46% of Pharma Execs Believe ‘Beyond the Pill’ Will Show a Financial Return in Three Years
25 Sep 2013: A recent study shows that nearly half of the pharmaceutical industry (45.7 percent) believe that value added services and a ‘beyond the pill’ strategy will show a financial return within 2-3 years.
The Value Added Services Report, released earlier this month, shows that while nearly half of the industry are optimistic about a quick return on investment, 27.7% believe that a financial return could well take up to five years.
‘Beyond the Pill’ and outcomes-based solutions for big pharma have been touted by many as the future business model for the industry. However despite optimistic predictions, value-added services are facing resistance from the industry's senior management, who aren’t immediately sold on the revolutionary concept.
According to the study, overcoming resistance will be a time-consuming process. "Pharmaceutical executives are very conservative. It will take market shocks and push by payers and regulators to rethink their approach," says James Allen at PA Consulting.
It is a paradox that pharma companies are willing to invest huge amounts of money into drug development, but are unwilling to invest a fraction of those amounts into development of outcomes-centered services, even though those are objectively much less unpredictable. "Their concerns are not just about return on investment," explains Janssen's Chris McNeal, "but they feel that they expose the company to litigation risk for the venture with relatively low profit margins."
Some companies are more responsive than others. Joseph Jimenez, who recently followed Daniel Vasella as CEO of Novartis, explicitly declared that he wanted to shift the company towards outcome-based pricing. "I also started to shift our business away from transaction model that was focused on physically selling the drugs to delivering an outcome-based approach to add value beyond the pill. I really believe that in the future, companies like Novartis are going to be paid on patient outcomes, as opposed to selling the pill," he said in an interview with the Wall Street Journal.
To download an extract from the Value Added Services report which focuses on the 6 most challenging aspects of gaining management buyin and how long it should take before you see ROI from services, click here.