__Even the largest pharmaceutical companies will soon need to “step outside their sector “ and collaborate with other organisations, according to a new study.

The report, authored by PricewaterhouseCoopers, claims that a flurry of merger and acquisition deals have been triggered (Roche/Genentech, Pfizer/Wyeth, GlaxoSmithKline/Stiefel and Merck & Co/Schering Plough), there are alternatives that “will actually be more flexible and value-enhancing in the long term”. Collaboration is a word that runs through the report and __PwC says that government responses to the economic climate “has allowed collaboration outside the pharma sector that would have been unthinkable before, such as waiving competition issues for mergers”.

The report says that collaboration could address the current funding crisis for biotech firms “but this requires an immediate response”. It adds that the pressure to change to new business models could come from outside the pharmaceutical sector, “perhaps triggered by regulators, investors, and healthcare payers”.
It cites a study by RAND Corp which estimates the financial savings from having 100% participation in disease management programmes for four diseases (asthma, chronic obstructive pulmonary disease, diabetes and congestive heart failure) in the USA. RAND estimates the net savings to the health system to be $28 billion but drugmakers “will need to move fast, because several non-pharmaceutical companies have already entered the arena”.

PwC notes that Vodafone has joined forces with Spanish telemedicine provider Medicronic Salud and device manufacturer Aerotel Medical Systems to offer a wireless home monitoring service. Similarly, Prudential is collaborating with Virgin Active Health Club through a critical illness policy that provides subsidised gym membership and rewards people who exercise regularly by reducing their premiums.

The report says that “demands from different stakeholder communities, including the patient, will demand that pharmaceutical companies provide holistic solutions not narrow treatments”. This means that drugmakers will have to ‘profit together’, by joining forces with academic institutions, hospitals and technology providers to companies offering compliance programmes, nutritional advice, stress management, physiotherapy, exercise facilities and health screening. __

Jo Pisani, partner in the pharmaceutical and life sciences practice at PwC, says that big pharma’s traditional fully-integrated business model enabled it to ‘profit alone’ successfully for many years. The top companies saw their market value soar 85-fold between 1985 and 2000 “but this model is now under huge pressure and if not already broken is predicted that by 2020, will not work”.

She added that “in the next decade no pharmaceutical company will be able to ‘profit alone’ and while extensive collaboration will take many firms “out of their comfort zone, it’s the only way they will profit by 2020”. Ms Pisani adds that the shift in the market “and strategic importance of data and new technologies opens the door to new entrants to take a leading role, such as Google and Microsoft, data providers and companies with strong brand reputations that can be stretched such as GE Healthcare.”

Simon Friend, global pharmaceutical and life sciences leader at PwC, added that most large pharma companies use external contractors to supplement their in-house resources, “but very few firms have taken the next step”. However, “there is no reason why many companies could not outsource R&D, manufacturing and promotional activities”, he added.

This would allow them to focus on “their main value-adding functions – project management, business development, regulatory affairs, intellectual property management, pharmacoeconomic analysis and the formation of good relationships with key opinion leaders and healthcare payers”. Mr Friend concluded by saying that “the world is changing fast and those who are flexible and can adapt will reap the benefits.”