How open innovation could reinvigorate the pharmaceutical industry with fresh R&D opportunities

The pharmaceutical industry is struggling. It has reached a critical point in time, as most key players are asking more or less the same questions. How can we increase innovation? How can we increase productivity? How can we improve the value added to the patients and shareholders? Is the ‘blockbuster model’ viable? If not, what can be done to replace it?

Pharmaceutical innovation is often divided into therapeutic innovation and pharmacological innovation, hereby distinguishing between benefits to patients versus existing treatments and improved pharmacological characteristics, not leading to clear efficacy benefits [101]. While this seems appropriate when looking at the molecules, a broader understanding of pharmaceutical innovation is required – particularly when discussing new business models.

The cost of bringing new medicines to patients has increased dramatically over recent decades, while the productivity has declined [1]. It is estimated that the total capitalized cost of bringing a new molecule to the market is somewhere between €800 million and €1.3 billion [2] and the median total time to achieve this is approximately 13 years. Thus, it is not surprising that the return to shareholders for the pharmaceutical industry has decreased significantly during the last decade to a point at which it is now questionable if there is any positive return at all [3].

Many factors have contributed to the current state of business for the pharmaceutical industry. Among those most often mentioned by industry executives are the high costs of drug discovery/research tools, chronic and complex indications, clinical trial size, patient recruitment/retention during clinical trials, late stage attrition and increasing regulatory demands. The latter is probably one of the key factors for high development costs owing to risk-averse behaviors from authorities such as the US FDA [4]. In addition, the increasing focus of cost–effectiveness of new treatments and introduction of further ‘reviews’ such as Health Technology Assessments (HTA; e.g., National Institutes for Health Research [NIHR] Health Technology Assessment programme [102] and European Network for Health Technology Assessment [103]) increases the complexity of bringing new drug treatments to patients.

It is surprising, however, to realize how little focus we have had on the failure of our business model. It seems like the industry has spent a lot of energy finding explanations to its problems rather than to fundamentally rethink the way we discover, develop and market our products, and perhaps more importantly: what is it exactly we want to bring to the patients in the future? Recent examples of companies rethinking the way they develop compounds do illustrate the value of collaboration and implementation of newer thinking [5,6], such as a stronger focus on translational research in development programs and collaboration through consortia. It does of course raise issues around ownership of the intellectual property (IP) when academic institutions discover new treatment concepts/molecules, but this can be solved by setting up joint ventures owing the IP. Recently, numerous public–private consortia have also been set up, indicating a mutual interest in broadening scientific collaboration [7].

While there are numerous examples of other companies, who successfully innovated new business models (e.g., Amazon with online distribution of books and Starbucks with its redefinition of the benefit of coffee) or fundamentally transformed their business model (e.g., IBM moving from main frame to PCs and Apple entering the music, MP3 player market with the iPod^®, a product innovated and developed through open sourcing), the pharmaceutical industry has done little, if anything to innovate its business model. We are still bringing molecules (traditionally chemical entities, but recently also biotechnologically engineered large molecules) to the market, and we are still developing them the way we have done for the last several decades.

One of the key drivers for not changing the business model has been the extraordinarily high return of investment seen years back (and now minimized, as mentioned earlier), partly driven by the IP framework allowing companies many years of market exclusivity. This IP framework – now sometimes referred to as the ‘old IP’ – has recently been criticized for being a key culprit in the decline of innovation. In a remarkable report from last year, the International Expert Group on Biotechnology, Innovation and Intellectual Property concluded that a ‘new IP era’ that focuses on cooperation and collaboration is slowly emerging. IP is meant to assist in this process by encouraging cooperation among various brokers and stakeholders. The best innovative activity occurs when everyone – researchers, companies, government and nongovernmental organizations – works together to ensure that new ideas reach the public, but are appropriately regulated and efficiently delivered to those who need them [8].

With the kick-off of the Critical Path Initiative by the FDA in 2004, and the Innovative Medicines Initiative (IMI) by the EU and European Federation of Pharmaceutical Industries and Associations (EFPIA), governments are clearly signaling the importance of boosting the innovation and productivity in the pharmaceutical sector, as the lack of new, clinically value adding treatments is becoming clearer. But what can we – the key player in this field – do ourselves?

It is perfectly within our ability to redesign our business model. This could include the development and marketing of integrated healthcare solutions rather than simply progress and market molecules. The product we would bring to the end-users could typically consist of:

• • A drug (key competence of the pharmaceutical/biopharmaceutical company);

• • A diagnostic or theranostic (e.g., a chip or a system by which responders/nonresponders to a given treatment can be identified a priori or a technology by which early diagnosis of an underlying defect in the biological system can be identified) advanced monitoring of biomarkers or vital functions (remote sensoring, nanoelectrodes/nanosensors, biomarker monitoring via chips and wireless connection to servers with advanced analysis of biomarker trends and feedback to the clinicians or patients real-time) [9];

• • Remote sensoring/compliance systems supporting early intervention and optimized dose regimens;

• • Healthcare professional and patient information systems that integrate all the knowledge about the disease, the biomarkers and the treatments integrating the patient’s own data and prognosis. Some systems are already emerging in early versions, primarily offering a place for the end-users to access all their health data (e.g., Microsoft’s Health Vault [104] and Google Health [105]).

A change in the R&D business model would lead to increased product diversity, and access to new hereto unaccessed markets. Together, the development of more individualized therapies and earlier interventions (i.e., targeting disturbed molecular networks rather than treating later-stage diseases with organ impact, which is current practice) would lead to increased R&D innovation and productivity.

It is clear that such healthcare solutions can best be innovated, developed and probably even marketed through the collaboration of many different companies from different industries sharing their expertise and IP, thus, creating synergistic, superior products, a process now known as open innovation [10]. Building on the assumptions that ‘not all the best people in the field work for us’, ‘external R&D can add significant value for us’, and ‘building a better business model is better than getting to market first’, open innovation will allow companies to increase their innovation, their productivity and ultimately even transform their business. In this aspect, it is worth remembering that innovation is not just product innovation. Equally important is process innovation and business model innovation. In many ways process innovation has been neglected in traditional pharmaceutical R&D because focus has been on project innovation. This is a pity, as many resources can be freed up by improving the processes, and better processes can in themselves further nurture increased project innovation. Innovating Business Models is generally a strategic exercise that, when successful, can transform the business completely. Open innovation can, and probably should, be explored in all of these areas. One area in which open innovation has exploded owing to its very nature is the internet.

Some companies have already been using the Internet for idea generation (e.g., Procter & Gamble’s Connect & Develop [106] and InnoCentive [107]), and while open source seems ideally suited for software developers and other IT development, it may also add value to other business, including the pharmaceutical industry.

However, open innovation is much more than smart use of the internet. It is a new way of creating business, and will require clear changes in the mindset in most, if not all pharmaceutical corporations.

Companies outside the pharmaceutical sector have already seen the value of open innovation, and are changing their strategies – and the way they are organized. An interesting example is Philips, who have pioneered in the Open Innovation arena, not least by setting up a more than 900,000 m² High Tech Campus in Eindhoven giving access to approximately 80 companies in the high tech and biotech sector [108]. This way, Philips is gradually opening their doors to a broader range of skills, IP and technologies – a process that undoubtedly will lead to increased innovation and value creation for both Philips and these companies.

Now, what is happening in our own industry and what more can we do? As yet, there are only few published examples of open innovation in pharmaceuticals, but initiatives such as the Pfizer Incubator [109] and Lilly’s Phenotypic Drug Discovery Initiative [110] seem promising. Moving forward, it will be necessary to rethink the way we plan and manage our IP. We need to ensure diversity in our skills base (bringing many different skill sets to the table), and we need to be open minded towards potentially new business areas. The thinking around sharing of IP and collaboration in a much broader sense must be implemented in all parts of the R&D value chain – and for some, this may feel like their first parachute jump. A relevant concern could be that a change in IP policies could lead to decreased intercompany competition stimulating an oligopolistic pharmaceutical market. This would require that open innovation actually removed several players from the current field – a field that already today is very crowded. When changing a business model, as described above, much of this IP sharing would not only take place between pharmaceutical companies, but would be equally important between pharmaceutical/biopharmaceutical and other industries, such as IT, mobile phone and nanotechnology. In itself, this opens up for new product types and new markets, as mentioned earlier.

We need to have courage enough to start thinking game change in our industry. This means fundamental rethinking of our business model and willingness to implement major changes, and will require tough, but necessary, discussions amongst regulatory agencies, prescribers and other healthcare professionals, patient organizations, recommenders (such as the NICE [111] and the HTA) and payers. It does not seem to be a matter of if we need this, rather it is a matter of when we will see the change.

Financial & competing interests disclosure

Thomas Senderovitz is an employee of UCB SA. The author has no other relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript apart from those disclosed.

No writing assistance was utilized in the production of this manuscript.