Global pharmaceutical (pharma) companies are up against it. The patents of blockbuster drugs from Pfizer, GlaxoSmithKline and Novartis, to mention three, are about to expire; replacing them with new drugs is getting tougher. Research productivity is down; investors have begun to ask hard questions. Consumers are protesting high drug prices, and governments and insurance companies in western countries are listening. But companies are beginning to rethink the assumptions on the basis of which they did business, says Simon Friend, global pharmaceutical industry leader at PricewaterhouseCoopers (PwC). The US consultancy firm recently released a report titled ‘Pharma 2020: The Vision,’ which identifies these challenges, and attempts — in Friend’s words — ‘to throw up possible scenarios for the future’. BW’s Gauri Kamath caught up with Friend during his recent visit to Mumbai. Excerpts:

To what extent have the challenges outlined in Pharma 2020 been recognised by the top companies? Are any in denial?
There is recognition in senior management. Some are in denial about what the extent of the issue is. But one of the problems in a lot of organisations is you’ve got the pain understood up on top, but down in the guts of the organisation, sales are still growing, cash is still strong, profits are still strong and bonuses are still good. So they are saying, what’s the problem? That’s one of the big issues that pharma companies are going to have to address as they move into the new world — change management and people. Up until recently, pharma has been a supply-driven industry. Companies produced drugs and people paid for them. We have now moved to a much more demand-driven industry, part of the overall healthcare model. So, the concerns of the regulator, the payer, the physician, the patient and the government are all having an impact.

Is the industry consolidated or is there scope for more?
There are a lot of complications in merging two very large pharma companies. I see consolidation at the mid-tier level. I see consolidation in family-owned businesses recognising the problems coming up and saying to themselves, if we are going to extract value out of this business, when is the time to get out? And, maybe, now is the time to get out. Particularly in Europe, we saw it over the past 12-18 months. I think you will probably see a little bit more of that. You will see some defensive consolidation where people struggling through R&D pipelines come together and create some critical mass to take them through it.