Box 3. Box 3 Big pharma case study: Merck's enterprise-wide response to OBA

Although most large pharma and biotech manufacturers have recognized a problem and are now struggling to incorporate OBA and healthcare value into their business models, Merck (Whitehouse Station, NJ, USA) has taken path-breaking action. Recognizing that its existing structure and processes were insufficient to address the rise of payers and their now-central role in coverage, access and utilization decisions, in late 2005 Merck embarked on a two-year program to update its business model and centralize healthcare value as a mission-critical objective.

According to Merv Turner, Merck's senior vice president of worldwide licensing and external research (and coleader of the organizational redesign project), Merck formed much greater integration between research and commercialization franchise leaders to ensure that research targets and commercialization efforts were fully consistent and working together, rather than independently. "In the past, we would have been satisfied with proof of scientific concept; now we require proof of commercial concept [early in the process] also," Turner says.

One of Merck's greatest challenges was overcoming siloed functional capabilities that were largely autonomous, in an emergent environment that requires real cross-functional decision making. To address this challenge, the company developed and implemented an integrated R&D process that functionally brings together development, clinical, marketing and outcomes capabilities at all stages.

Merck also recognized the need to expand their focus to include payers as serious decision makers. "Merck now defines its customer value propositions in terms of our three primary constituents: physicians, payers and patients. We try to understand a drug's value proposition from each of their perspectives," says Mark Stejbach, Merck's vice president of managed care, who is one of the drivers of Merck's internal efforts. To ensure that healthcare value is at the center of each product development program, Stejbach adds "we seek to measure a new drug's profile against the standard of care, not just placebo."

Merck has clearly differentiated itself by recognizing the issues and taking action. We believe their choice to hit OBA head-on using early-stage cross-disciplinary development teams is likely to reap substantial commercial and financial gains in the coming years. Yet there are many different pathways to adapting to a healthcare value–driven environment. The pathway forward requires companies to approach these challenges in a manner consistent with their individual circumstances and culture. The only constant requirement is commitment.