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New business model for pharma industry could deliver breakthrough growth, says IBM report

Toronto, ON May 26, 2003 Pharmaceutical companies that switch from the traditional “one size fits all” approach to healthcare to a biology-based “targeted treatment solutions” model could triple shareholder value by 2010, according to an IBM Business Consulting Services report, called Pharma 2010: The Threshold of Innovation.

By better understanding and defining diseases, pharmaceutical companies will be able to develop “targeted treatment solutions” for patients with a specific disease pathology. These solutions will serve as the basis for diagnosing, treating, monitoring and providing healthcare support services to the benefit of patients, payers, physicians and the industry itself.

The report says this new model of drug discovery and development could:
– reduce time to market from 10 to 12 years to between three and five years;
– increase success rates from first human dose to market by a factor of four;
– slash R&D costs per drug to a quarter of the current global average of $US800 million.

Conversely, the report predicts that traditional “one-size fits all” model of providing drugs to patients will deliver a growth rate of 5.3% to 2010, rather than the 9% predicted by some analysts.

“With the targeted treatment solutions model, it will be easier to predict which drugs will have the best success rates for specific patients,” says Dr Terri Cooper, partner, IBM Business Consulting Services (Canada). “The ability to segment diseases and patients on the basis of their probable responses to a particular drug will fragment the market and end the current monolithic approach of the industry. To realize the full potential of the disease driven approach of targeted treatment solutions, pharmaceutical companies will need to transform every step of the value chain.”

In recent years there has been a gradual shift in the balance of power away from the pharmaceutical companies to its customers: patients, health providers and physicians. Where pharmaceutical companies could once command a good return on investment, governments and healthcare insurers are now beginning to stipulate improvements they want and the prices they are willing to pay. It is now the healthcare payers not the drug makers who are defining the threshold of innovation.

According to the report, with the aid of tools such as genomics and proteomics, researchers will be able to define diseases more accurately, as well as to understand better how they progress and why some individuals are more susceptible than others.

Broad-based business transformation will be required to ensure pharmaceutical companies can manage the complexity associated with working on multiple disease areas and products types that use different research, development, manufacturing, marketing and sales techniques and serve different markets.