Successful companies and even entire industries all have a lifecycle, and all eventually reach a point where their business model approaches the end of that lifecycle and is no longer viable. Companies that are early in recognizing the shift and can execute the successor model effectively will typically become leaders in the next stage of the industry’s development. Sometimes the transitions are incremental and gradual; more often, they involve discontinuity and dislocation. The outlines of the transition are always clear in retrospect, and most of our wisdom about such transitions derives from retrospective analysis. But what is the appropriate advice for companies that are in the middle of a transition when the old model still appears to have life remaining and the new model is underdeveloped and unproven?

This is the situation facing the global pharmaceutical industry today.  It’s well known that pharma is going through a tough time.  It’s now fashionable among politicians, pundits, and journalists to criticize all the ways in which the industry’s pursuit of profit conflicts with the healthcare needs of patients.  The industry has had to bear greater scrutiny and skepticism from all its stakeholders than it has known for generations.  The tangible impact has taken the form of patient lawsuits, governmental investigations, increasingly aggressive efforts of third-party payers to influence pricing and utilization of branded drugs, a more cautious approach to clinical evidence and new drug approval on the part of regulators, and new constraints on sales and marketing practices.