The last lever for big pharma?

Pfizer is financing a study of ways to expand access to health care in rural China. They better hope they find opportunities, because expansion into previously unserved markets is one of the last real levers big pharma has to pull with its current business model.

There’s a lot of confusion, even within big pharma companies, about the true drivers of growth. Ask around and most will say big pharma has prospered due to the introduction of new blockbuster drugs that were discovered in the company’s labs, developed by the company, and commercialized. In reality, big pharma companies almost never discover drugs that make it to market and haven’t launched novel blockbusters in a decade or more either. Yet, until recently, big pharma companies have been able to grow because there were a lot of other levers available, including:

  • Increasing price –which ran well ahead of the CPI
  • Increasing the addressable market –by expanding the number of people their drugs are indicated for. This can be done in multiple ways:
    • Filing for additional indications
    • Promoting off-label use
    • Expanding the pool of treatable patients by encouraging groups that set guidelines to do so. Examples include the establishment of “pre-diabetes” and lowering the threshhold for hypertension
  • Launching line extensions including combination products and extended release products

These opportunities are pretty well tapped out, so geographic expansion to places like China and India start looking attractive, even if it will be a long time before people in those countries become big purchasers.

Meanwhile there is one other major lever: medication adherence. If big pharma can find a way to encourage existing patients to sustain their therapy, there is also a significant growth opportunity. That’s easier said than done, however, and pharma companies are still struggling to find cost effective approaches to this challenge.

March 20, 2009

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