Drug Sector to Change Entirely in 10 Years

Deloitte, a financial counseling and audit company, published its report titled "Future of the Health Sector: Strategies for Success in 2015" in which medical sector including the fields of medicine, medical devices and biotechnology was dealt with. According to the report of the organization based on the research it realized along with The Economist Intelligence Unit, there are important changes awaiting the sector in the next ten years. The future of the drug firms will be based on innovative drugs not even in their portfolio yet. The report revealed as a result of various researches realized in the health sector. 193 senior executives and administrators participating in the questionnaire study realized in March-April 2006 answered the questions on how the enterprises will change until 2015 and what strategies they will adopt to be successful. When preparing the report, not only a round table meeting was held in June 2006, but interviews with the CEOs and members of the board of directors of global drug, medical device and biotechnology companies were made on the future of the sector and the companies. According to the report, the changes in the demographic structure of the countries and aging populations, changes in the appearance of the diseases, new technologies in the market, factors like the big increase in the health expenses require a serious change in the business strategies of the firms operating in the sector. The report also foresees that the drug firms constituting a significant portion of the health sector should develop their innovative product portfolio. The firms active in the medical sector are required to determine their corporate priorities to assure success in the next ten years. However, firms have not determined their corporate priorities yet. These firms are going to need new business models to stand the hard competitive environment they are to face in the future. Deloitte Turkey Tax Services Partner in Charge and the Leader of Health Industry Zeki Kurtçu, indicating that a hard era awaits the health sector but with high rewards, expressed that the sector will change substantially in the prospective period. Kurtçu said: “The firms in the health sector, one of the most important sectors of the future, will turn more to the developing countries. It is highly important that Turkey provides concessions to improve the investment environment and develop human substructure to benefit from that wave. The firms and countries that can read the prospective period well and shape right strategies will benefit from the advantages of the growing economy." Success Criteria Will Remain According to the report, there are a lot to change between 2006 and 2015, but success criteria of the firms are not among them: Profitable growth, high credit and powerful product portfolio. In Deloitte’s study, it is noted that the future of the health sector relies particularly for the drug firms, on products and services not included in their portfolio yet. While the firms reduce their costs, they will have to offer several innovative products. The firms which need to review their R&D approaches to make it more effective will have to change their traditional sales and marketing approaches too. It gradually becomes politically unacceptable that the new drugs are marketed with an excessively aggressive strategy. Such strategies will have to be designed in a way to focus better on the consumers. Traditional strategies to commercialize the product will not be effective any more. The firms will have to develop new approaches that take into consideration both the users and the regulators of the sector. The research reveals that the companies in the health sector are not experts yet in activities which are thought to become critical in 2015. Companies need to improve their expertise in several core areas. Recruitment and keeping of the best human resources will be highly important. Developing Markets Get More Important Developing markets will play a big role in the future of the sector. Companies will need to invest significant amounts to a wide range of activities including R&D in the developing markets. It is expected that the firms in the sector achieve more than 25 percent of their total incomes from developing countries until 2015. A substantial part of the CEOs participating in the research put China to the top among the developing countries. The country seems appealing to the health sector with its high population, low costs and rapid economic growth. Mid-European countries that produce products and services in this sector with their stable market and low costs ranked second, and India, which has a big domestic market and a work substructure that is suitable for R&D ranked third. As to Eastern Europe including Russia, which has several qualified technicians and researchers, ranked forth among the favorites of the investors. It will be hard to achieve considerable growth by organic means, mergers and purchases will continue. Partnerships/alliances will occur as an important way of earning revenues. Firms will establish partnerships and connections with either academic environments or purchasers (public and private) taking advantage of spreading partnerships.