Medicines as a Service

A New Commercial Model for Big Pharma in the Postblockbuster World

by Soeren Mattke, Lisa Klautzer, Tewodaj Mengistu

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Abstract

The past decade has not been kind to large pharmaceutical companies. Their share prices have been lagging the market after many years of outperforming it. Many had to undergo painful restructuring and workforce reductions because their traditional blockbuster model is becoming extinct. More and more top-selling drugs are being replaced by cheap generics, and developing new drugs is more difficult because fewer opportunities exist and more-costly research and development (R&D) productivity has declined. Although this diagnosis is not disputed, the best course of treatment is not clear. Companies have tried to stop the bleeding with the help of mergers and reorganizations and infused new blood by acquiring biotech companies or their innovative products or by diversifying into products other than prescription drugs. In this paper, the authors propose that the pharmaceutical industry can reconfigure its considerable resources to develop innovative and meaningful business models that are based on services that improve access and adherence to prescription drugs for chronic conditions. They argue that such innovation beyond drug development is consistent with the core capabilities of large pharmaceutical companies and has the potential to achieve profit levels similar to those of its traditional models. Their argument is based on the fact that, although effective medicines for most chronic conditions exist, access and adherence to medicines is far from what would be needed to achieve full treatment efficacy. Therefore, value can be created by getting and keeping more patients on their drugs, and innovative business models would allow pharmaceutical companies to capture that value.

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