Biomedical Engineering Reference
In-Depth Information
amassed conceptual understanding gives rise to reasonable data proxies and ave-
nues for data augmentation; previously arcane mechanisms and procedures are
made more transparent through case studies and open discourse.
Most of the academic papers cited in this chapter have focused on capturing the
drivers behind successful innovation outcomes while accounting for factors ger-
mane to the pharmaceutical industry. Now that the readers are more familiar with
the complex landscape in the industry, we will briefl y discuss other academic fi nd-
ings illuminating additional aspects of the drug innovation process. Of course, we
are limited by space considerations so this review will be somewhat sketchy, but we
hope that even a brief exposition will incite the curiosity of more researchers to
focus on this domain. Readers interested in a good summary of strategic marketing
decision models in the pharmaceutical industry are referred to the detailed compila-
tion by Shankar (
2008
).
2.3.6.1
Risk-Taking + Investment in R&D + Good Luck = Business
Viability and Market Dominance
The sources of today's strategic and performance heterogeneity in the pharmaceutical
industry were examined by Lee (
2003
). In a historical study on the development trajec-
tories of the US pharmaceutical fi rms from 1920 to 1960, he traces the current power-
houses back to their origins, and most importantly, to the decision to embrace large-scale
manufacturing of antibiotics in the 1940s despite the uncertainties prevalent at the time.
Considerable investments in R&D made this possible, although the risks were substan-
tial. Also, those early innovators were able to charge premium prices. The most success-
ful of them have managed to sustain their dominance in drug innovation by investing
the market proceeds into hiring biologists and scientists at an increasing rate, which
ultimately enabled them to branch away from antibiotics (Lee
2003
).
Other pharmaceutical fi rms (imitators) chose not to commit considerable
resources to R&D and survived for a while by selling existing, known products at
low prices, thus remaining peripheral to drug innovation. The initial choice of prod-
uct strategy, perhaps infl uenced by the risk adversity of the fi rms' management teams
at the time, has acquired irreversible momentum over the years, persistently widen-
ing the gap between these two groups (Lee
2003
). A third group of less successful
early innovators, constrained by modest market returns, could not sustain the high
levels of R&D investment needed for risky innovation, and have either morphed into
imitators or vanished altogether. This study demonstrates the stickiness in early stra-
tegic choices, as they get reinforced and perpetuated by their own consequences.
2.3.6.2
The Importance of Investing in Own R&D
Synergies between biotech fi rms and large pharmaceutical companies seem natural
given their co-specialized assets. Indeed, the multiple licensing agreements and the
numerous alliances in existence nowadays can certainly attest to the signifi cant
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