Over the last 25 years, the global pharmaceutical industry has made revolutionary contributions to clinical care. The industry now faces the challenges of unpredictable product pipelines, increasingly competitive markets, and uncertain policy and regulatory environments. Despite ongoing medical need related to many diverse diseases, pharmaceutical companies—much like medical technology companies—can no longer depend on their innovation engines and pricing power to achieve profitable growth.
The net result of ongoing cost pressures and a precipitous decline in R&D productivity will be an unprecedented decline in the share of the overall healthcare profit pool captured by the largest research-based pharmaceutical companies, while lower-margin sectors, like generic manufacturers, will increase their share. The critical question for these companies is how to evolve their business model in order to thrive in a world of shifting profit pools by focusing on outcomes rather than by simply generating more inputs—more products, more procedures and ultimately more cost to the payers.