It is not rocket science for any business executive to know that if your business model is not based on customer-centric strategies, it will soon be made obsolete by market forces. The pharmaceutical sector in the United States, has however, opted to move its strategy in a direction that it is based primarily on doing almost everything against the interests of its customers. The recent revelations about Merck and Pfizer have further shown that the drugmakers really don't understand what it means to develop a customer-centric strategy.
As I have argued in the past, the business model of drug industry is failing. It is relying too much on regulatory changes and government support to sustain its business model rather than refining its business model to match the new realities.
The import of prescription drugs from Canada is a classic example of how the drug industry wants to alienate its customer base with the help of the government. The report submitted to Congress by the Health & Human Services Task Force after studying the issue of importation of drugs from Canada reads as if it was typed in the offices of PhRMA (Pharmaceutical Research & Manufacturers of America). The arguments are so lame that they will not convince even a six-year old what to say of adult Americans, who overwhelmingly support drug importation. This spirit was very well verbalized by Rep. Bernie Sanders who says, "“It is ironic that two weeks after the HHS announcement that millions of safe and affordable flu vaccine doses will be imported from Germany , HHS is releasing a report saying drug importation cannot be done safely and affordably. This report is reflective of the entire Bush policy to protect the financial interest of the pharmaceutical industry over the health of regular Americans. Four states in our country, a number of cities and millions of Americans are currently purchasing safe and affordable medicine from abroad. The fact that the Bush administration continues to bury its head in the sand and dutifully parrot the drug company line will not reverse this trend. If we can import beef, poultry and vegetables safely from abroad then there is no reason we cannot figure out a way to safely import prescription drugs. The momentum remains with the American people."
How to develop a customer-centric business model in the pharmaceutical sector?
- Talk to your customer. It is fairly obvious that the pharmaceutical companies have a serious image problem. A recent Gallup survey finds the pharmaceutical industry is perceived very negatively by the American public, ranking 24th out of 25 business sectors included in the poll. It does not help the sector to rely on the government to communicate that it is protecting the drug companies even if it means it is not in the best interests of Americans (it is amazing to me how many pharmaceutical companies talk about putting patients first, even Merck, but do entirely opposite things).
- If you don't adapt, someone else will. That is the new mantra in a world that is increasingly small and information flows seamlessly. Indian drug companies are already making inroads, Americans are flying to India and other countries for medical treatment, and Canadian pharmacies are establishing sophisticated supply chains to provide Americans with the drugs that they need (market demand always creates development of safe and reliable support systems though there will always be instances of minor fraud, and that is where we are today).
- An average customer doesn't care what it takes to develop or approve a drug. What they want are affordable and safe drugs. And American pharmaceutical companies can do both of these by using these two customer demands as the guiding principles of their business model rather than fighting (with the help of the government) with their customers.
Recommended article: Drug companies need business model transformation