Too Big To Succeed: Where Are Large Pharmas Heading?

Diminishing R&D productivity, patent cliffs, pricing pressures, and tougher regulations have contributed to decelerated growth in the pharmaceutical industry. These challenges have forced large pharmas, defined throughout this analysis as the top 10 global pharmaceutical companies by 2011 revenue, to rethink their business models. (See Exhibit 1.) Among these changes have been the evolution of pharmaceutical commercial models toward new customers (e.g., payors), increased externalization of R&D through consolidation and dealmaking, reorganization into smaller business units for increased productivity, and geographic expansion to access faster-growing emerging markets.

But none of these fixes, all incrementally positive, addresses the fundamental dilemma facing large pharmas. L.E.K. findings indicate that company...