Dispatches from FT Global Pharmaceutical and Biotechnology conference, London

Quintiles CEO: Change in R&D paradigm must come from Pharma's boardrooms

By Dan Stanton contact

- Last updated on GMT

Quintiles CEO, Tom Pike, speaking in London on Monday
Quintiles CEO, Tom Pike, speaking in London on Monday

Related tags: Pharma industry, Investment

Vertical integration is inhibiting pharma R&D innovation, according to Quintiles CEO Tom Pike who says executives must be involved in selecting CROs.

At the FT Global Pharmaceutical and Biotechnology conference in London, UK this week, Tom Pike - CEO of the largest contract researcher organisation, Quintiles – told executives and investors the pharma industry spends around $90bn annually in development with just a 7.5% internal rate of return.

“We are not making the cost of capital when it comes to R&D spending, so as an industry something needs to change,”​ he said, and while admitting “service providers are not perfect,”​ CROs must lead the way as they deliver the “same or better quality, and make investments that [pharma] would be reluctant to make.”

CROs have invested in technology to aid trials, including computer assisted design, the use of electronic health records and risk-based/data-driven monitoring, and though the pharma industry has been slow to pick up on such innovation until now, Pike told the room: “The more we invest in technology the less the pharmaceutical firms have to worry about it.”

Vertical integration and the Oil Industry

The pharma industry deserves to be vertically integrated due to the sheer size of the major players and the importance of the end product, he said, but admitted both Big Pharma and smaller biotechs CEOs had expressed their concerns over the stifling of efficiency and innovation. He continued, comparing the pharma industry with the oil industry:

“The oil and gas industry were classically vertically integrated and if you look at it over the years they started off the same way – massive investments, moving petroleum around, providing service stations, creating a whole infrastructure – and then, after the last really 70 years, you see specialists emerge.

“Schlumberger started as a surveying firm but slowly over time added services and actually got better than the oil companies at providing certain services.”​ They invested in technology, bringing a competitive advantage over the traditional oil firms.

“In many ways we are going through the same thing where we need to be open to service providers growing, investing in technology and specialising and that way disrupting the industry and making it more efficient.”

Top Down

For this to happen, Pike argued development outsourcing decisions needed to be made from a board room level. “If we’re talking about changing the paradigm for development it’s going to be very hard to change that from the middle of your organisation.”

While some pharma firms have made executive agreements and forged strategic relationships with their CRO partners (Quintiles, for example have a strategic partnership with Merck Serono​, Eisai, and AstraZeneca​), Pike said it is still normal to have middle management “maybe making a $200m decision as to the choice of the vendor,” ​and though this is not always a problem they lack “the scope of the whole process to give away whole processes or think of innovative change.”

“So we have to rethink, given that we are so vertically integrated, that we have to make change but have to think of who can make these decisions and how these changes will take place.”

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