Like every major industry also Pharma has its own challenges and specialties. For example, more than in any other field you can witness that there is very close link to science and scientific methods. But you also observe that there is strong regulation – much more than in other industries – that affect actors in their latitude. In addition to the strong regulation, a unique system of physicians, pharmacists, health insurance companies and other health system participants protects patients from the effects of bad drugs. Everything at reasonable costs.
More than ever, this sector is facing economic pressure: Although the pharmaceutical industry grew at more or less constant rates, it faces major challenges in the area of substantial innovation. Since a large part of their turnover depends on patent-protected products, a balanced relationship between the sale of existing products and substantial investments in innovative new drugs is necessary for innovative pharmaceutical companies to survive in the long term.
Live or Die
That is how this characteristic of the pharmaceutical industry is named in the book Innovation and marketing in the pharmaceutical industry. “Live or Die” means that companies whose ability to innovate is declining will have to face future sales losses from patent-protected drugs that threaten their very existence. And while innovation is crucial for pharma, it’s the second characteristic “large in size” that makes the situation even more threatening. Usually, large sales can be achieved per product, which seems to be a fantastic property at first glance. On the other site of the coin this also means, that a lack of innovative new drugs has a strong impact on sales and with it on sustainability of the company or the sector. This is even more impactful if you take into account the short time span of a drug product in which its originator can generate sales solely before the product expires from patent protection. These characteristics are the driving force that pharmaceutical companies must use to continuously produce substantial innovations as they are continuously in the area of conflict between development costs, uncertainty about feasibility, return-on-investment and development time.
Cost, Development Time and Risk
Compared to other industries, the cost of developing a new drug is gigantic: on average, it can easily exceed the 1 billion € threshold. Due to the nature of pharmaceutical research, the cost of a successfully launched product always includes also the cost of failed research projects. Even more preeminent is the average development time of a drug, which is usually more than ten years. While this is linked to essential opportunity costs, also the risks of failure or competition is tremendous. As in every other industry today, development time is the most driver for costs and risks due to major uncertainties that are introduced into product development, like altered market or regulatory requirements, changing customer demand or lack of investment capital.
Because of the high development costs, the number of products that pharmaceutical companies have in parallel development is significantly limited. Nevertheless, at strategic level costs often play a smaller role in the development of a drug than reducing uncertainties, hyper-competition even in new therapeutic areas, maximizing return on invest while minimizing time to market. The analysts’ pressure on pharmaceutical companies to compensate the threat of a drop in sales in the following decade with new innovations in the product pipeline leads to short-term optimizations instead of a long-term orientation of the development backlog.
The ethical dilemma
It is important to note a dilemma that drugs, unlike other products, are subject to: On the one hand, medicines are products that are exposed to the mechanisms of the market. On the other hand they are also a kind of social common good that must be available to people who need them as they come down with moderate or even severe or currently untreated diseases. At the same time the expectation of patients rises, that even with severe chronical disease they can receive treatments allowing for a “normal” life. Patients today already have more knowledge and more opportunities to influence their health and manage their treatments. To do this, they have at their disposal state-of-the-art technology that will enable groundbreaking innovations in healthcare in the future. Nevertheless, the public image of pharmaceutical companies is marked by mistrust. The strategic orientation of innovations must therefore also satisfy an ethical component and cannot take into account purely economic circumstances. In the future, a great deal of effort will be required to move from a relationship of conflict to a relationship based on partnership between industry, patients and the other actors in the health systems.
Its already reality that pharmaceutical companies aiming to offer holistic solutions beyond the delivery of the pure medicine and start providing therapeutic solutions that also contain service and technology – everything gets connected. Digital solutions and data systems are the key resources for the future. New innovative technologies such as 3D printing in the context of additive manufacturing have the potential to radically change the MedTech sector by providing completely new possibilities for product design and manufacturing and with it the pharmaceutical industry.
Agile Pharma – unthinkable?
New ways of proving compliance with regulatory requirements must be found, but that seem not insurmountable – even if enormous resentment still prevails in this respect today, primarily due to ignorance or misunderstanding. A whitepaper of Pathfinder Software LLC for example concludes for the usage of agile in FDA regulated environment:
The reality is that agile methodology, appropriately applied, improves reliability, safety and effectiveness, is compatible with quality system regulations, and is in fact recognized as a consensus standard by the FDA.
Despite all the resistance that the agile movement is still provoking today, especially in conservative companies, agile methods and collaborative structures have long since found their way into pharmaceuticals and medical technology. Today there are numerous examples of successful agile transitions in the healthcare and pharmaceutical industry. However, most or all of them affect just an excerpt of the total value stream of the company and are no total agile transitions. Pharmaceutical companies often start agility via IT or software-related projects in which external partners or service providers use agile working methods. But there are other already published approaches on how the pharmaceutical industry can deal with the challenges of the future by applying Agile and Lean Development principles. Those include the creation of agile R&D structures in pharmaceutical development, the optimization of clinical development through agile approaches, lean innovation in the pharmaceutical industry and lean in medical laboratories. This matches the conclusion of the Contract Pharma Paper „Agile Drug Development: Lessons From The Software Industry.“:
To sum up, agile methodology is showing itself a promising way of working and moving beyond software development projects and soon will find its place in other industries like pharmaceuticals.
Lean and Agile offer effective solutions to many of the challenges facing the pharmaceutical industry today. It is in the nature of agile methods that they do not offer a ready-made solution, but a way to address the underlying problems of the organization through short learning cycles and collaborative environments. The experimental structure and the almost scientific approach make Agile an excellent alternative, especially to connect researchers and developers with each other and to collectively advance innovations in the company.
Here you will get more and more examples on applied Agile and Lean Development principles in Pharma and MedTech.
My personal contribution to improved Pharma Development
My personal experience with applying lean development and agile in Medical Device and Pharma is that more agility leads to improved competitiveness and performance of core processes as well as interaction between core, support and leadership processes. In this blog I would like to present concepts, ideas, results, models, examples and analyses about the use of agile methods for development in conservative environments, but mainly focused on the pharmaceutical and MedTech field. My hope is to provide ideas and solutions and with this contribute to reduce the overall development time that pharmaceutical companies need to provide high quality treatment solutions to patients that truly require them. Just because I’m convinced of one thing: In our industry, each and every saved day matters!
- Ding, M., Eliashberg, J., & Stremersch, S. (Hrsg.). (2014). Innovation and marketing in the pharmaceutical industry (Bd. 20). New York, NY; s.l.: Springer New York.
- Shamsi, M., Huynh, C., Gordon, J., & Patloori, S. (2017). 3D opportunity for health care. Deloitte University Press.
- Kappe, B., Posada, M., & MacTavish, R. (2013). Agile in an FDA environment. eBook, 23. (Pathfinder Software LLC, Hrsg.)
- Barnhart, T. M. (2013). Creating a lean R & D system. Boca Raton, Fla.: CRC Press.
- Rosenberg, M. J. (2010). The agile approach to adaptive research. Hoboken, N.J: Wiley.
- Schuh, G. (Hrsg.). (2014). Lean Innovation in der Arzneimittelbranche (1. Aufl. Ausg.). Aachen: Apprimus-Verl.
- Protzman, C., Kerpchar, J., & Mayzell, M. M. (2014). Leveraging Lean in Medical Laboratories. Hoboken: Taylor and Francis.
- Alaedini, P., Ozbas, B., & Akdemir, F. (2014). Agile Drug Development: Lessons From The Software Industry. (Contract Pharma, Herausgeber) Why pharma needs to move from a “waterfall” to a “scrum” model