Commercial excellence in Pharma 3.0

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The pharmaceutical industry is navigating a profound transformation and companies are scrambling to adapt their commercial models for competitive advantage and a new degree of engagement that we call “Pharma 3.0.”

Pharma 3.0 requires shifting away from an arm’s length approach to patient health, one that has centered on delivering drugs to the health care system. It calls for an up-close focus on the patient, providing products and services specifically designed for health improvement and understanding what drives value for new market stakeholders.

To succeed in Pharma 3.0, pharmaceutical companies are being challenged to enable multiple business models and adapt their approaches to the market, re-aligning value propositions for numerous, rapidly changing stakeholders.

The fundamental goal is commercial excellence. We have identified three critical components for commercial excellence within Pharma 3.0:

  • Understanding what drives value: developing the ability to continuously identify, monitor and map the changing value drivers for diverse market stakeholders.
  • Taking an agile approach to the market: providing a dynamic value proposition, through appropriate channels and optimal relationships that meet changing demands along the offering’s life cycle. This involves enabling the interplay among business model development, market access and product launch around what drives value for individual stakeholders.
  • Becoming an enabling organization: taking a customer-centric view, organized around market stakeholders, and learning in real time.

In the Pharma 3.0 business model, which has been the topic in our two most recent reports on the pharmaceutical industry — Progressions - Building Pharma 3.0 (2011) and Progressions - Health care everywhere (2012) — the industry will collaborate with other players, such as information technology companies, medical technology companies, food companies and retailers, to deliver patient-centric products and services.

EY infographic of health outcomes go-to-market strategy

Understanding what drives value

As changing market incentives are reshaping the health care ecosystem, the stakeholder landscape for the pharmaceutical industry is swiftly shifting. Payers and patients are increasingly taking the lead in decision-making, deciding what offers the best value for their money in terms of positive improvement in health outcomes or concrete economic benefit.

In addition, the tremendous expansion of available health data has empowered payers, for example, to be able to “mine” data as a basis for outcomes-based pricing and reimbursement schemes, and to assess a treatment’s ultimate effectiveness within a real-world environment (as opposed to a tightly controlled study environment).

Furthermore, governments, faced with the complexity of managing health care systems at the national level, have often engaged in a devolution process, granting decision power for health care to local or regional governments.

Adding to this complexity, distribution systems vary widely across countries, with wholesalers and pharmacies not only having a strong impact on how margins are distributed along the value chain but also having strong political power to influence policy-making.

Finally, in emerging markets, other considerations, such as demanding investment in local manufacturing, directly or through alliances, often come into play and must be understood and reflected in commercial strategy.

Taking an agile approach to market

In such a dynamic business environment, commercial excellence will require the provision of robust, individualized value propositions, and the agility to address and respond to needs as they evolve. This involves the interplay of four components:

  • Business model development: creating a value proposition and associated business model through commercial trials
  • Market access: optimizing relationships and working assets to best enter markets and build a sustainable presence
  • Product launch (and re-launch): optimizing the business model in terms of value proposition and communication channels during market entry or re-entry phases
  • Commercial investment portfolio optimization: conducting high-end analytics and business modeling to drive transparency around informed investment spend, to align and synchronize such activities cross-market, cross-brand, cross-channel and cross-stakeholder-group.

Becoming an enabling organization

At the enterprise level, companies need to build new core capabilities for success in Pharma 3.0. These new capabilities will enable connecting information, collaborating radically and operating multiple business models simultaneously.

The commercial organization also must realign itself around markets and stakeholders. To do this, information on all stakeholders, and on what drives value for each of them, will need to be managed centrally and integrated into business model development, market access, and product launch activities.

Yet the dynamism of the market and the interplay among these activities will require an agile organization with silos removed and enabling functions closely aligned in culture, behavior, management and performance measurement.


Pharmaceutical companies are being challenged to adapt their commercial models to offer individualized value propositions increasingly centered on delivering health outcomes. To achieve commercial excellence in this environment will require insight — insight into value requirements and insight into what it is that determines and drives certain behavior. It also depends on the ability of an organization to collect, assess and reflect market learning, in real time.