Medical industry moves innovation from R&D to the supply chain

June 27 2013

When it comes to the pharmaceutical industry, the idea of competition via innovation has been a widespread adopted concept. Traditionally this means pharma businesses are pouring money into the research and development hoping to come up with the next great drug.

According to a recent Xconomy column by Noubar Afeyan, this approach is starting to lose its effectiveness. Several companies like Pfizer and Sanofi have cut their R&D budgets in recent months and are causing a major shakeup in the industry.

But there is a good reason for this. A study by Oliver Wyman found that the value generated from every dollar invested in medical R&D has dropped by over 70 percent. On top of that from 1996 through 2004, drug companies produced $275 million in five-year sales for every $1 billion spent on R&D. From 2005 through 2010 that number has dropped by $200 million.

Because of this, phrama businesses need to start looking at other ways to innovate and one of the top ways is through the supply chain.

"The concept of an innovation supply chain aims to capture the diverse participants and organizational linkages involved in the ultimate delivery of an innovation's value to its end customer," Afeyan wrote. "Ultimately, we can imagine innovation supply chain managers focused on the cost, efficiency of supply, predictability, flow of information and other resources, optimal linkages, incentives, and many other means to maximize realized value."

With the help of a business supply chain partner that is experienced in the medical industry, any company can change the way they ship and optimize the solution.