Old "Car" Model Applied to "New" Pharma Industry

12/15/2011

Old "Car" Model Applied to "New" Pharma Industry

Fierce Biotech reports that some Pharma manufacturers are looking to the car industry for ideas on how to adjust their business model to be more profitable as well as perhaps shorten drug delivery times. Auto makers are very familiar with outsourcing many aspects of manufacturing and primarily concern themselves with design and marketing. The pharma equivalent might be drug R&D and marketing.

GSK and AZ in particular were cited as two big pharma picking car makers' brains, drawing on companies like McClaren, Jaguar and Renault. In addition to outsourcing expertise, Porsche (for one) has crowed that it reduced product development time by 28%. Contrast this by industry watchers claims that Big Pharma development times have increased by 31% -- there might be something to learn here. Porsche actually has a consulting arm that is starting to market to pharma.

One big caution though -- auto makers haven't historically always been able to recoup their costs of capital -- not exactly a ringing endorsement for someone who wants to compete in pharma industry with dwindling capital markets to support it. Auto makers may have the most to teach in manufacturing and reducing costs there.

Interestingly, Pharmalot reported yesterday that 38 manufacturing plants were closed in the US this past year as pharma looked to downsize (and outsource like autos?). While, Fierce reported on comments by Merck's CEO Ken Frazier indicating he would buck the Pharma R&D downsizing trend to continue to invest in R&D (consistent with auto internasl development model?) instead of cutting back R&D more severely (to also outsource) like GSK or Pfizer. The debate will rage as to which is best until more data emerges supporting a winner.

From an innovation standpoint though, it is good to see companies willing to consider other tried and tested business models for applicability to their situation -- especially cross industry like this.