Compliance as a Strategic - Global Health Care as a Strategic Function ... Customer Intimacy ... (Total Cost) Source: Michael Treacy and Fred Wiersema (1997) Product Superiority
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Compliance leaders need expertise in three areas: – Compliance expertise which incorporates skills such as risk management, policy development, regulatory knowledge, investigation and monitoring/auditing.• Compliance leaders have strong competencies in this area.
– Leadership expertise with skills associated with leading and motivating compliance teams. • Compliance leaders are beginning to develop deep expertise in this area.
– Strategic expertise and skills required to give flight to the business and elevate the role of the compliance function within pharmaceutical firms. • Focus of the Session.
Understand pharmaceutical global market trends and the role of multinational, regional and domestic firms in multiple markets.
Understand how compliance leaders can provide a strategic advantage to firms through innovations in compliance strategies that enhance business (within the tenets of an ethical policy)?Understand how compliance leaders can recognize the emerging changes in the environment and be the first‐to‐market with innovative compliance strategies?
Understand how multinational firms compete when their compliancepolicies do not match the policies of competitors? – How can compliance leaders better understand their customers and develop
innovative non‐duplicatable compliance strategies such as brand leveraging to help their firms grow rapidly in markets?
Source: Elizabeth Robinson, The Soaring Cost of a Simple Breath, NY Times, October 13, 2013; http://www.nytimes.com/2013/10/13/us/the‐soaring‐cost‐of‐a‐simple‐breath.html?_r=0
Source: Vivian Hunt, Nigel Manson, and Paul Morgan (2011), "A wake‐up call for Big Pharma: Lower profit margins suggest a need for new business models,: McKinsey Quarterly, December.
Most of the Growth Has not Come from Big Pharmaceutical Model
Source: Vivian Hunt, Nigel Manson, and Paul Morgan (2011), "A wake‐up call for Big Pharma: Lower profit margins suggest a need for new business models,: McKinsey Quarterly, December.
Competition Has Increased in the Pharmaceutical Industry
Source: Vivian Hunt, Nigel Manson, and Paul Morgan (2011), "A wake‐up call for Big Pharma: Lower profit margins suggest a need for new business models,: McKinsey Quarterly, December.
Source: Roche Invests $877 Million to Boost Biologic Therapies Production; WSJ, October 14; http://online.wsj.com/news/articles/SB10001424052702303376904579134981048824064
Western Pharmaceutical Firms and Emerging MarketsEmerging markets are facing increased price pressures due to reduction in pricing power, regulatory intervention, and lower priced “good enough” products. – “Advanced market” strategy has worked well for the high end markets; emerging market mass markets will require a complete rethink. • Emerging market competitors will always have cost structures that are lower than Western firms.
• The asymmetric effects of ethical codes – Western firms have them and Emerging market competitors do not.
• So how do Western firms battle with our emerging market competitors?
China investigates baby formula firms for pricing violations in 2013.– Nestlé SA, Danone SA, Royal FrieslandCampina NV, Abbott Laboratories and Mead Johnson Nutrition.
– All firms under investigation reduce baby formula prices.
Other Industries– Pharma, Medical Devices, TVs, Automobiles.
Source: China Investigates Foreign Makers of Baby Formula, July 2, 2013, WSJ; http://online.wsj.com/article/SB10001424127887323297504578580920868011296.html; http://online.wsj.com/article/SB10001424127887323455104579012543957866998.html
China Investigates Pharmaceutical Industry in 2013.– 27 Firm on Cost Issues– 33 Firms on Pricing Issues
• GlaxoSmithKline, Merck, Astellas, Sandoz, Boehringer Ingelheim, Baxter International and Fresenius.
– Pharma companies on compliance business practices (GSK, UCB and others).
– GSK employees were charged with bribery. • GSK promised to reduce pharmaceutical prices.• Xinhua states “China may see a nationwide price cut on medicines).
One Target may be the 500 National Essential Drug List where Big Pharma Seek Premiums.
Source: Pharma Can Survive China's War on Drugs, July 5, 2013, WSJ; http://online.wsj.com/article/SB10001424127887324260204578587372019648796.html
In November 2012, India's Intellectual Property Appellate Board a blow by revoking the patent on Roche’s Pegasys (Hepatitis C drug).– Roche announced plans to reduce costs of two cancer drugs, Herceptin and Mabthera in 2013, without any requests from the Indian government.
Indian Government won a case against Novartis for Glivec. The courts said that pharmaceutical companies had to prove significant clinical efficacy enhancements of their drugs over already‐patented compounds.
In 2012, India’s patent office forced Bayer AG to grant a license to an Indian generic‐drug producer for Nexavar (kidney‐ and liver‐cancer medicine) for patient health and affordability reasons. – In response, Cipla reduced prices of cancer medicine by 75% and is selling generic versions of patented Bayer, Novartis and AstraZeneca cancer drugs in India and other developing countries.
Traditionally, firms would withdraw drugs from the emerging market when faced with regulatory price pressures. The actions of firms suggest that emerging markets are too large to ignore and firms are willing to reduce prices dramatically.
Local firms are willing to create generic versions of pharmaceuticals.
Other large emerging nations would want to follow the same policy. If China and India succeed, will other emerging nations follow?
Highest Growth Countries (worldwide):– Venezuela, Argentina, China, Ukraine, Vietnam, India and Brazil.• 2015 Size – China #3; Brazil #6; India #8; Mexico # 14; Venezuela #15 in the World.
Latin American Market Estimate for 2012– $70 Billion; Brazil is 40% of the Market; Mexico 20%.
Affluent and Aging Population.
Growth in Government and Private Insurance.– Pharmaceutical Coverage is Low in Latin America.
High Price Sensitivity– But also Brand and Relationship Sensitive.
Competition– Local Firms Will Dominate (2,000 firms in LAC).
• Government Relationships, Provider Relationships, Distribution Channel Relationships, Low Prices– Big Pharma Will Need Partners (Government, Local Firms).
Ache/Prodome Brazil 4.70 Novartis Switzerland 4.40
Janssen Cilag Belgium 3.70 Eurofarma Brazil 3.50
Boehringer Ing. Germany 3.70Pfizer(bought Teuto)
USA 3.40
Glaxo WellcomeUnited Kingdom
3.50Bayer Schering Plough
Germany 3.20
Schering Plough Germany 3.20 Boehringer Ing. Germany 2.60
Eli Lilly USA 3.00 Nycomed Denmark 2.40
Demais Empresas ‐ 55.80 Demais Empresas ‐ 55.90
Source: Caliari and Ruiz (2010), “Structure and Innovation in Pharmaceutical Industry in Brazil: The impact of Generic Drugs;” http://www2.druid.dk/conferences/viewpaper.php?id=500557&cf=44
Bristol‐Myers‐Squibb sold off its baby formula, ultrasound machines and surgical bandages businesses.
The company has a third fewer employees, and half as many manufacturing plants as it did in 2006.
Midsize Player Looking for Big Deal (e.g., Biogen Idec, Shire, Gilead Sciences).
Source: “Bristol-Myers Stalks Deals To Bolster Its Drug Lineup”, Wall Street Journal, March 4, 2013; http://online.wsj.com/article/SB10001424127887323293704578332191493675744.html
Abbott Has Split into Two Firms:– Abbott has created a company focused on diversified medical
products consisting of medical devices, established generic pharmaceuticals, diagnostic and nutritional businesses. This company, has retained the Abbott name, has sales of approximately $22 billion and is led by Abbott CEO Miles White.
– The second company Abbvie, with current sales of around $18 billion, has taken over Abbott's research‐based drug business an pipeline focused on specialty markets such as multiple sclerosis, immunology and hepatitis C. The research company's drug roster include Abbott's biologic, or biotech drugs, including the rheumatoid arthritis blockbuster Humira.
Compliance Related Trends in the Pharmaceutical IndustryTraditional Focus on Sales, Commercial, Physician and Medical Professionals is Declining.– Channels, Alliances and Institutions.
From Internal Sourcing to External Sourcing.– Collaboration
High/Low Price Sensitivity– But also Brand and Relationship Sensitive.
Competition– Local Firms Will Dominate (5,000 firms in Emerging Markets).• Government Relationships, Provider Relationships, Distribution Channel Relationships, Low Prices– Big Pharma Will Need Partners (Government, Local Firms).
Emerging Compliance Issues – Moving Toward Compliance 2.0Different Compliance Requirements for Different Firms– Advanced Country Firms and Emerging Country Firms.
Dr. Arun Sharma is Executive Director of the JAE Leadership Institute and Professor in the Marketing Department at the School of Business Administration, University of Miami. Arun has extensive knowledge of firms through his experience in consulting, and conducting seminars. He is a well known expert in Global Market Trends, Leadership Strategies, Sustainable Competitive Strategies, and Market Strategy and his expertise is in designing and implementing corporate strategies. He has consulted and conducted seminars for companies such as Accenture, Agilent Technologies, Ambrosetti, American Express, AT&T, Bell South, Citrix, Ericcson, Exxon, Goodyear, HP, IBM, Lucent, Macy’s, MasterCard, Motorola, Siemens, Sprint, Telecom Italia, Telecom Italia Mobil, Visa International, Wal‐Mart and Western Union. He has extensive expertise in business and consumer markets, technology, financial, telecommunication, healthcare, consumer goods and consulting industries.
He has previously taught at the University of Illinois at Urbana‐Champaign where he received his Ph.D. in marketing in 1988. Arun also has an MBA and a Bachelor of Engineering degree in Metallurgy. Prior to joining the academic world, he worked for three years in a high‐technology firm where he handled product management and sales management responsibilities.
Arun has published extensively (over 80 refereed articles) and is on the review board of major journals and has received many excellence in research and excellence in teaching awards from the School of Business Administration at the University of Miami. He can be contacted at 305.284.1770, Fax: 305.667.2557 and email: [email protected].