Globalization in Biotechnology, Ernst & Young report (cont)

As promised here is the post on globalization, one of the three major trends driving the biotechnology industry to reinvent itself, according to Ernst and Young 2008 biotechnology report. Pharma and biotech companies are taking advantage of the ‘flattenning world,’ as described by Colin Powel in his keynote speech, and jumping into the globalization trend in the hopes of finding new opportunities for cutting costs and for increasing profits by selling to underserved markets.

In order to cut costs but not production, many Western biotechnology and pharma companies are laying off domestic workers, but also hiring new workers in emerging markets due to their willingness to work for significantly lower salaries without compromising education and/or productivity levels. The convention’s panel on the EO 2008 global biotechnology report highlights this hiring practice as a temporary solution for cost cutting and for the need to expand globally, predicting that the workers from current emerging markets will eventually raise their salaries as competition for their work increases.

From the perspective of the current emerging markets, the new hiring trend is also only a temporary fix for their desire and need to grow internationally. As new markets continue to emerge competition within the emerging markets will increase. The West will have an ever-growing pool of highly trained employees willing to work for potentially even lower salaries, making a relationship based solely on this factor somewhat unsustainable. In an effort to forge more sustainable relationships, emerging markets are moving beyond offering ‘cheaper labor’ and large bodies of “clinically naïve patient populations” to “acquiring assets from, or allying with, western companies.” Ultimately, this will then challenge and increase competition for western markets. It is worth noting that being tempted by ‘clinically naïve patient populations,’ may not be the most ethical of temptations, particularly since one of the big challenges in pharmaceutical R&D is obtaining a quality informed consent. Balancing the need and desire for innovation and for respecting individuals and communities is a continuous challenge. Even NASA struggles with finding the balance between its drive for scientific advancement and its responsibilities to its employees and communities.

A more sustainable and obvious approach regarding globalization for the biotechnology industry, involves western markets seeing emerging markets not solely as opportunities for ‘cheaper labor’ but as emerging consumer-bases, according to the report. Since these emerging consumer bases cannot yet afford to pay western prices for products, the report suggests that western companies “work collaboratively with innovative companies in emerging markets to develop products designed specifically for local conditions.”

As you can see the convention was filled with information and inspiration for professionals from all niches within the biotechnology field, from the scientists to the executive and the salesmen to a bioethicist. It was wonderful to see Vertex Pharmaceuticals taking the lead in creating awareness of the ethical challenges facing the biotech industry and courageously attempting to meet those challenges, by sponsoring the convention’s bioethics track! Thank you to Navigant Consulting, CRT-Tanaka and Nicole Ruediger at BIO for making my participation possible. The experience was fantastic and I am already looking forward to next year’s convention!

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Ernst & Young 2008 global biotechnology report “Beyond Borders”.

Ibid pg. 8

Ernst & Young 2008 Global biotechnology report highlights

The Bio International Convention hosted a fantastic panel today on the 2008 Ernst & Young global biotechnology report.  The industry is at “the start of a revolution” and aiming to reinvent itself because of three trends, shared moderator Glen Giovannetti of Ernst & Young, (1) R&D productivity, (2) personalized medicine, and (3) globalization.  This post will briefly introduce the first two trends leaving the large topic of globalization for a subsequent standalone post.

The first motivator for industry innovation is R&D productivity.  Due to patent expiration problems, Giovannetti outlined, pharma’s drug sales will be reduced by $67 billion between now and 2012 leaving pharma searching for ways to increase profits.  Consequently, Pharma is buying promising revenue-generating assets from smaller biotech companies and cutting costs by laying off employees. Unsurprisingly, pharma wants and needs to reinvent itself and increase innovation. 

The second trend driving industry reinvention and innovation, personalized medicine, is of particular interest as I am a supporter of person-centered bioethics.   Personalized medicine promises the potential for getting the right drug to the right patient at the right time using for example the patient’s own molecular information. Additionally, it changes medicine’s focus “from efficacy to efficiency,” according to co-moderator Mara Aspinall, former president of Genzyme Genetics, potentially improves its safety and eases pricing pressures.  As personalized medicine grows, the panelists predicted that consumers will focus less on a medicine’s catchy tagline and/or color and more on its results and cost, effectively widening the market’s playing field.  Interestingly, it seems big pharma’s marketing and PR practices and competitive edge will be affected.  Aspinall mentioned that currently only 50% of drugs are effective and that personalized medicine could potentially boost this number.  Not only would marketing practices be affected, but the diagnostics and IT fields would be impacted as well.  Personalized medicine needs diagnostic testing and IT infrastructure, and according to Aspinall it has not been decided who will pay for the needed growth in these areas. Personalized medicine is still in its infancy, but promises to bring innovative options to healthcare.

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