After releasing a new drug on the market, a Big-Pharma company typically has between 8-12 years of market exclusivity to make a profit before the drug’s patent expires. When a patent expires cheaper generic versions of the drug are allowed to enter the market. This inevitably affects sales of the original, more expensive drug. To protect themselves against large drops in revenue after crucial patents expire, Big-Pharma companies are constantly trying to invent new drugs and/or improve existing products (ever-greening) to replace old ones. This paper pharmaceutical industry in the global economy (2005), by Davidson and Greblovin, goes into more detail explaining the importance of intellectual property to the pharmaceutical industry.
The necessity for a Business Development (BD) department, as explained by Understanding Pharma, arose from the increasing difficulty for Big-Pharma companies to invent new profitable drugs, and the realization that internal resources alone were not sufficient to meet commercial objectives. BD is responsible for seeking external opportunities, such as new technologies or financial assets, to complement core business and fill gaps in the pipeline so R&D can successfully develop new drugs. BD is responsible for ensuring the company meets annual and long-term strategic goals. Strategy is based on financial objectives, the area of therapeutic priorities (core business) and competitive situation.
Very basically, there are three categories of external opportunities which BD seek:
- Purchase rights from a third party (in-licensing), such as IP for a new technology.
- Sharing rights collectively between companies, e.g. co-commercialization. The hugely successful anti-cholesterol drug Lipitor (peak revenue of 9 billion dollars per year) was a product of a co-promotional alliance between Pfizer and Warner-Lambert.
- Selling rights to another company (out-licencing)
- The relevance and importance of business development and licensing in the biopharmaceutical industry (biotechblog.com)
- Pharmaceutical Industry- Innovation is the only way forward. (2020health.wordpress.com)