PharmExec Blog

Open Innovation in Pharma: What Does It Mean?

There’s a lot of talk today about “open innovation” in business and research forums—but what exactly does it mean? How does open innovation as a concept apply to the pharma sector? Does it signal a change in the way pharma companies approach research and innovation? Roy F. Waldron reports.
There are a number of highly innovative US companies that were at one time fully-integrated entities—companies that made mainframe computers, wrote the software, and sold you the paper on which to print. Essentially, they did everything from soup to nuts. That model in the IT and electronics area has changed dramatically over the last 30 years. Many of the biggest names in those fields claim that their adoption of an open innovation model led to this result and saved their businesses. So, what is open innovation?
Open innovation can be categorized three ways:
Type I is pure outsourcing, often touted as open innovation, or R&D activity pursued by external entities, such as contract research organizations (CROs) and universities.
Type II consists of licensing and its variations—collaborations, joint ventures, even in some cases technology transfer, and perhaps what is called “crowd sourcing;” where a number of innovators come together to address a problem and solve it.
Type III is R&D in the space beyond IP—an interesting concept, but which doesn’t really help us much with what this means as applied to pharma innovation.
Rather than digging further into the jargon, we need to ask what caused certain companies to adopt what is called an open innovation model.
What happened in the electronics industry is instructive. By the early 1990s, IBM was on the verge of bankruptcy. The Taiwanese and the Japanese manufacturers in the 1970s and 1980s began making chips that were competing with IBM’s products. IBM had to do something with the last few million dollars in its bank account to bring the company back to viability. Its solution was to open up its patent portfolio to outsiders in a systematic way, as a means of generating income.
Today we are enjoying the fruits of a dizzying number of collaborative endeavors started decades ago that have resulted in the launch of many new products in the last few years. The products combine the strengths of a number of different independent companies coming together to create an innovative array of handsets, tablets, GPS devices, and computing devices. A fact worth noting is that the intellectual property environment for these business sectors remains very vibrant.
Are there similar dynamics at play in the pharma sector that will push our industry toward an open innovation framework? If so, what can we expect these frameworks to look like?
A key influencing issue is the volume of R&D assets that are not being pursued simply because of the enormous risks and costs of developing new drugs. In the pharma sector, the information imbalance might be the culprit here. Scientists in the pharma industry will all agree that in order to get to the next generation of drugs, greater access to the best information is needed.  But more information is the not the answer—access to the right type of information is. Yet the most critical information is often protected by privacy concerns.
Only once there is a better flow of the right information among pharma companies on disease, health outcomes, and genetic information, will there be a real race to develop new drugs and therapeutics. The difficult part is figuring out the biological and therapeutic pathways, which were not as simple as earlier thought.
The great misconception has been that the pharma industry is interested in patenting the genome and owning your genes. Rather, the industry is primarily interested in owning the intellectual property to the therapeutics they develop and sell.
Hence this brings us to the question of whether external pressures are creating a flatter, more equal world for information in the pharma sector. Does the narrow sequestering of critical information somehow prevent the formation of such an environment? Without that informational equality, will the industry ever be compelled to adopt behavior that would result in a more open innovative world?
We are today seeing more willingness to collaborate, or at least there is now an established culture in pharma where Type 1 outsourcing activity is frequent. And increasingly there is Type 2 licensing and collaboration activity, but perhaps probably not as much as one would like to see, and certainly not as much as in the software, electronics, and IT industries. The pharma sector needs to spread those costs and risks in an environment where there is limited access to the right kinds of information.
There are a number of examples of companies seeking to gather and access the right information on genetic information on specific disease states. For example, the Asian Cancer Research Group founded by Pfizer, Merck, and Eli Lilly as a not-for-profit company seeks to accelerate research on new medicines to treat the most commonly diagnosed cancers in Asia (gastric, lung, and other forms cancer) via the creation of the “most extensive pharmacogenomic cancer databases known to date” over the next two years.
But such approaches answer just a few of the questions for some diseases and probably don’t provide sufficient information to understand what is going on in human biology. So in the end, the question is whether the creation of a culture of collaboration as evidenced by the above noted consortia will be enough to create successful environments for the pharma sector.
Or must industry await a flatter world of information access via some form of a high societal-level regulatory intervention aimed at liberating information? The answer is that we need to do both.

There’s a lot of talk today about “open innovation” in business and research forums — but what exactly does it mean? How does open innovation as a concept apply to the pharma sector? Does it signal a change in the way pharma companies approach research and innovation? Roy F. Waldron reports

There are a number of highly innovative US companies that were at one time fully-integrated entities — companies that made mainframe computers, wrote the software, and sold you the paper on which to print. Essentially, they did everything from soup to nuts. That model in the IT and electronics area has changed dramatically over the last 30 years. Many of the biggest names in those fields claim that their adoption of an open innovation model led to this result and saved their businesses. So, what is open innovation?

Open innovation can be categorized three ways:

Type I is pure outsourcing, often touted as open innovation, or R&D activity pursued by external entities, such as contract research organizations (CROs) and universities.

Type II consists of licensing and its variations—collaborations, joint ventures, even in some cases technology transfer, and perhaps what is called “crowd sourcing;” where a number of innovators come together to address a problem and solve it.

Type III is R&D in the space beyond IP—an interesting concept, but which doesn’t really help us much with what this means as applied to pharma innovation.

Rather than digging further into the jargon, we need to ask what caused certain companies to adopt what is called an open innovation model.

What happened in the electronics industry is instructive. By the early 1990s, IBM was on the verge of bankruptcy. The Taiwanese and the Japanese manufacturers in the 1970s and 1980s began making chips that were competing with IBM’s products. IBM had to do something with the last few million dollars in its bank account to bring the company back to viability. Its solution was to open up its patent portfolio to outsiders in a systematic way, as a means of generating income.

Today we are enjoying the fruits of a dizzying number of collaborative endeavors started decades ago that have resulted in the launch of many new products in the last few years. The products combine the strengths of a number of different independent companies coming together to create an innovative array of handsets, tablets, GPS devices, and computing devices. A fact worth noting is that the intellectual property environment for these business sectors remains very vibrant.

Are there similar dynamics at play in the pharma sector that will push our industry toward an open innovation framework? If so, what can we expect these frameworks to look like?

A key influencing issue is the volume of R&D assets that are not being pursued simply because of the enormous risks and costs of developing new drugs. In the pharma sector, the information imbalance might be the culprit here. Scientists in the pharma industry will all agree that in order to get to the next generation of drugs, greater access to the best information is needed.  But more information is the not the answer — access to the right type of information is. Yet the most critical information is often protected by privacy concerns.

Only once there is a better flow of the right information among pharma companies on disease, health outcomes, and genetic information, will there be a real race to develop new drugs and therapeutics. The difficult part is figuring out the biological and therapeutic pathways, which were not as simple as earlier thought.

The great misconception has been that the pharma industry is interested in patenting the genome and owning your genes. Rather, the industry is primarily interested in owning the intellectual property to the therapeutics they develop and sell.

This brings us to the question of whether external pressures are creating a flatter, more equal world for information in the pharma sector. Does the narrow sequestering of critical information somehow prevent the formation of such an environment? Without that informational equality, will the industry ever be compelled to adopt behavior that would result in a more open innovative world?

We are today seeing more willingness to collaborate, or at least there is now an established culture in pharma where Type 1 outsourcing activity is frequent. And increasingly there is Type 2 licensing and collaboration activity, but perhaps probably not as much as one would like to see, and certainly not as much as in the software, electronics, and IT industries. The pharma sector needs to spread those costs and risks in an environment where there is limited access to the right kinds of information.

There are a number of examples of companies seeking to gather and access the right information on genetic information on specific disease states. For example, the Asian Cancer Research Group founded by Pfizer, Merck, and Eli Lilly as a not-for-profit company seeks to accelerate research on new medicines to treat the most commonly diagnosed cancers in Asia (gastric, lung, and other forms cancer) via the creation of the “most extensive pharmacogenomic cancer databases known to date” over the next two years.

But such approaches answer just a few of the questions for some diseases and probably don’t provide sufficient information to understand what is going on in human biology. So in the end, the question is whether the creation of a culture of collaboration as evidenced by the above noted consortia will be enough to create successful environments for the pharma sector.

Or must industry await a flatter world of information access via some form of a high societal-level regulatory intervention aimed at liberating information? The answer is that we need to do both.

For the full version of this article, click here.

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