Applying project management for competitive advantage
In September 2001, ESI International conducted a study to determine the importance of project management within the pharmaceutical industry. Our findings revealed that:
• Project management is being applied within pharmaceutical companies in the areas of information technology (IT), research and development (R&D), and strategic alliances.
• Project management methods are mainly applied within project teams.
• Pharmaceutical companies are increasingly relying on informatics to gain a competitive advantage in drug R&D. Project management skills are required to implement IT-based informatics projects.
The pharmaceutical industry is primarily engaged in manufacturing, fabricating, and processing drugs into pharmaceutical preparations for human or veterinary use. It is characterized by intense competition, innovative technology, and rapid and dynamic change.
North American companies (U.S. and Canada) possess the market share of the world's pharmaceutical sales as shown in Exhibit 1.
Mergers between pharmaceutical companies have increased in recent years. The reasons for a merger vary. The need for expansion of revenue bases is necessary due to patent expirations. Consolidation allows manufacturers to create value by eliminating redundant expenses and deriving top-line synergies. Also, companies can share the costs of research and development and reduce the risk of bringing a new product to market.
Pharmaceutical companies also engage in strategic alliances with other drug companies. This strategy avoids costly mergers and acquisitions. It also allows drug companies to pool sales forces for maximum market coverage and sales impact. Strategic alliances can take many forms, including:
• Entering into co-promotion deals with other drug makers
• Expanding product offerings and/or distributing drugs developed by other firms
• Developing new biotech products through research collaborations with smaller firms.
Not all alliances are successful, however. According to a survey conducted by PricewaterhouseCoopers, many fail due to the slow speed at which results materialize from the alliance. Poor communication among the partners during a joint venture was also cited as a cause for failure.
Current Trends Within Pharmaceutical Project Management
Approaches to Project Management
A study conducted by the Pharmaceutical Education and Research Institute (PERI) and members of the Pharmaceutical Research and Manufacturer's Association (PhRMA) sought to identify how various approaches to pharmaceutical project management affect organizational effectiveness. Results of the study are presented below.
• Two emerging trends in pharmaceutical project management
• Virtual project: Contains project work off-site and at a considerable distance from management. Many firms can share the ownership of the project, and employees and nonemployees share project tasks.
Exhibit 1. North American Leads World in Pharmaceuticals
Source: IMS Health, Pharmaceutical Executive, April 2001.
• Empowered project: The team has authority over most decisions and is committed more in terms of time frames and emotions. The company will allocate significant resources to pursue project goals.
• Five emerging success factors in managing projects more effectively
• Give ample resources and “priority” to each project in the portfolio.
• Create strong, dedicated project teams.
• Empower the project team, as much as possible, to make all decisions relative to the project.
• Focus on projects related to the firm's competencies.
• Manage the portfolio as if it comprised a group of timelines that were ready to explode.
• Five important aspects of a project team
• Commitment: The commitment of the project is related to the emotional aspect of the project member. This also implies a high-performing project in which team members are more closely affiliated with the project than they are with the firm.
• Expertise: This appears to be enhanced when the team has technical competence in a research area.
• Ownership: Sole ownership of a project clearly is not a prerequisite for high-performing projects, nor is it important to limit the project team to full-time employees. Project leaders rated their codevelopment projects as higher performing projects, and leading firms in the pharmaceutical industry engage in co-development projects more frequently than do firms in other industries.
• Proximity: The highest performing projects are those with the highest proportion of key parties who are within walking distance to the project leader. Face-to-face communication with the project leader correlates to team members’ increased productivity.
• Authority: The analysis suggested that allowing the project members more authority and disempowering departments is associated with higher project effectiveness.
The Impact of Informatics
Pharmaceutical informatics can be defined as applying IT to manage scientific information during the various phases of drug development. Informatics technologies are popping up in nearly every stage of the drug development process. In the early stages, for example, it allows researchers to analyze the terabytes of data being produced by the human genome project. In the later stages, manufacturing informatics is used for finding and communicating informative relationships in the data gathered from process development and manufacturing operations. The goal is to produce analysis results that direct actions for better process control. This helps to speed new drugs to market and reduce their production costs by minimizing specification failures, assisting technology transfer and scale-up, and stabilizing the manufacturing process.
While the pharmaceutical industry is far behind in its use of IT, resources are being dedicated to informatics. Accenture Consulting estimates that drug companies will spend more than $4 billion a year on informatics. That figure does not include the cost of hardware. In addition, most big drug manufacturers have created informatics departments.
Project management is a critical component of informatics. There are great challenges to implementing informatics that call for well-trained project managers. It will be difficult to fully integrate the diverse technologies throughout the drug discovery process. Not only is there a need for integrating the life-cycle process, but there is also a need for making different standards and platforms work together. Pharmaceutical companies are combining in-house tools and licensing software, and partnering with companies that already have a piece of the technology. The number of mergers and acquisitions further complicates the integration issue as each company has different databases. Finally, there is a cultural issue involved with encouraging scientists to stop doing business as usual and begin relying more on computers.
Given the opportunities and challenges, it is not surprising to see pharmaceutical companies hiring IT professionals with experience in project management methodologies and technologies for their informatics departments. Also, most universities include project management in their informatics curriculum.
Research and Development
R&D spending of the top 20 U.S. pharmaceutical companies has more than doubled during the past seven years. In fact, these companies invested more than $26 billion in 2000 to discover and develop new medicines—a 10.1% increase from 1999. U.S. pharmaceutical companies invest a higher percentage of sales in R&D than any other industry, including electronics and aerospace. However, there will still be insufficient resources to develop all possible candidates. Management will need sophisticated techniques to decide which projects are the most worthwhile to pursue.
Pharmaceutical companies must seek ways to introduce more efficient processes and reorganize with an eye toward achieving greater productivity. In doing so, however, they must be careful not to stifle innovation and creativity or decrease the opportunity for discovery. More attention is being given to integrating R&D activities worldwide to reduce development times and improve the focus on the commercial outcome. It also has been acknowledged that better integration of R&D and marketing is needed to ensure that development targets areas of greatest commercial interest and scientific feasibility.
Informatics and R&D
The differentiator of R&D competitiveness is now shifting in favor of those companies that can provide an environment that includes informatics. Some view the management of R&D to a large extent as the management of the information flows between researchers and among research teams. The widespread use of external resources to conduct R&D activities adds to the complexity of the process. In world-class R&D information environments, project groups can work together in accessing, analyzing, and visualizing project data; making and communicating decisions; and validating the underlying reasons for their choices. Effective R&D enables scientists to identify potential compounds before expensive toxicological studies and clinical trials take place.
Exhibit 2. Relationship Between Line and Support Functions in a Clinical Department
Source: Drug Information Agency, 1998.
Global R&D Teams
A study by the Tufts Center for the Study of Drug Development and SRI International on the successful relationship of project management and global R&D teams identified several lessons learned. The findings revealed include:
• R&D in a global organization is about continuously transferring team thinking and knowledge throughout the entire organization.
• Project planning and management ensure a more rigorous and strategic approach to portfolio management.
• All team members must possess project management skills, which means companies must provide project management training as needed in the use of Gantt charts and other management tools.
• Teams should be independent of line functions, allowing managers to concentrate on development, marketing, and tracking progress of the milestones.
• When senior R&D management agrees to key objectives developed by a project team, it should incorporate them into its own key milestones on product approvals, global registrations, and development phase transitions.
Collaboration among clinical research departments, which conduct testing on humans, often spans countries and continents. Timely written or electronic status reports are the principal means of communication among clinical research organizations and their partners. Managing this communication network is the foundation of a successful project. Planning, implementing, monitoring, and controlling a global clinical program are key responsibilities of project management.
The importance of project management in clinical research is no more apparent than during a process audit. Clinical research departments of pharmaceutical, device, and diagnostic manufacturing firms often conduct process audits for regulatory compliance, scientific integrity, and sound business practices.
Exhibit 2 shows what auditors look for when reviewing a company's line functions. Notably, the “Project Management” line function transcends all support functions.
Drug Discovery Strategy
Successfully bringing new drugs to the marketplace often depends on the quality of development strategy. A solid drug development strategy is concerned with eliminating, at the earliest time, projects that offer poor prospects for commercial return. Termination decisions are rarely made with absolute certainty, which is why they are so often painful for teams and companies.
One tool commonly used to evaluate the prospects of a drug is the target product profile (TPP), which is a method that serves as the basis for establishing clear go/no-go criteria for the compound throughout development. The TPP model involves the process of evaluating a product's prospects before it is introduced into the market.
With TPP, the project manager must possess good planning skills to ensure that other options are fully explored. In addition, the project manager must use effective business skills when evaluating the investment opportunity with regards to the key parameters of risk, time, cost, and return.
The pharmaceutical industry is experiencing a wave of innovation in drug discovery and manufacturing. Researchers are working and collaborating in new ways. These changes are directly affecting how drug companies are conducting business. Pharmaceutical project management is playing an important role in this new environment.
Pharmaceutical companies rely on project teams for most tasks. The project teams usually are empowered, independent to make decisions, virtual, geographically dispersed, and cross-functional. The project teams rely on project planning, coordination, and communication for reporting status and transferring knowledge.
Pharmaceutical companies recognize the critical need to shorten the development time for getting new drugs to market. They are also concerned about the dismal percentage of new drugs that are developed from the large number of compounds tested. In response, pharmaceutical companies are increasingly relying on informatics to gain a competitive advantage in drug R&D. Project management skills are required to implement IT-based informatics projects.
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Proceedings of the Project Management Institute Annual Seminars & Symposium
October 3–10, 2002 • San Antonio, Texas, USA