Pharmaceutical procurement teams need to change their approach to alliance management. Is trust the key to success?
A few years ago I had the opportunity to be part of a ground-breaking initiative with our suppliers. We sent a team to the boards of some of our major suppliers and asked a simple question: “Why is it that you are always late and come in over budget?”
To which they said: “Why is it that you always change your mind about what you want and interfere in the way we deliver it?”
It was then logical to respond: “If we promise to not change our mind and to leave you in control, will you deliver on time and budget?”
They agreed and so a new contract was created.
20 years on and the same questions still seem to remain, and now, more than ever there is a need to change our approach.
I believe that the solution to the challenges of clinical development today do not lie within our own organisations, but between our organisations, and should be accessed through increased collaboration unpinned by deliberate trust
To investigate this, it’s useful to consider three questions:
- Why do we need to change?
- Why should we collaborate?
- How can we trust someone outside our own company?
Why do we need to change?
The pharmaceutical industry has seen the need for change for years, and the same underlying factors remain:
- A clear constraint on resources;
- The number of NCEs per year decreasing dramatically; and
- R&D costs rising, reportedly having doubled in the last decade alone.
Meanwhile, we need more specialised patient populations, there is a lack of easy wins as drug targets, and we face the continually tougher regulatory environment. All of these have contributed to longer development times and rising costs.
These same problems are threatening the level of potential investment. We have witnessed the death of the blockbuster as the magic answer, while at the same time seen cost pressure on sales. The patent cliff is a real problem in many companies, there is generic competition, and sadly mega-mergers have been ineffective, cutting staff costs without delivering efficiency.
If we do what we have always done, we will get what we have always had.
Why should we collaborate?
Basically there is no alternative! In a world of increasing communication, it is hard to keep knowledge secret. Employees no longer stay decades at the same company, and staff turnover is far higher than it was.
The Internet allows for very quick sharing of data. It’s also a reason why information leaks. So let’s stop keeping so many secrets and start to share information first.
The market place is very complex. The top pharmaceutical companies hold only around 6 per cent of market share, while the top 7 Contract Research Organisations (CROs) combined hold only around 50 per cent of the market.
In this situation innovation is critical and anyone (regardless of size) is a potential source of the answer. This includes totally new players, as any quality questions can be managed. Someone else knows something you do not. If you want something, it is out there!
How can we trust someone outside our own company?
We have to start by wanting to trust – trust is necessary to access new solutions. This means that we have to be open, to accept others, to make sure that we are reliable in ourselves, and live congruently with our values. In this way we communicate trust.
Of course it is also important to have a right worded contract. After all, incentive is better than enforcement, and a new way of working may need new contract wording.
In this we should look carefully at what is being bought and make sure this is reflected in the T&Cs. For the lawyers – a standard template may not be appropriate. In any contract, payment should be linked to goals and should incentivise both parties. There are many other relevant contractual matters.
There is nothing wrong with walking softly and carrying a big stick.
Trust is the only way forward. But this is not a short path, we need to be ready for the long term, trust takes a while to establish and can too quickly be lost.
We need to do something different. We need to access new innovative solutions. It is time for increased collaboration with partners, underpinned by deliberate trust.