. With this report we do not offer specific recommendations for individual companies. Instead, we paint a detailed picture of today's changing healthcare universe. In particular, we draw attention to the major challenges and opportunities facing companies today – and the challenges that will face companies tomorrow.

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