A view from the Center

Deloitte's Life Sciences & Health Care Blog

Building an open innovation approach to R&D

Open Innovation (OI) is gaining an important foothold across a number of major industries, from information technology to retail. Today, health care leaders are starting to recognize that OI can have great value in research and development (R&D) and in marketing strategies to build or recover market share. Though entry has been slow, some major biopharmaceutical companies are beginning to make considerable moves to leverage the OI trend.

As an example, regional innovation centers established by Johnson & Johnson are attracting scientists, entrepreneurs, academics, and other businesses and are embracing the value of building partnerships. These centers are innovation hubs that are helping to develop new medical, diagnostic, and marketing capabilities.

Eli Lilly’s Open Innovation Drug Discovery laboratory provides access for outside partners to two complementary scientific platforms. Data and intellectual property (IP) generated by the alliance stays with the institution or medical investigator. The value to Eli Lilly is its right to negotiate for access to molecules or to continue to partner to advance promising breakthroughs.

Such efforts show an industry that’s starting to “get it,” and move in the right direction. As outlined in a recent Deloitte report, Executing an open innovation model: Cooperation is key to competition for biopharmaceutical companies, analysis reveals that the success rate of OI pursuits in biopharma is higher than for closed-model product development. Fifty-four percent of all active drugs were sourced through an OI model, compared to the 46 percent derived from a more traditional closed model. But, life sciences companies are comparatively late to the OI game; adoption has been slow, and so far infrequent. According to analysis performed by Deloitte researchers, organizations are still sourcing about 80 percent of their R&D pipeline through the more closed end of the OI spectrum.

The heavy reliance that has been placed on the traditional closed model could well have a stifling effect on innovation. At this point, it is probably fair to say that those organizations resistant to some aspect of OI – recruiting external partners and crafting a truly collaborative model – could find themselves lagging behind. The main areas of concern tend to be uncertainty about OI-centered R&D models, questions of IP rights and issues pertaining to management style, culture and company outlook. The expansion of data-sharing is critical to creative success down the line, but it continues to keep some companies nervous about proprietary control.

These are legitimate concerns and questions that need to be answered to each organization’s satisfaction. But one thing is clear when it comes to the broader application of OI sources and strategies within biopharma: OI likely will be integral to future of pharmaceutical industry R&D and product development.

In this new age, competitive balance can be established by those companies willing to allocate time and resources to partner with innovation centers, academic sources, venture capitalists, and other entrepreneurial sources.

OI can be part of the roadmap for that journey ahead. Companies looking to start or restart OI projects should consider taking the following steps:

  • Measuring the current state of their existing OI activities against each OI framework element
  • Developing strategic goals for the future state of OI
  • Conducting a gap analysis and developing an execution roadmap
  • Garnering leadership support and gaining stakeholder alignment to integrate OI with existing R&D initiatives and striving for consistent success measures
  • Mitigating execution risks

The potential of OI methodologies to bring drugs to market in a more cost-conscious and time-effective way is tangible – especially as participants pursue efforts at the most open end of the spectrum. The biopharma industry, as has been seen across the provider and health plan sectors, is in the midst of a transformative change. Collaboration is replacing direct competition as the driver of exciting new research and product development breakthroughs.

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Author bio

Jennifer brings more than 20 years of experience to Deloitte & Touche LLP from both the public and private sectors and is one of the leading professionals in our Life Sciences Governance Regulatory & Risk practice and a U.S. subject matter expert on strategic risk management and compliance issues in Life Sciences. She serves Life Sciences clients, including global pharma, med tech, CROs, and public research organizations such as the NIH.