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Open Source Model in Healthcare can Create Shared
Value
Last weekend, I (Salil) visited my parents who live in
Hyderabad, a city in South India. During the trip, I
initiated a conversation with an old family friend
named Ghuraan Bi by simply asking how she was
doing. A slight lady in her 60s, the innocuous
question seemed to trigger a barrage of emotions.
Ghuraan Bi settled down on the floor and unbundled
a small bag in which she stored betel leaves (paan) and
betel nuts (supari). This was an indication that she was
preparing for a long conversation, and then, she said
something that immediately caught my attention. She
narrated a story about how she had to loan her home
out as collateral to the local money-lender in order to
pay for her husband’s medicines. Tears welled up into
her eyes as she spoke about how expensive medicines
took her home away from her. “Why do medicines
have to cost so much?”, she asked! Why, indeed!
It is well known that sections of society are driven
below the poverty line due to unbearable costs of
healthcare and medicine in India. This is largely
because millions of people pay out-of-pocket in the
absence of social security guaranteeing health as a
fundamental right. Some hold the pharmaceutical
industry responsible for this “evil” despite knowing
that the cost of medicines is only approximately 15%
of overall healthcare costs. This is not to say that cost
of medicines should not be reduced. The intention is
just the opposite. It is to explore how healthcare can
be made more accessible to the people through
innovative partnerships, effectively leveraging
technology and building innovative distribution
models between different stakeholders. It is about
thinking how to achieve this by getting the public and
private sectors to work together to develop a wide
range of innovative tools, partnerships, and
approaches to improve healthcare delivery to the
underprivileged.
Andrew Witty, Chief Executive Officer of pharma major
GlaxoSmithKline, in the January 2011 issue of Health
Affairs, wrote that pharmaceutical companies are driving
crucial research into new medicines in a way that can
benefit the life of the poor. The pharmaceutical industry
and the public sector are thinking differently than before
about how to improve access to medicines and advance
research and development. Witty writes that diseases
disproportionately affecting developing countries play a
large role in stalling economic and social development.
Pharmaceutical companies are driving crucial research
into new vaccines and medicines; however, although
there is an imperative for industry to research new
therapies for diseases of the poor, the financial returns
are often seen as limited.
What if financial returns do not become the constraining
factor? Would companies be more open and willing to
create innovative models? Take for instance a not-for-
profit arm of the business. In a publicly held company,
pressure from investors is likely to deter the Board of
Directors and top management from considering any
model that does not generate profit or financial return.
Such innovation is likely to happen in smaller, privately
held start-up companies such as the Institute for One
World Health (iOWH), which became the first nonprofit
pharmaceutical company in the United States. Since its
inception, iOWH has received more than $200 million
from the Bill & Melinda Gates Foundation, as well as
funds from other philanthropic donors.
It’s a brilliant start! But, the ‘down-side’ is that excellent
initiatives such as iOWH are simply not large enough to
create an impact of the size that can simultaneously
benefit the lives of the two billion people who do not
have access to medicines and healthcare across the world.
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For such large-scale benefit one needs the scale of
multinational companies that have both the resources
and the capability to create world-wide impact. At the
moment, this circle of not-for-profit and pressure for
financial return is a vicious one!
In their recent Harvard Business Review article, Michael
Porter and Mark Kramer introduce the concept of
“shared value” that blurs the profit/non-profit
boundary. Shared value, according the article, is defined
as practices that enhance the competitiveness of a
company while simultaneously advancing the economic
and social conditions in the communities in which it
operates.
Pharmaceutical companies like GlaxoSmithKline, Pfizer
and AstraZeneca have begun tentatively pursuing an
“open innovation” strategy, to share their collective
pool of intellectual property, resources, and data. This
is popularly known as “Open Source Drug
Development” (OSDD) which opens research facilities
to allow external researchers to work side by side with
company scientists. This provides scientists and their
institutions with access to compounds, technologies,
and expertise that can help facilitate research on
treatments for neglected diseases. OSDD also creates
access to compound “libraries,” or collections of
molecular entities, to support new and much-needed
research leads. These compounds may have been cast
aside by these companies for their lack of profitability.
Another important aspect in creating inexpensive
medicines is transferring the technology for producing
drugs and vaccines. This is one of the most innovative
and sustainable ways to bridge both the research-and-
development and access gaps and to increase the
availability of medicines in the developing world.
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These transfers are at the cutting edge of business
practices today. When iOWH, the not-for-profit
company, did not have funds for manufacturing facilities
to make and distribute a broad spectrum antibiotic that it
could take through to commercialization, it partnered
with a for-profit company in India, Gland
Pharmaceuticals, which agreed to take on those roles for
no profit, no loss.
The key enabler here was that Gland Pharma is a family-
run business with limited or no pressure from investors.
However, a game-changer is iOWH’s semi-synthetic
version of an antimalaria drug that has entered the
commercial scale-up process and is on schedule to be
manufactured by Sanofi-Aventis for no profit, no loss, by
2012. This would be a significant way forward for the
pharmaceutical industry to emulate going forward.
Imagine the possibilities that would emerge if large
pharmaceutical companies could be persuaded to
consistently invest a part of their resources to create
shared value. If only large companies, government
bodies, NGOs, think-tanks and other players in the
healthcare delivery chain put aside a self-centered and got
together to think of the larger good they could create for
humanity. Now is the time for the healthcare community
and the public and private sectors to come together and
work together. For these efforts to be successful, it will
be necessary to find tailor-made solutions to specific
public health problems and to evolve our business
practices and models in an effort to improve and do
more. The need of the hour is for a body to work
proactively to bring these players – both large and small
– on a single platform to do just that.
Medicines do not have to be so expensive. That will
make Ghuraan Bi and many others very happy!
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About the authors
SALIL S. KALLIANPUR
I am just another guy caught in the quagmire of
pharmaceutical marketing, trying to get my two
cents across through my blog and this newsletter. I
haven't worked outside the pharmaceutical industry
and outside the sales & marketing function. I
sincerely hope that there will be people from other
industries and domains who will deem it fit to share
their views and rich experiences. Last but not least,
I am no John Mack, so do forgive the limitations in
views expressed! It is my sincere hope that this
newsletter helps each of us understand how our
work in healthcare marketing intersects with life, in
general, and helps us to become better human
beings.
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JAMES J. GILLESPIE, PH.D., J.D.
Dr. Gillespie focuses his research, teaching, and
consulting on the strategic, financial, and operational
aspects of the global healthcare and life science
industries, with particular focus on the biotechnology,
medical device, and pharmaceutical sectors. He
actively participates in leading conferences, research
reports, white papers, and other intellectual endeavors
exploring biopharma and healthcare issues. He is a
successful entrepreneur with significant hands-on
operational experience. He founded a commercial,
industrial, and residential contracting company and
grew annual revenues from $0 to $1 million,
increased employees from 1 to 15, and created a base
of 3,000+ customers. He is currently President at
Center for Healthcare Innovation
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