Business model innovation in the pharmaceutical industry

26 February 2014 16:38

(updated: 18 December 2016 16:40)

Business model innovation in the pharmaceutical industry

The pharma industry is under massive pressure. This context has prompted a widespread experimentation with the business models in the industry.

The pharma industry is under massive pressure. Politicians, insurers and others put pressure on the industry to lower its prices. Patients are increasingly interested in and knowledgeable about treatments and their effects. Many argue that technological opportunity in the industry is dying out, as companies have to pour increasing funds into building shrinking pipelines of new potentially marketable drugs. This context has prompted a widespread experimentation with the business models in the industry. Thus, companies seek to get closer to patients and build services into their offerings. KPIs, job descriptions and other aspects of internal organization change in the process. At the same time, the pharma companies are changing their boundaries as they engage in new partnerships.

In “Business Model Innovation in the Pharmaceutical Industry: The Supporting Role of Organizational Design,” Klement A Rasmussen of the Danish pharma company (Leo Pharma), and I, detail these changes in the industry, focusing on three ideal typical modes of business model innovation, the “incremental” or traditionalist model, the full-blown service-oriented model, and the in-between or “transitional” model, exemplified by Novo Nordisk, UCB and Leo Pharma, respectively.  You can download the paper here (but you will need to have or set up an SSRN account).