McKinsey Quarterly, a business and strategy journal I respect and enjoy reading, did a recent article “Pharma manufacturing for a new era: The sector can restore lost value by focusing intently on manufacturing innovation.” This was one that I found logical sounding, but also found difficult to completely agree with.
It is an interesting analysis of what pharmaceutical industry players need to do, to be more like other big industries, in manufacturing operations. But therein lies the rub… pharma cannot completely be like other industries. The writers give examples of how it can learn from archetypical firms like Intel and Disney…. and the steelmaker, Nucor, which left me completely amazed.
Pharmaceutical firms face existential threats not because they do not have cool manufacturing plants like Intel, but when they spend billions in what can sometimes be nothing more than a scientific educated gamble. They can come up with something that “seems to work OK” and then be denied the right to sell the resulting product — as it may have side-effects no one can predict — because the ultimate recipient, the human body, is still such a mystery.
Keep in mind, I am no defender of pharma, much less any big industry. But, I want them to get a fair shake. Like many industries that get too big, and can (seem to) make “obscene” profits in the eyes of people, pharma gets the worse of both words compared to banking, oil companies, etc.
On the one hand people accuse them of exploiting suffering and on the other hand complain about the lack of more blockbuster drugs. That is not even counting the conspiracy theorists and others who suggest governments and pharma companies conspire to sit on cures for things like cancer “to make more money.” {How NOT selling a cure and sitting on it makes more money they are unable to explain}.
We want firms to fund billions in research at their own risk, but ask them to throw it away the minute one patient in a trial dies of a heart attack (as happened just this week with a major drug trial). We put them through onerous processes that can take years, if not decades, then we complain about the time to market for new drugs. We look the other way when they lose billions on a failed drug, but then complain when they finally make a profit on something that (seems to) work… at least until some unknown side-effect pops up years later.
Much that we like Utopian ideals of only launching drugs that have no side-effects, and cost very little, we cannot forget that we live in the real world.
Intel can design a new version of a chip, usually based on an existing architecture, or even a new one entirely, but most likely targeted at one of its usual areas… e.g. CPUs for PCs, or cell phones. Pharma does not have the luxury of saying, we will keep redesigning and launching new versions of a drug every 90 days going after the same sore-throat market as the existing product.
Intel can decide to enter a new industry, say, chips for car entertainment systems, but using almost all the same core knowledge, with the same known laws of physics, electronics engineering and manufacturing, that they use for their other chips. Even if they decide to go into some new type of ASIC (application specific integrated circuit), they can use existing knowledge, skills, processes, people, manufacturing and some levels of innovation to quickly bring the chip to market, seed it to OEMs, see how it works, and go back to designing the next version improving on the last one. They do not have to wait for a trial of 100,000 devices over 2-5 years while they await approval from a government authority (like the FDA in USA) before they can actually “launch” or monetize the product.
The writers’ giving the example of Disney in a discussion on pharmaceuticals left me even more puzzled. Yes, DIsney went from a movies-based business into an entertainment conglomerate, but how does that relate to pharmaceutical manufacturing? Should pharma firms start selling soda, chocolates and cigarettes to move from being a medicine-based business to a “conglomerate of products that go down people’s throats”?
The final comparison the article above makes is to the steel industry, mentioning Nucor. I am sorry, but which one of us would like to have our medicines, that go into our mouths, stomachs, hearts, brains, and bloodstreams, be made by pharma companies that somehow emulate (no disrespect to steelworkers) the steel industry!?
Yes, pharma firms need to focus more on strategy (all industries do), and learn from every other industry what makes sense to learn and emulate. Yes, they need more innovation (all industries do). Yes, we all know, almost any known product or manufacturing process in the world can be improved. NO, you cannot emulate Disney, Intel and Nucor to somehow become more successful in creating, manufacturing, and delivering safe, reliable, inexpensive, drugs that will win approval, of authorities, doctors and the rest of us.
Such blind emulation of other industries like Technology, Steel & Entertainment can kill not just the Pharma industry, but real people, like us!
