Life Science Practice
Life sciences, pharmaceuticals, Merck, AstraZeneca, Alergan, Quintiles, IMS Health, pharma
A ‘race to the bottom’ with price wars is not the solution when margins are squeezed.
That’s a zero-sum game.
“Brands indicate value,” says Merck APAC’s Ramesh Subrahmanian and nowhere more so than in the pharma industry. “Where their health is concerned, almost every consumer will go for the more trusted brand. We've an opportunity now to establish a value proposition with the medical community and patients. We need to educate people about staying healthy - our role now is way beyond just providing medications."
I think this kind of thinking is an antidote to the more traditional approach taken to these vexing issues.
When Heidrick and Struggles hosted an informal gathering of pharmaceutical industry leaders in Asia, conversation revolved around industry competitiveness. Around our table were executives from firms including Merck, AstraZeneca, Allergan, Quintiles and IMS Health. All present were emphatic that the solution was not a "race to the bottom" with price wars. That's a zero-sum game.
In a flat world where knowledge is transferred globally in an instant, governments demand lower prices for drugs. In the ever-present issue of generics, margins are inevitably squeezed.
Eroding margins present ongoing challenges for leaders in pharma. How on earth do you satisfy your shareholders and stakeholders in such an environment?
I believe the leadership profile in the industry is therefore shifting substantially. Just having a solid background in pharmaceutical sales is no longer the sole pre-requisite to leadership. Pharma leaders need to orchestrate brand-building in a way that can overcome the pricing issues. Businesses which are able to manage the economics of the sector, will offer a powerful antidote to the cheap and faceless generic products.
So where do we find these superheroes - people who can see around corners, who can juggle stakeholders including patients, doctors, the scientific community and hospitals?
We are looking more broadly these days and locating great leaders in sectors that are used to operating in low-margin environments. Obviously the world of fast-moving consumer goods (FMCG) is one such area. To be honest, much of the challenge lies with the pharma companies themselves, not on whether the leaders are available. The companies now need to be open to look outside the sector for people who are agile enough to innovate in a rapidly evolving marketplace.
Strong industry leaders who have risen through the traditional research and development and sales channels will continue to be important pillars of the industry. But if companies are to survive and prosper in a world where the blockbuster drugs are going off patent and aggressive generics are eating into the market, they will need to broaden their horizons.