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Creative Alliances with Nontraditional Players Increasingly Essential for Survival in Pharmaceutical Industry, New Ernst & Young Report Finds
Date:2/11/2010

-standing vertically integrated blockbuster-driven model, defined in the study as Pharma 1.0, to today's Pharma 2.0 business model. Under this business model, companies have adopted a number of changes to improve productivity and financial performance, from pursuing more targeted therapies, broadening their portfolio of products and capabilities, to establishing more independent and flexible R&D units, to boosting partnerships with biotech firms, and universities and outsourcing many non-core functions.

The report finds that even as pharmaceutical companies continue to implement strategies to prosper in Pharma 2.0, these efforts may be overtaken by a Pharma 3.0 "ecosystem" comprised of established industry members, nontraditional companies and an increasingly informed data- empowered consumer.

The entrance of many non-traditional players in Pharma 3.0 will heighten the need for further business model innovation by traditional pharmaceutical companies, making development of innovative new commercial models a critical counterpart to the development of innovative new medicines. Managing and optimizing an increasingly complex network of partners will pose new tests for industry leaders, whose success will come increasingly from adapting their company's unique assets and attributes to fit someone another company's business model. Early industry attempts to adapt to the Pharma 3.0 environment highlight some of the challenges ahead, according to the report. For example:

- As patients play an increasingly active role in managing their health care enabled by personal health records, smart phone applications, and other technologies, pharmaceutical companies remain largely on the sidelines of this revolution, hampered by a regulatory framework governing patient interactions which has been slow to evolve.

- As leading hospitals and payers mine electronic health records for correlations between prescribing patterns
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SOURCE Ernst & Young LLP
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