What is the primary difference between big vs small pharmaceutical companies? And what are the advantages and disadvantages of each? In this article, we’ll discuss how these different types of organizations often benefit from each other.
The top 20 global pharmaceutical companies have annual revenues in billions of US dollars. These organizations have phenomenal resources to create life-changing patient treatments, dedicating years of research and development to pursue scientific discovery. However, the size of these companies also brings disadvantages, like a lack of agility and resistance to change.
And while smaller pharmaceutical firms are quicker to enact change, they may lack financial resources. Both types of companies are challenged to drive innovation for new drugs and existing drugs. This extends to prescription drugs, vaccine doses, gene therapy, and other healthcare solutions for treatment.
Experts believe the typical drug development model – where one “blockbuster” drug supports research and development for other treatments – is outdated. To move forward and innovate, small biotech companies and big pharma giants must work together and create a better way to bring more medicines to consumers.
What are the advantages of being a small pharmaceutical company?
Small pharma companies are having an outsized impact on the drug development landscape. These companies are overwhelmingly driving drug innovation, accounting for 63% of all new prescription drug approvals over the past five years. Small pharmaceutical companies can use their size to advantage in several ways:
Partnering with big pharma
Smaller companies often conduct early-stage research and development but lack the resources to take their products further in the drug development regulatory process. These companies can partner with big pharma companies that benefit from de-risked technologies.
Fierce Pharma reported on a real-life example of how this partnership can work. A small biotech was struggling to find funding to develop a drug for an extremely rare disease with a patient pool of just 700 patients worldwide. A large pharma operating in the oncology space became interested in the drug because the rare disease was a precursor to cancer.
By funding the rare disease drug, the large pharma gained access to the small company’s voucher that can be used to accelerate the timeline of any drug in the pipeline. “The infusion of money from the large pharma company allowed the small biotech to produce a solution for 700 patients in the world and keep the price tag of the drug to a respectable level where it is still affordable and able to be reimbursed,” stated Fierce Pharma.
Smaller companies can be more nimble than larger ones simply because there aren’t as many people involved in decision-making. This makes it easier to make changes and act on them quickly.
We saw one example of this during the pandemic when pharma companies immediately needed to increase operational agility. McKinsey reports: “When operating in a virtual world, interactions with coworkers, cross-functional experts, and managers cannot happen by chance. They require intent, which has often resulted in smaller meetings and more careful consideration of who should be present. And decisions are needed quickly.”
Big pharma companies can take a cue from their smaller counterparts by embracing what McKinsey calls entrepreneurial action, and rewarding those actions accordingly. Another recommendation is to focus on HCPs and what matters most to them, whether content, professional opportunities, or educational information. Large companies might also consider being more flexible around concepts like risk management – not in terms of accepting more risk, but by considering potential risk on a case-by-case basis. The result could be increased efficiency and speed to market.
In a smaller company, it’s more likely that employees will be trained to handle duties beyond their primary job description. This can benefit the company in multiple ways, including increased productivity and flexibility.
Cross-training also benefits employees, who may feel more valued. With pharma talent in high demand, employees have choices about where they work. If their current company offers more opportunities to increase their skill set, they may be more inclined to stay at a small biotech or pharma company for longer stints rather than taking their skills to other organizations.
Subject matter expertise
Small pharmaceutical companies focus intently on a single disease state or disease community and have a wealth of knowledge about the topic.
Naturally, smaller companies also have disadvantages. These could include fewer financial resources and less capacity to provide employees with competitive salaries and other benefits, possibly contributing to attrition. Smaller companies may also not have the global reach and deep financial resources of large worldwide companies.
“Large pharma is deciding that rather than take the risk of developing a single drug over the course of seven to 10 years and spending $7 billion, these companies are taking their chances on innovative, small companies.” – Nach Davé, VP, development strategy, Premier Research
What are the drawbacks of big pharmaceutical companies?
At first glance, it may not seem as if there are any downsides to big pharma’s resources and reach. As mentioned above, these companies have global presence, name recognition, and credibility. They invest heavily in developing relationships with key experts. In doing so, they develop a deep pool of trusted global KOLs in different disease communities. Many KOLs prefer to work with companies that are well-established and offer a predictable cadence of opportunities to share their expertise.
But this isn’t the entire story. In 2018, research revealed that nearly 80% of patents approved by the United States FDA corresponded to medicines already on the market, while diseases not considered growth markets were largely ignored. Currently, there is more focus on developing drugs to treat rare diseases, but these drugs are naturally limited in terms of commercial success. This is one of the challenges big pharma faces.
Balancing rare disease R&D with revenue demands
By steering the industry toward a focus on orphan drugs, large pharmaceutical companies “may have created a game that’s hard for them to win,” said IDEA Pharma CEO Mike Rea in 2021. “You’re probably not going to make up your revenue from having 30 or 40 small, rare orphan drugs going forward. You need to continue to look for the big revenue ones.”
However, this trend shows no sign of slowing. The orphan drug market is forecast to reach $340 billion by 2027, with several powerful trends driving growth – increasing patient advocacy, technological investments, and regulatory incentive programs, to name a few. Large pharma companies must balance their priorities between the attractive orphan drug space and revenue generation.
Resistance to change
Pharma is a conservative industry and, in many ways, still relies on traditional activities like mergers and acquisitions or large-scale restructuring to streamline operations or gain new pipelines for potential innovative drugs. While these efforts usually prove beneficial, companies may miss opportunities to reveal efficiencies through digital transformation or rethinking their approach to product launches and other activities.
Pharma change management can be slow, particularly when it comes to introducing new tools or processes. However, even top global pharmaceutical firms can benefit from incremental change and technological innovation.
Lack of speed and agility
Big pharma’s size can work against it. More people are involved in decision-making across every aspect of the business, which means longer timelines. It is more difficult to effect change from within, and large companies may find themselves behind the times when it comes to the latest trends in pharmaceutical innovation.
The relationship between big and small pharma companies
As previously mentioned, big and small drug developments can partner across product life cycle management in pharma. This trend may eventually evolve into a new business and R&D model, with early-stage innovation fueled by nimble small-cap pharma or biotech firms and big pharma marketing muscle.
“The industry has become more open-minded about its business model, and more companies are getting bolder and starting to implement new ways of doing business. The pharmaceutical industry used to be built on proprietary knowledge, tools, science, and data. This has changed.” – Bernard Munos, InnoThink and the Milken Institute
This new business model would be mutually beneficial for both types of companies – small companies can innovate without needing to support rapid growth, and large companies can more quickly bring new, high-revenue products to market. As these partnerships proliferate, companies must support how they gather, share, and interpret insights to ensure compliant information handling, including documentation around protocol design, data review, essential documents in clinical trials, and publication development.