Decision Making in Big Pharma vs. Small Pharma


On many occasions, I have the opportunity to speak with leaders at small pharmaceutical and biotech companies. They always say, “We don’t operate like big pharma” or “I’m not interested in hearing the best practices from big pharma.”

As a younger and less experienced leader from big pharma, I couldn’t fathom what they meant by these statements.  Is it arrogance?  Or just some desire to be different?  To somehow break the mold? Then I had an “aha” moment.  These small pharma folks are right.  We all know many of the qualities that make small pharma different – the size of the company, the limited resources, the level of risk, the small and specialized pipeline, etc.  Those are the obvious things.

There is one big difference for big pharma vs. small pharma companies . . . it’s the decision making process.

But at the heart of it, there is one big difference for big pharma vs. small pharma companies that truly explains why one solution or best practice cannot be applied to the other.  It’s the decision making process.  They make product development decisions very differently, mainly, because they have to. I thought about how big and small companies progress through product development. I have highlighted three distinct instances where their decision-making processes are completely different.

Working backward vs. working forward

Big pharma is all about the Target Product Profile (TPP).  Once they have a candidate suitable for human studies, they typically create a TPP.  They develop a picture of what the marketed product should look like, which includes the dosing regimen, label claims, safety profile, contra-indications, etc.  Then they work backward to design a clinical and pre-clinical program that supports development of the TPP.

This may call for studying multiple indications simultaneously or pre-investing in big ticket items to beat a competitor to market.  Typically, they will generate various development scenarios and compare the cost, return, and risks of each before making a decision.

Small pharma does not have this luxury.  They don’t have the resources to spend on a program that allows for much pre-investment or larger studies to expand the label beyond the bare minimum.  Small pharma works forwards, not backward from an ideal TPP.  They advance assets to the next milestone, spending as little as possible to get there.  Getting to the next milestone quickly and at low cost will allow them to demonstrate steady progress to investors and solidify additional funding.  There is less scenario building in this case and fewer decisions to be made because the boundaries of cost and timeline are much firmer.

Sneak peek vs. wait it out

Let’s face it.  No one wants to wait until the end of the clinical study to see the results.  Everyone wants a sneak peek at the results and not just for curiosity.

For big pharma, having some early indication of the results will often trigger additional investment in the subsequent study; i.e., drug supplies, long-term pre-clinical safety studies, etc.  They can do an interim analysis on a subset of patients, while the trial is ongoing to get this early data.  Even better, they can conduct adaptive trials that change course as a result of interim results.  This allows them to merge a Phase IIB dose range finding study with a Phase III pivotal study, for example, into one protocol and ultimately accelerate NDA filing.  These sneak peeks allow big pharma to make decisions mid-stream and change the course of development.

Unfortunately, small pharma often has to be more patient.  The CRO may charge more to conduct an interim analysis. Even if they did get an early peek at the data, it might not do much good because there may not be money available to pre-invest in the next trial.  Adaptive trials are pretty much out of the question because they are just too costly.  They require interim analyses, more patients, more sites, and investment in drug supply at risk to be prepared for all possible outcomes stemming from those interim results.  While big pharma can use an interim analysis as a decision point, small pharma has to forego this opportunity in most cases.

Big fish vs. small fish and the CRO relationship

If you are a large pharma, the world is your oyster when it comes to outsourcing.  The big CROs offer the full menu of all possible services, all integrated under one umbrella.  It’s one-stop-shopping. Of course, it can come at a high price, but a large pharma has bargaining power.  They run hundreds of clinical studies per year so the CRO realizes that there is a steady stream of income to be had if they negotiate a deal with a large pharma.

Large companies also have a mature procurement organization to structure complex contracts with the appropriate safeguards in place to ensure CRO performance.  This means that big pharma has a few preferred CROs lined up, ready and waiting to conduct the next trial according to pre-negotiated terms.

If you are a small company, the outlook is very different.  You are a small fish in a very big pond.  Sure, there are CROs that cater to smaller companies, but they don’t always offer the full gamut of services.  Even if they do, it is unlikely that they are experts in all of those services, so you may not want to source too much from any one vendor.  Chances are, you will deal with many different CROs that each specialize in a smaller set of services.

Selecting the right vendors and monitoring their performance is a whole different ball game for a small pharma.  Each trial and each service may represent a new negotiation between the CRO and the small pharma company.  At every step of the way, outsourcing decisions need to be made.

Understanding these differences makes for a more fruitful discussion between small and large pharma leaders.  It also helps those of us who provide services better understand the needs of our clients and design solutions that will help them make decisions.  After all, making better and timelier decisions is what ultimately brings products to market faster or at a lower cost.  During a time when the industry is struggling to innovate and compensate for generic competition, this is something we all want.

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