An industry facing uncertainty and change must adopt new decision-making frames.
How Mental Frames Affect Decisions
We simplify the complexities of our world with mental frames. They determine what aspects of the world we see. Frames bring some things to the forefront of our attention and push others in the background to be given less attention or none at all. Frames affect what we think about, the choices we make, the resources we allocate. Frames include beliefs, assumptions, concepts, predispositions, what is taken for granted, and views about what drives success.
Often, we are not conscious of the frames we use in our thinking, and how powerfully they may be driving our choices. Because they can lead to both good decisions and bad ones, it is important to be aware of the frames we use and judge whether they are best suited for the circumstances facing us. If not, then we should consider new frames.
In every industry, some frames come to dominate conversations, thinking, and work. They emerge largely from successes. Media coverage and interactions among industry professionals disseminate and reinforce them. While no frame can unerringly lead to good decisions, the ones that gain dominance are seen as driving success. Among pharmaceutical companies, the dominant and long-held frames include innovation, unmet medical needs, first-in-class drugs, and blockbusters. In recent years, emerging markets has been added to the list.
The question is whether these dominant frames are still the most suited as the world of pharmaceutical companies continues to change in fundamental ways. The example of U.S. automakers in the years following the oil shock of the 1970s and market entry by Japanese automakers underlines how old frames can lead to competitively damaging decisions. The continuing struggles of Sony in consumer electronics and music and the many extinct computer firms further illustrate the value of adopting new frames when industries transform. New frames can illuminate the changing world in new ways and facilitate better decisions. But they also can be wrong, as the dot-com era of the 1990s amply demonstrates. Adopting new frames to replace or complement old ones needs careful thought.
The World of Pharmaceuticals Is Changing. Should Its Frames?
In the last few years, the world of pharmaceuticals has been changing in ways that appear fundamental rather than transient. Most are, by now, widely acknowledged. Price pressures and rising health care costs already were evident before the global recession made the situation worse. As governments in high-income countries find their budgets stretched, so do those in emerging economies in their attempts to provide health care to millions more citizens. Globally, governments and individuals who pay out of pocket remain the leading payers. Price pressures are likely to continue. The greater emphasis by pharmaceutical companies on emerging economies is a long-term bet. Although growing rapidly, in the near term these are relatively smaller markets with modest margins. They have large patient populations, but a great majority cannot afford to pay for medicines they need. Emerging markets also are the source of new competitors with global ambitions. The patent cliff arrived but R&D pipelines were not adequate to replenish the steep drops in revenues. Mergers and acquisitions helped revenues but brought with them other costs. Still the question remains of how to get R&D productivity to desired levels medically and financially.
During the next few years, demand for medicines will rise globally due to aging populations, obesity-related illnesses, and rising life expectancy and incomes in emerging economies. How this increasing demand will affect the economics of the business is uncertain. Scientifically, the industry is moving toward personalized medicine. It will make treatment more effective but will shrink the patient population relative to the one-size-fits-all approach of the conventional blockbuster model. Costs for discovering, developing, and marketing personalized medicines may not decline, but it may be difficult to charge substantially higher prices to offset the smaller markets. While the blockbuster model is frequently criticized, there is little agreement on what might replace it effectively.
These are some of the factors reshaping the landscape. Jointly, they present many scenarios but there isn’t room here to enumerate them. However, they do raise the question of whether the long-used decision frames in the industry are right for this new, uncertain reality. The need for changing frames is reflected in Eli Lilly’s lucid call to reinvent invention. The search for new frames is under way.
Dominant Frames in Pharmaceuticals
The most influential frame in pharmaceuticals is innovation, which is appropriate as new or better medicines have to be discovered using long-term, high-risk R&D. But, innovation is viewed and practiced in varied ways across different industries. From looking at industry conversations, media reporting, and what is celebrated, one can surmise how innovation is primarily viewed and practiced in pharmaceuticals rather than how it should be or occasionally is.
Innovation in pharmaceutical companies is generally equated with novelty and pioneering discoveries. Hence, the prestige accorded to targeting unmet medical needs and creating first-in-class medicines.
Just about every pharmaceutical and biotechnology company says that it targets unmet medical needs. What does this framing of innovation actually mean? With this statement, the companies are announcing that they approach research in novel ways, and work in new scientific territories. This is believed to make it more likely that they will discover novel medicines that can be patented and sold at a price premium. It is mainly a signal to scientists and investors about uniqueness and being at the cutting edge of research. A contrasting frame, one that I have not seen used, is unmet patient needs. The two frames highlight different factors. Unmet patient needs has little to do with the research undertaken in labs but has everything to do with the patient’s experiences—medical, economic, others. With many orphan and neglected diseases needing treatments, very different emerging market settings, and moves toward personalized medicine, unmet patient needs is a useful frame to adopt.
First-in-class drugs are accorded prestige in innovation that is far above that conferred on the remaining drugs, often called me-too or, more kindly, follow-on drugs. The labels that frame these types of medicines say it all. Such labels make sense from a scientist’s perspective because being first in making discoveries and advancing knowledge brings status and prestige. Scientists want to be seen at the cutting edge. From a patient’s perspective, the picture is different. First-in-class drugs provide treatments where none existed or they may be big improvements over existing remedies. But, that does not mean that me-too drugs necessarily provide only incremental benefits to patients. The best-selling drug in the history of medicine is Lipitor. It was the fifth statin to be launched and was almost not developed for being a me-too drug. Similarly, Zantac was launched a few years after the first-in-class Tagamet and quickly became the best-selling drug of its time. The overwhelming majority of drugs approved by the FDA are me-too or follow-on drugs. Many succeed well in the market because they effectively address unmet patient needs. Scientific primacy is not always congruent with treatment effectiveness, market performance, and investor returns. Patients celebrate medicines that make them better, whatever be their launch order and scientific status.
Since no medicine is perfect, patients hope for better ones to come along, whether they are follow-ons or first in new classes. Decision making would benefit by according more status to follow-on drugs. And, personalized medicine would require looking not just at classes of chemistry but also patient segments based on genomics. For an era of repurposed medicines, combination therapies, growing ability to identify which medicines work best for which patent sub-populations, biosimilars on the horizon, and promise of emerging markets, we need different frames to influence our thinking and decisions.
The conventional dominant frames create blind spots in a complex, changing, uncertain, ambiguous world. There are so many unsolved problems in the life sciences and health care ecosystem that we need more frames so we can see more, take the perspective of different ecosystem players, and expand the objects of innovation from products to services, processes, systems, practices, business models, behaviors, and mindsets. I propose adopting a problem solving frame for more effective decision making. It does not replace innovation, but encompasses it (see figure). It enables viewing innovation as problem solving. And, it broadens the scope of thinking.
The Problem-Solving Frame
A problem can be conceptualized by three elements from the perspective of an individual (e.g., a patient, payer, physician, scientist, sales and marketing personnel): current state, desired state, and the path separating the two. Solving a problem requires a thorough understanding of the two states and the specifics of what is required in going from the current to the desired.
- Whose problem should I (or my organization) be solving? Consider the range of people and organizations that are part of the life sciences and health care ecosystem. Also, consider people, functions, and business units within your organization.
- What problem should I (or my organization) be solving?
- Does the intended beneficiary want this problem solved? Will they (or someone else) pay us to solve this problem? In other words, can this problem be solved profitably?
The problem-solving frame (PSF) and the innovation frame (IF) differ in what they emphasize.
- PSF can be applied by anyone in the organization. IF is generally used by those formally engaged in innovation (e.g., scientists doing drug discovery).
- PSF can be applied to a wider range of situations than IF. Moreover, if innovation is seen from a problem-solving perspective, it expands the focus from medicines to services, processes, systems, activities, practices, business models, mindset, and behavior.
- PSF spotlights the problem, IF spotlights the solution.
- People often fall in the plunging-in decision-making trap—they start gathering data, analyzing, and developing solutions without carefully determining whether they are solving the right problem and solving it in the right way. PSF reduces the chances of falling in the plunging-in trap. IF does not specifically deal with it.
- PSF’s success metrics are whether the right problem has been solved, and how well it has been solved. IF’s success metric is the novelty or innovativeness of the solution.
Changing times call for new frames to think about the world differently. Moving the spotlight from innovation to problem solving will better assist pharmaceutical companies profit and grow as the life sciences and health care ecosystem continues to transform.
John L. LaMattina, Drug Truths: Dispelling the Myths About Pharma R&D (Hoboken: Wiley)