Mals Musings: Overweight, Oversized, and Over the Top
Why its time for pharma to go on a crash diet
Is the healthcare sector embarking on another bout of downsizing, consolidation and soul searching? It would appear so, and on this occasion the raison detre differs from previous consolidations.
We are all too aware of the now infamous global recession, which appears to have produced side effects that reach the normally insulated healthcare sector. Could the chills of recession really be a major driver in the current plight of the healthcare sector?
Before the recession, politicians and patients were already quite a formidable opposition for the industry. Today, the recession has combined with these factors to change our sector permanently. The days of excesses are disappearing fast as we are getting a glimpse of the competitive climate other sectors have had to operate within.
The healthcare sector is special, because of the nature of what we do, who we serve and, ultimately, the fact that the payors are not the end users. It is clear that the special treatment for the industry is over, and we are under attack. However, I think it is good for us in the long run. Budgeting, strategy and running a lean business will start to resonate as we are forced to think about our business model and value creation process.
In an environment where there are excess resources, it is inevitable that strategy will not be taken seriously. We can just as easily solve our problems by spending more on research, recruiting more reps. or booking more ad spaces.
The payor is different from the decision maker and the end user. This complex trilogy lends itself to subjective and unbalanced decision-making. Unfortunately, there were examples of practices that suggested that industry was too big, too powerful and, at times, out of control.
Perhaps it is an exaggeration of the reality, but nonetheless the actions of regulators and attitudes of the public would suggest that this perception is not uncommon. So a reduction in sales, marketing and other resources is a move in the right direction. The world needs a fit pharma sector that is big enough to deliver value but also not so big and powerful that it is uncontrollable
So the recession might actually create an opportunity for us to not just merge and acquire but to rethink our business model, challenging the role and effectiveness of every part of our value chain. In the end, we need to move from oversized, overweight and out of control to right size, right weight and in control.