Change in the Pharmaceutical Industry : Aspects on Innovation, Entrepreneurship, Openness, and Decision Making

Abstract: Over the past century, the pharmaceutical industry has been a major contributor of individual and population health and societal wealth. Its products and services have contributed to longevity of large groups of patients and symptom relief from major diseases. However, during the past 2 decades, the innovative capacity of the pharmaceutical industry has lagged behind, and there have been concerns and discussions on the prevailing business model of the industry, and whether it needs to be refined and altered. Development of a new drug is a time-consuming and complex undertaking, which involves elements of discovery as well as process development. Recently, the average cost of developing a new molecular entity (NME) was estimated to be around U$800 million for small molecules and around U$1,300 million for biologics. If post approval costs for Phase IV studies, costs to gain regulatory approval in various global markets and costs for obtaining additional label claims for new indications are included and adjusted for cost increases and inflation, the cost estimates per NME increase to U$1,754 million for small molecules and U$3,911 million for biologics. Revenue streams from global market sales are only able to offset these escalating costs to a limited extent. The present dissertation focusses on the on-going change processes in the pharmaceutical industry (Big Pharma). An important change process is related to open information and open intellectual property (IP) platforms. The work also relates to entrepreneurial orientation, inherent project uncertainty and decision modelling. In the biomedical field, there are an increasing number of stakeholders that collaboratively develop, package and build transactions around technology. Such open innovation model differs from the classical closed innovation model when openness is structured in open networks and business consortia. This thesis provides examples of how open innovation models function in the context of the pharmaceutical industry and how Life Science companies could design their IP-strategies to optimize the value extraction potential from open innovation in general and open IP platforms in particular. The present work also investigates perceptions of experts within the pharmaceutical industry and allied health sectors, with respect to entrepreneurial attitudes, intent and engagements during pharmaceutical innovation and new drug development. It was shown that positive attitudes and orientation towards entrepreneurship are perceived to be of high value for the early strategic selection and validation of the drug target area, for costs assessments and pharmacoeconomics, as well as for positioning and marketing of a new drug to patients and the public. Entrepreneurial traits were however judged to be less important for some major process steps during preclinical and clinical development. Based on real scenario cases, this thesis also investigates how employees make judgments in the pharmaceutical industry and allied health care sectors. Each case study relates to go/no-go decisions taken from the various steps in drug discovery through preclinical and clinical development (IND) on to market introduction (NDA) and treatment of the target population. Results revealed that there is a major inter-individual difference between experts in their individual intuitive go/no-go/recycle decisions during the drug discovery and development process. This lack of coherence and wide variability with respect to the drug development cases selected may reflect judgment  in the real world. Accordingly, increased openness, entrepreneurial awareness and orientation towards entrepreneurial engagements and skills may help the pharmaceutical business sector to improve vital parts of its value creation processes. Also, by modelling decision-making in real cases from initial drug discovery to late development and marketing, in pharmaceutical industry R&D, we demonstrated that rational decision-making can commonly be managed by a group of 10 – 15 experts when mean group judgments over a series of decision points are clear go decisions. However, when mean group judgments from one decision point to another vary from go to stop in a specific case, i.e. involves a recycle component, there will be a need to expand R&D expert input substantially. In such cases, the drug development processes more or less takes on the form of an open innovation process. Thus, our findings may be used to construct a new model on how to plan and model the size of expert input in structured decision processes similar to those practiced in the pharmaceutical industry. Based on the findings in this thesis, it may be concluded that high-tech innovation in the pharmaceutical and biotech sectors show signs of movement from a closed to a more open innovation paradigm. This change is driven by several factors such as the possibility of rapid and unlimited communication through the Internet, the increasing global availability of experts for complex decision-making, the international reach of innovators and entrepreneurs, the need of the venture capital market to support appropriate investment cases, as well as the increasing possibility and interest of external suppliers and interest groups to participate in new product and service development.