Large pharmaceutical companies start structural adjustment： Pfizer and Roche …
Source | Medical Economic News
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What is the core logic of the adjustment of multinational pharmaceutical companies? Recently, less than a month after Peng Zhenke returned to Pfizer, he announced a drastic adjustment of the organizational structure of Pfizer China, which became the focus of the industry, and all the heads of six business divisions competed for posts. Combined with the organizational changes and adjustments of Roche Pharmaceuticals, Huizhi Pharmaceuticals and other companies some time ago, the focus of the industry has shifted to issues such as purchasing with quantity and how to deal with foreign pharmaceutical companies driven by medical insurance negotiations.
What is the core logic of the organizational structure adjustment of multinational pharmaceutical companies in the context of the changes in the pharmaceutical industry? How to treat the coping strategies of major companies? Is Pfizer’s competition for posts a big subversion of the existing employment rules in the industry? Let’s try to find the truth from the case analysis.
01
Pfizer China replicates global architecture.
There are three main points of organizational change in China announced by Pfizer this time: First, six independent business divisions have been established, namely, hospital emergency, cancer, rare diseases, inflammation and immunity, vaccines and broad market. This setup is almost a replica of the company’s global structure in China. After the recent reorganization, Pfizer Global is divided into six business divisions: hospital emergency, oncology, rare diseases, inflammation and immunity, vaccines and internal medicine. The reason why Pfizer China has not only set up an internal medicine division is that the sales of corresponding products (mainly Ai Le Tuohe Changpei) in China are limited, which is not enough to support an independent division. The Broad Market Division has the characteristics of China, mainly covering the medical institutions in the county and even the lower market. Many multinational pharmaceutical companies, such as AstraZeneca and Sanofi, have proved the effectiveness of the strategy of Broad Market Division in practice.
Second, set up a strategic innovation department. This is also a continuation of Pfizer’s global strategy. The core of Pfizer’s global growth strategy is "Bold Moves", which consists of five parts: release of human potential, innovative drug research and development, transition to market model, digital victory (mainly digitalization of drug research and development) and guiding policy dialogue, that is, bold action strategy. The establishment of the Strategic Innovation Department is closely related to the strategy of market model transformation. The core of this strategy is to solve the problem of patients’ ability to pay, which is also the core mission of the Strategic Innovation Department. After Pfizer divested its original research drugs and business, it focused on innovative drugs, especially drugs for tumors and rare diseases. These drugs are extremely expensive, and solving the problem of patients’ ability to pay (medical insurance, commercial insurance, charitable funding, etc.) is an important guarantee for product quality.
Thirdly, the heads of the six business divisions that were not mentioned in the official website report but mentioned in many reports will all adopt the competitive employment system, and all employees who have served in Pfizer’s current position for more than 24 months can compete for employment without the prior approval of the superior manager. It is relatively common in domestic-funded enterprises that the heads of business departments compete for posts. Among them, the most famous case is that 7000 employees of Huawei resigned and re-competed for posts. This operation is very grounded and aims to activate the organizational potential. However, domestic pharmaceutical companies have hardly heard of any company taking this measure, and it is really admirable for Pfizer, as a multinational pharmaceutical company, to take this step.
Previously, only two divisions of Pfizer had corresponding leaders, namely, the general manager in charge of anti-infection business and the general manager in charge of tumor and rare diseases business. After the reorganization, the anti-infection business was transferred to the hospital emergency business, and the tumor and rare diseases business was split into two business divisions: tumor and rare diseases. As a result, the position of the boss of four major business divisions is empty. Such organizational restructuring will have little impact on Pfizer’s senior management team in China. As a very senior professional manager, Peng Zhenke has successively taken charge of Bristol-Myers Squibb China, Sanofi China and Sanofi Jianzan Europe, and is very familiar with China’s culture and market competition environment, and has sufficient leadership and cultural adaptability to promote such organizational changes.
However, this restructuring will inevitably weaken the roles of the chief operating officer and the vice president of marketing in the previous organizational structure. The chief operating officer set up by pharmaceutical companies is often trained as a presidential candidate. With the participation of Peng Zhenke and the establishment of the mechanism of six business divisions reporting directly to the president, the role of the chief operating officer has become subtle. At the same time, the positioning of the vice president of marketing in charge of cross-brand marketing strategy has also been split into various business divisions with the establishment of six business divisions, losing its independent value. The follow-up whereabouts of the two bosses are worthy of attention.
02
Huizhi embraces digitalization.
At the same time as Pfizer’s structural reform, it is also concerned about the new organizational structure of Roche Pharmaceutical and Huizhi not long ago. Roche set up a new product pipeline strategy team in China, reporting directly to the general manager of Roche Pharmaceuticals; Huizhizhe has set up two new teams, digital therapy and health management platform, both of which report directly to President Huizhi China.
These two adjustments are adjustments to functional departments, which are much smaller than those made by Pfizer China to directly adjust the business team. Of course, Huizhi China completed the reorganization of the business team structure at the beginning of the company’s establishment in 2020, and set up three major organizations: the hospital division, the retail division and the business division, with great moves. Huizhi is a merger of Puqiang, which was spun off from Pfizer, and Mailan, a generic drug giant. The major shareholder is still Pfizer. It can be seen from these strategic measures of organizational structure of Pfizer and Huizhi that although Pfizer has faced challenges in the pipeline of new drug research and development in recent years (in fact, all the shortcomings have been made up by the successful cooperation with BioNTech’s COVID-19 vaccine), the strategic height and execution ability of commercial organization operation are still beyond that of other pharmaceutical companies.
The core positioning of Roche’s new team is company strategy formulation, strategic insight and analysis, product excellent listing, disease field integration strategy and competitive information collection and analysis. The main line of these functions is to help Roche Pharmaceuticals communicate and connect with global product research and development, and help Roche China to better and faster introduce Roche’s global new products under the market changes that heavy products such as rituximab and trastuzumab for injection are gradually listed.
Huizhi’s initiatives are full of innovative exploration and embrace digitalization. Among all multinational pharmaceutical companies, Huizhi has the best conditions to explore digital innovation and transformation. Different from other mainstream pharmaceutical companies positioning innovative drugs, Huizhi sells generic drugs and original research drugs, and the profit margin of these products will be gradually compressed to a very small level. For enterprises, it is necessary to improve operational efficiency and user experience by means of digitalization. Huizhi has previously explored the path of cooperating with Yiduyun Internet Hospital by setting up the Internet Medical Division. After quick trial and error, it quickly adjusted its direction to more specific digital therapy and health management. For Huizhi, a multinational pharmaceutical company with talent advantages, as long as the strategic direction is unwavering, it will certainly find a pragmatic and feasible landing path.
03
Where is the core logic of transformation?
In recent years, under the impetus of national policies, quantity purchasing and medical insurance reform, the traditional business model of multinational pharmaceutical companies relying on original drugs is no longer feasible, and multinational pharmaceutical companies have also abandoned the lucky mentality that "the policy is just testing the water" at the beginning of the quantity purchasing policy. Except for a few enterprises that position original research drugs and generic drugs like Huizhi, most multinational pharmaceutical companies have clearly recognized the situation and firmly turned to the positioning of innovative drug development. Although the strategic direction is clear, the research and development of innovative drugs often takes ten years, and it takes several years for existing drugs to be introduced into the China market from all over the world. Strategic adjustment often lasts for several years, and turbulence in the adjustment process is inevitable.
For multinational pharmaceutical companies positioning innovative drugs, the impact of business structure adjustment is not great. The organizational structure model established by selling original research drugs as innovative drugs for many years is still feasible in the New Deal era. The mainstream structure is either a business division system that manages the market and sales, or a structure that separates the market from sales and sets up a separate marketing function. Both models have their rationality. The bosses of multinational pharmaceutical companies set the corresponding organizational structure according to people, time and situation, and adopt one of the two models, or a mixture or variant of the two models.
Then, the introduction of new products, market access, patient’s ability to pay and digital organizational capabilities have also become the most concerned organizational design areas of multinational pharmaceutical companies besides marketing and sales capabilities. Needless to say, the China product pipeline strategy team of Roche Pharmaceuticals is a typical case. Another case, for example, AstraZeneca set up a NPP(New Product Planning) team under the Ministry of Business, and some teams even gave NPP leaders the level of executive director, which shows the importance attached to new product introduction.
Whether the product can enter the national medical insurance and how to complete the product entering the hospital as soon as possible after entering the medical insurance has become the key to the volume of new products after listing. Therefore, it has become an organizational design favored by multinational pharmaceutical companies in recent years to open up cross-team government affairs, market access and even major customer teams. This is probably the background of the times when Bian Xin, who is in charge of market access, was able to take the helm of Roche Pharmaceuticals. In the past, this channel was only open to candidates who had been vice presidents of the business department. The importance of patients’ ability to pay is related to the fact that cancer drugs and rare diseases drugs have become the main research and development directions of innovative pharmaceutical companies. In addition to national medical insurance, how to build a multi-level medical security system through charitable projects and business insurance cooperation has become the key. However, at present, the ability to pay mainly depends on national medical insurance, while charitable donations mainly rely on cooperation with large foundations and associations. Many of these abilities are placed in government affairs or access-related teams. A few multinational pharmaceutical companies also have some positions in charge of commercial insurance, mainly in government affairs or access teams. Pfizer’s separate placement in the Strategic Innovation Department is a relatively innovative move.
Of course, digitalization is also an area that attracts more attention. Many companies, such as AstraZeneca, Sanofi, Merck, etc., have set up vice-president posts to take charge of digital related work. However, for multinational companies that locate innovative drugs, the direct help of digitalization to business is not as direct as the previous capabilities. Looking forward to the success of digital transformation in companies like Huizhi, it will provide more learning output for innovative pharmaceutical companies.