Guest blog: Changes and challenges in pharmaceuticals

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This guest post was provided by Phil Yates, the trainer for the 3 Day MBA in Pharmaceuticals with Terrapinn Training. He is a specialist trainer providing mentoring and coaching support to managers across the globe.

The global pharmaceutical market is growing steadily with sales reaching $1.08 trillion in 2011, representing a year-on-year increase of 7.8%. Growth in the mature economies is slowing; however sales in the BRIC countries (Brazil, China, India and Russia) rose by 22.6% and sales in the other 13 growth countries rose by 7.2%. If this pattern continues the market for medicines could be worth nearly $1.6 trillion by 2020.

Demand for pharma's products is rising dramatically as the global population increases and becomes older and more sedentary. The global population is 2010 was around 6.9 billion people but by 2020 there will be more than 7.6 billion people. If present trends continue many of these will have health problems. More than 30% of the population will not get sufficient physical exercise, more than 20% will be overweight or obese and more than 13% will be over 60 years ld. These factors all increase the risk of developing heart disease, diabetes and cancer.

The number of people reaching really old age is also increasing with the prevalence of dementia doubling every five years after the age of 65. The World Health Organisation predicts that, by 2020, non-communicable diseases will account for 44 million deaths per year which is 15% more than in 2010. The global incidence of infectious diseases is increasing as well, partly because some diseases have become drug-resistant but also due to new pathogens such as HIV and MRSA.

Meanwhile, many of the growth economies are improving access to healthcare. Brazil is introducing mobile clinics for rural communities. China has invested US$ 125 billion to extend health insurance cover to more than 90% of the population by the end of 2012. Mexico has just completed an eight-year drive to provide universal coverage. And India's National Rural Health Mission has achieved considerable progress in the 7 years since it was launched.

In short, there are more people and specifically more sick and elderly people in the world today than ever before. More people have access to affordable healthcare than ever before and, access to healthcare is becoming regarded everywhere as a basic human right. Many of the historical barriers to free trade have been removed leading to unprecedented growth in global trade. Major scientific and technological advances together with socio-demographic changes, increasing demand for medicines and trade liberalisation, will revive pharma's fortunes in the future and deliver dramatic improvements in patient care. But for the industry to prosper in the future, it must first make sure it has a future. We believe the industry faces three fundamental challenges:

Rising customer expectations

The commercial environment is getting harsher. Healthcare payers are imposing new cost constraints on providers and are very carefully scrutinising the value of medicines. They want new therapies which are clinically and economically better than existing products, with compelling outcomes data supporting claims about a medicine's superiority.

Poor scientific productivity

The pharmaceutical industry's output has flat-lined for the past decade and the processes it uses to discover and develop new products has changed very little. So it is unlikely that productivity will suddenly increase.

Cultural inertia

The prevailing management culture, mental models and strategies underpinning the industry are those on which it has traditionally relied even though these have been eclipsed by new ways of doing business. Many of the conditions that will determine future performance are already in place. Most, if not all of the products that will be launched within the next ten years are already in the pipeline and many of the senior executives who will be at the helm have already been identified. Changing the culture of large organisations can take many years and within the 3 Day MBA programme we look at how to maximise the value of new and existing medicines, develop business models for the growth markets, improve scientific productivity and reinvigorate corporate culture.

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