Logic of in-house drug development vs in-licensing, as assessed by Mercer

The historic logic of in-house drug development compared with in-licensed products when related to new cash and value perspectives is questioned in a new report from Anglo-US firm Mercer Management Consulting, entitled: Rewriting the Rules - Are today's integrated business models right for tomorrow?

Mercer partner and co-author of the report Richard Balaban notes that "the in-house versus in-licensing debate centers on whether you sell what you discover or figure out ways to access what you need to sell. A key question for today's integrated pharma companies is the extent to which they can unbundle their value chains in innovative and value-creating new ways, constrained as each is in relation to its R&D resource, customer relationships and marketing power."

The report notes that, because of a marked reduction in R&D pipeline productivity, the industry's need to access novel drugs to cure highly-prevalent diseases has never been stronger. But it queries the broadly-accepted wisdom that one blockbuster business model fits all players. Instead, it says, each pharmaceutical company now needs to develop a differential strategy that fulfils its unique position and potential and that, contrary to the past decade, drugmakers are becoming very different in how they balance in-house with in-licensed activities.