Wednesday, January 27, 2010

DDP 2010: Pharma Pipeline innovation in the age of the Pharmaceutical Minibuster

Chris Anderson
Author The Long Tail: Why the Future of Business is Selling Less of More and Free: The Future of a Radical Price

Chris begins the presentation by demonstrating the end of the blockbuster. He issues this in with the N Sync No Strings Attached CD, which is the best selling CD of all time. It was the last real blockbuster in music. It hasn’t been updated in the last few years, but blockbuster albums have essentially fallen off a clip in the 2000s. The demand for music is not down, the record labels are having trouble. Music playing devices, concerts, and licensing is very high. It’s now a fragmented market. There are 10 million tracks on iTunes. We’re seeing a different music landscape, and music does not fit all, techno, pops, blues, and we all choose our distinctive taste.

Supply was confused with demand, this was one example. We accept what we’re given, until the 20th century market choices have expanded from 10 to 100 choices. Demand is shaped like a bell curve, try to find a middle ground to appeal to the most customers. The Long Tail curve actually fits it better.

Long tail graph as opposed to the long tail curve: Doesn’t have an average, it goes on forever
We find that a few things are really popular, and many things are not as popular, but still appeal to a specific crowd.

The culture we grew up in was dominated by blockbuster products. This is what the retail channels want. Example: at Walmart, if two don’t sell a week, it falls off the shelves. The internet has changed business, it has infinite shelf space. The long tail has been extremely lengthened, and consumer can really find and choose what they want. With the Blockbuster industry of music, about 40% of the market was not seen.

Long tail rules: 1) If you lower the cost of creation and distribution, you can offer more products and variety. 2) “More Variety” means products are available to satisfy more minority tastes 3) There Is lots of room at the bottom for many different individualized tastes to be filled.

What does this mean for Pharma?
-Blockbusters are now Niche Busters. One size doesn’t fit all, and while niches haven’t been economic to date, they can better fulfill the market. The Pharma market is going to have to follow suite.
-Diagnostic boom of individualized patents. Companies are finding out the uniqueness of individuals.
-Electronic Medical Records. These allow for better targeting and treatment
-Informed/empowered patients – Informed can demand more specialized care. Patients can see more information, which empowers them, and can better characterize their individual needs.

Sometimes, we have to give something for free. Even though healthcare is expensive, DNA sequencing cost is decreasing in much the same why as computer chips have over the years. Free goods are not new to Pharma. It’s the patent work that is expensive to obtain, but producing the finished pill as a good costs significantly less. The cost of obtaining biology information is decreasing, so what will Pharma do to make up for the shifted revenue?

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