The healthcare industry is in part driven by patents, which naturally creates a lot of NDA’s and secrecy. But it is with business as with life: You cannot do everything on your own.
However, a new approach to doing business emerges these days in the healthcare industry. The Sustainable Development Goals (SDG) highlight 17 relevant goals to establish a more sustainable world. Number 17 is about partnerships, and some people have labelled this the most important SDG, because it is necessary to reach all the other SDGs.
Many pharma, Medtech, and healthcare systems have set sustainable goals, but the road is still hard and often unclear, when we move beyond scope 2.
So let us take a dive into the value that partnerships create. If handled right, partnership contribute to innovation, increased sustainability, and economic gains. Be they partnerships in take back-solutions, clinical development, production or new ways of valuing and pricing treatment.
Partnerships as a driver for innovation
The traditional approach to innovation is closed innovation. In this approach, the ideas are created internally and then evolved into a concept to manufacture and commercialize through the vertically integrated structures inside the pharma companies.
In this way, the pharma companies can protect their IP without the risk of revealing company knowledge and thereby get exploited. However, research indicates that protecting IP does not automatically lead to success. Perhaps that is one of the reasons, industries in general have recently started experimenting with newer business models, based on harnessing the collective creativity through open innovation.
Open innovation requires a more flexible business model where innovation can be created in collaboration between internal and external ideas, knowledge and expertise. The goal is to tap into knowledge, expertise and creativity, external from the organization.
The leveraging of outside scientific expertise during open innovation processes improves the probabilities of big pharma to gain access to breakthrough discoveries. As the rate and the amount of innovation keep accelerating in the many sectors of the industry, it is challenging for the companies to seize all of it.
A growth in partnerships across the pharma companies has already begun and some of them even look towards smaller companies or academical institutions. R&D consortia, which is a form of open innovation, has grown radically within the last 20 years between biomedical companies.
For those who wish to lead innovation and be frontrunners of their markets, an open strategy is an essential and valuable model.
Partnerships as a driver for increased sustainability
Unlike larger and slower companies that tend to lack behind market changes, entrepreneurs can bring new solutions to the market rather quickly.
Recently, efforts to reach out to the small and medium-sized enterprise (SME) ecosystem from large companies seem to be increasing, which could potentially help the industry to gain desperately needed agility in order to facilitate a new, more sustainable pharma landscape.
The value of these innovative partnerships has been recognized by pharmaceutical executives and frontier innovators alike. At Novo Nordisk, building a more sustainable business has been a priority for 20 years. But in 2018, leaders agreed that they could think even bigger than wind farms and carbon offsets.
The Circular for Zero initiative (as they called it) aimed to reshape and develop more sustainable insulin injector pens.
Each year, Novo Nordisk builds and distributes half a billion injector pens worldwide – many of which end up in landfills and take about 100 years to decompose. To address this problem, Novo Nordisk teamed up with MATTER and Green Innovation Group to host the 2019-2020 Novo Nordisk Innovation Challenge: a global search for solutions to help Novo Nordisk improve the recyclability and circularity of these pens.
Four out of the five participating SMEs ended up having pilot projects with Novo Nordisk and the solutions are breaking new ground in the efforts towards a more circular medtech sector.
This collaboration thus serves as a model for how competitive corporates in the field can raise the bar on the sustainability of the industry, while simultaneously strengthening their network of suppliers and the offering towards the market.
Partnerships as a driver for economic gains
In 2017, Unilever Foundry, a global platform for innovators and startups, released a report that predicted corporates and startups will work in the same physical space, side by side, by 2025.
The report shed light on three critical factors driving the need for strong collaboration between startups and corporates: learning something new, improving efficiency, and solving business problems in new ways that have the potential to scale.
Market leaders often favor rational investments as the financial structures seem more attractive; products generally have good margins and therefore, great profits. Moreover, they are often valued by the mainstream market and are used by the most profitable customers.
Disruptive products are the opposite and therefore, most organizations only invest in disruptive innovation when it is too late.
Smaller companies with fewer set structures and management practices do not focus on the mainstream market, but rather on niche markets. They develop products through trial and error. These processes are more likely to foster disruptive innovation than the practices of leading companies.
Thus, smaller companies grow their customer base and niche markets become mainstream. At that time, it is too late for the large market leaders to follow.
In 2017, The Pharmaceutical Innovation Index (PII), which ranks a company’s ability to deliver innovation to patients, confirms that the ones which address R&D with a creative way of early-stage collaborations, lead the market.
A comparison between the dollars invested per approved drug developed by startups and big pharma was conducted to compare the R&D productivity of both sides. The results show that startups discover more drugs than big pharma, with less capital.
This suggests that startups are more efficient and creative with their R&D efforts than big pharmaceutical corporations. And that is just one good reason to team up.
Bridging the gap through partnerships
There is a clear gap between ways of working in a large company compared to a startup, as startups typically have the willingness to take risks and work through trial and error with promising ideas that accelerate disruptive innovation.
Smaller companies, such as startups that focus on niche markets, do not need to worry about the large players in the market, which gives them more freedom and time to develop their technology. Therefore, they are more capable of pursuing emerging, growing markets even though they often lack resources and are not usually considered as a threat to the leading companies.
On the other hand, large companies typically have more market shares, economic resilience, and more manpower. By partnering up, both sides gain on financial, sustainable, and innovative parameters.
References
- CBInsights (1) 2018. Big Pharma’s Bets: Where They’re Investing And Acquiring Across Biotech, Drug Delivery, And More [WWW Document]. CB Insights Res. https://www.cbinsights.com/research/big-pharma-investingprivate-markets/ (accessed 2.17.20).
- Chesbrough, H.W., Appleyard, M.M. 2007. Open Innovation and Strategy. Calif. Manage. Rev. 50, 57–76.
- Christensen, C.M. 1997. The innovator’s dilemma: when new technologies cause great firms to fail. The management of innovation and change series. Harvard Business School Press, Boston, Mass.
- Ding, B. 2018. Pharma Industry 4.0: Literature review and research opportunities in sustainable pharmaceutical supply chains. Process Saf. Environ. Prot. 119, 115–130.
- Freeman, J., Engel, J.S., 2007. Models of Innovation: Startups and Mature Corporations. Calif. Man- age. Rev. 50, 94–119.
- Hinds R. n.d. The Importance of Collaboration Between Startups and Big Companies https://www.affinity.co/blog/startup-and-big-company-collaboration
- Hunter, J., Stephens, S. 2010. Is open innovation the way forward for big pharma? Nat. Rev. Drug Discov. 9, 87–88.
- IDEA Pharma, n.d. Transforming Strategy At Phase II [WWW Document]. IDEA Pharma. URL https://www.ideapharma.com/pii (accessed 5.11.20).
- Ioannou, L. 2018. Big Pharma’s billion-dollar scramble to invest in start-ups to fuel innovation [WWW Document]. CNBC. https://www.cnbc.com/2018/03/26/big-pharmas-scramble-to-invest-in-start-ups-to-fuel-innovation.html (accessed 2.17.20).
- Murphey, R. n.d. Are startups 5x better at R&D than big pharma? [WWW Document]. Bay Bridge Bio. https://www.baybridgebio.com/blog/rd_bigpharma_startup.html (accessed 2.17.20).
- Olk, P., West, J. 2020. The relationship of industry structure to open innovation: cooperative value creation in pharmaceutical consortia. RD Manag. 50, 116–135.
- Quelch, R., 2020. How pharma can adapt to climate change [WWW Document]. Pharma-Phorum. URL https://pharmaphorum.com/sales-marketing/how-pharma-can-adapt-to-climate-change/ (accessed 4.14.20).
- Weiblen, T., Chesbrough, H.W. 2015. Engaging with Startups to Enhance Corporate Innovation. Calif. Manage. Rev. 57, 66–90.
