Eric Garland - Scenarios In Practice: Futuring In The Pharmaceutical Industry

Scenarios in Practice: Futuring in the Pharmaceutical Industry

PHOTOS.COM

By Eric Garland

A consulting futurist offers insights on how a key foresight tool, the Impact/Probability Matrix, enabled decision makers in the pharmaceutical industry to see how certain trends could change how they do business.

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uture scenarios are useful tools to stimulate strategic thinking because they produce detailed stories about what the future could look like. When a decision maker understands where we might be heading, he or she can decide where to lead the organization. Scenario building is like journalism, except in reverse. Instead of collecting rigorous data about the past to write a story, in the scenario we make projections based on trend data that indicate the future. Based on rigorous trend data, futurists can draw pictures of the kinds of world that the trends could lead to. Trends alone are not enough for the decision maker. They are the abstract forces that will act on us and our competitors. They show a sliver of the future, but they are not complete enough to deliver a picture of the market in which we will be competing. Take these disparate trends, for example: • The cost of health care is increasing. • The baby boomers will be the largest group of people over the age of 65 in American history. • The Indian middle class is growing in number. • Businesses outsourcing work overseas is increasing as a strategy to keep costs low. • Diagnostics equipment is falling in price and increasing in connectivity to the Internet. These are interesting observations, but the information by itself is so abstract that it isn’t useful as a strategic tool all alone. But when the trends are crafted into a scenario, a story jumps out:

Much of the mundane work of the primary-care physician is outsourced using the Internet, although tough cases are still referred to American specialists.

This brief scenario tells a story— one that should give health-care executives something to think about. Though it may not come true exactly like that, the implications of that story as it develops will change how the executive thinks about the coming competitive pressures on the industry. This scenario asks important questions: • Is globalization going to impact the American hospital?

petitive threats and opportunities that are over the horizon.

Using Future Scenarios In Real-Life Situations Just as there are numerous ways to tell stories—film, kabuki, standup comedy—there are a number of ways to develop and present scenarios to a group that is thinking about a problem. One effective tool for scenario development is the Impact/Probability Matrix (Figure 1, page 32). The matrix presents four potential scenarios comparing each one’s potential impact and its probability of occurring. Impact is the estimation of whether a trend could be mildly disruptive (requiring a few new practices) or disturbing (requiring perhaps a complete change of business strategy). Probability is a measurement of how likely a scenario is and what events would need to transpire in order to bring it about. The Impact/Probability Matrix is useful for several reasons. It is a quick way to develop four individual scenarios with different implications for the organization. Four is a good number to work with because it gives a range of possibilities without overwhelming the decision maker with complexity. Offering two scenarios only would introduce a footballmatch mentality—our side or their side. Three lets people choose a middle ground, an often falsely moderate position to take. And five or more scenarios get difficult to understand. With four scenarios, the Impact/Probability Matrix offers views of distinctly different outcomes: • Flash in the pan—low probability, low impact. This scenario shows how events could turn out to be less of a disruption, and thus any overreaction on our part would be wasted energy. This scenario often surmises that the coming change will not really be a big deal, or will blow over quickly. • Business as usual—high probability, low impact. A change is com-

“The tools of the futurist help to expose our assumptions and our blind spots. They serve to show us . . . some of the things of which we are ignorant.”

Scenario for the Year 2016 America, fiscally burdened by the cost of its massive retired population, begins to outsource some health-care duties to doctors in India. Telemedicine becomes more widespread, involving the use of remote diagnostic machines, located in American clinics, to take readings and document a patient’s symptoms and vital signs.

• Is the U.S. health-care industry investing enough in cutting-edge information technologies? What about other countries? • Will foreign medical students who come to America stay, or will they return to their home countries to practice? • How much pressure is the baby boomers’ aging going to put on health-care practices? Can organizations minimize the discomfort by planning ahead? Realistically, we cannot plan today all the way out to 2016. Too much will change between now and then. But the tools of the futurist help to expose our assumptions and our blind spots. They serve to show us not only what we assume to be true about how the future will play out, but also some of the things of which we are ignorant. These insights are useful in business because they help point to comTHE FUTURIST

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ing, but we can adjust to it without suffering big growing pains. We need to observe the forces at play to see if some things will change around us, but our business will remain fundamentally unchanged. • The brewing storm—high probability, high impact. This is often what executives focus most on, a scenario that would mean a real problem. You can see the path to this “brewing storm,” and the exploration of this future will point to signs we need to watch for. card—low • Wild probability, high impact.

GlaxoSmithKline was recently sued by New York Attorney General Eliot Spitzer for fraudulently withholding information on trials of the use of the antidepressant Paxil in children. As part of its settlement, the company is disclosing all trials, regardless of

outcome, on a public database. This has spurred many stakeholders, from medical journal editors to Congress, to consider a permanent, industry-wide, mandatory database for all trials so that companies are no longer able to hide unflattering data. Proponents argue that this would improve the access that doctors and patients have to information about drugs.

The Impact/Probability Matrix in Action: Clinical Trial Disclosure Let’s see how the Impact/Probability Matrix works in real-life situations where nobody knows the outcome of trends and potential disruptions that will affect an entire industry. The matrix was put to use recently for a group of pharmaceutical industry decision makers concerned about a potential shift involving clinical trials and their disclosure to the public. In the past, drug companies have been able to conduct clinical trials to learn about drugs they are developing or marketing, but they have been under no obligation to publish their findings. Recently, several events have led government agencies to call for mandatory disclosure of trial data. THE FUTURIST

Scenario 1: False Alarm—Low Probability, Low Impact

“Lots of people will downplay the effects of a wild card. . . . But wild-card scenarios play out in reality all the time, especially in response to catastrophic events.”

Wi l d c a rd s a re t h o s e scenarios that are unlikely but could arrive if a couple of events come in rapid succession and change everything. It’s the “We never saw it coming” scenario—something on our blind side that would result in severe consequences due to our lack of preparation. Lots of people will downplay the effects of a wild card. Sometimes, if you propose one of these scenarios out of context, people will think you are an overreacting alarmist. But wild-card scenarios play out in reality all the time, especially in response to catastrophic events.

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For the industry decision makers, we used an Impact/Probability Matrix to explore how much disclosure might be mandated and how such mandates would change strategies at pharmaceutical companies. Figure 2 shows how the scenarios played out.

January-February 2006

American business has a short attention span, and there are sometimes fads and short-lived obsessions that quickly disappear. In the False Alarm scenario, the news cycle churns on and the media get tired of discussing something as arcane as clinical trial design and disclosure. Political interest, too, moves on when the election year is over. The whole thing goes away in a few months. In this scenario, the politicians have scored their victories and moved on to reform industries other than pharmaceuticals. The election year passes, and no political points are left to win. The news media find that the only details of the story left to debate are so specialized and complicated that only pharmaceutiPHOTOS.COM

Figure 1: Impact/Probability Matrix High Impact

Wild Card

Brewing Storm

Low Probability

High Probability

Flash in the Pan

Business as Usual

Low Impact

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Figure 2: Scenarios for Clinical Trial Disclosure

High Impact

Government Regulation

Total Disclosure

Low Probability

High Probability

False Alarm

Self-Regulation

Low Impact

cal company executives, physicians, and FDA regulators are willing to tune in. This scenario is unlikely, as aging Americans, Medicare budget battles, and rising drug costs keep pressure on all aspects of the pharmaceutical business. The public probably won’t simply turn away at this point.

Scenario 2: Self-Regulation— High Probability, Low Impact If no additional major events occur, and pharmaceutical companies step to the plate to increase their own disclosure, the government may allow the industry to police itself regarding its disclosure of information to the public. This is the low-government-intervention scenario, Self-Regulation. In this scenario, pharmaceutical companies all agree to post the results of completed Phase III trials that are material to understanding marketed drugs. Phase II and III trials of compounds not yet on the market will be conducted without any requirement for disclosure, though often the investment community will learn of these so as to understand the impacts of R&D and products in the pipeline on a com-

pany’s future.

Scenario 3: Government Regulation—High Probability, High Impact The scenario with the greatest likelihood and impact for the industry is one of federal regulations mandating the disclosure of clinical trials. In this scenario, legal actions continue to pile up, along with continued pressure on the health-care industry in general. The voluntary database PhRMA (Pharmaceutical Research and Manufacturers of America) fails to become a useful tool because of a lack of voluntary participation. Public and government discontent continues to grow. To avoid further legal actions, drug companies agree to a government-run database disclosing data on all Phase III and IV trials, regardless of their results. There would be penalties for a lack of disclosure.

Scenario 4: Total Disclosure— Low Probability, High Impact (Wild Card) If there are more scandals involving drug safety or obfuscation of trial data, the public could become so distrustful of the pharmaceutical THE FUTURIST

industry that government agencies might move to demand full registration of all research activities, from preclinical to Phase III and IV trials, irrespective of the market potential of the drugs. All participation would be mandatory. Other drug company activities would likely be monitored as well, including whatever the sales representatives tell prospective customers and how much doctors are paid to provide clinical information.

Business Implications of Clinical Trial Scenarios The Impact/Probability Matrix has delineated a range of scenarios, all with varying degrees of disclosure imposed on the pharmaceutical industry. There are scenarios in which business won’t change much, and others where pharmaceutical companies must operate with unprecedented transparency. The next step is to look at the potential impacts of these scenarios. Here are a few: • Silence might win. If the movement toward more disclosure of drug-trial results is only a flash in the pan, then the smart companies are followers, not leaders. If GSK and Eli Lilly put forth a clinical trial database with full disclosure, they will be stuck with it, while other companies still have options. • Disclosure becomes a way of life. The pharmaceutical industry is certainly regulated, but we could see a new era of government oversight. There may be new regulatory boards added to government agencies, and companies will need to augment their government relations departments, because the regulations are now mandatory. • First to market not always preferable; fast followers gain new advantage. The new era of disclo-

sure will change how companies come first to market. It is conventional wisdom that the first to market gets increased brand recognition. Now there is a trade-off. Later entries into markets may be able to structure Phase III programs more cheaply because companies will learn from their competitors about blind alleys not to go down. January-February 2006

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• Learn from every lab in the world. There will be a loss of secrecy, as competitors can observe trial design, patient populations, endpoints, and eventually results. Drug companies will be able to reap greater efficiencies as companies learn from other labs in all other drug companies. The total costs of drug development could be reduced as competing laboratories avoid duplicating each other’s mistakes and improve the design of their clinical trials. • Fewer studies. Companies may potentially limit studies if all trials must be registered and all results disclosed. A faulty or even exploratory trial design could result in immediate exposure to criticism by one’s competitors. Post-marketing studies are typically more open, but head-to-head trials will instantly signal to a competitor of an attack on its market share. Head-to-head studies may become riskier, as it will be less possible to conduct trials such as the PROVE IT statin study by BristolMyers Squibb, which inadvertently

showed the superiority of Pfizer ’s Lipitor. Pharmaceutical companies may adopt a more targeted approach. • More-successful studies. Even well-designed trials may result in unfavorable results due to poor enrollment, uncertain methodology, or endpoints of disease that are not universally accepted. Learning the pitfalls of other laboratories could help companies avoid them.

Futuring for Decision Makers This is only a partial list of implications. Once the decision makers are engaged in developing these futures tools and analyzing the scenarios, their open discussion about possible implications leads them to consider potential impacts they could have been denying. For these reasons, futures tools are useful not because they are some sort of crystal ball, but because they inspire people to consider what they already know about their world— whether it’s a business, an agency, a

school, a community, or even a family—and how it will change. In business, these tools get leaders a step closer to anticipating how their market will be different in the future. They can thus become better equipped to handle the competitor of tomorrow. Competitive intelligence is all about the future, whether 10 years or 10 weeks from now. Learning what may be around the corner is essential to strategy, and the tools of the futurist are ideal for improving other models of competitive assessment. ■ About the Author Eric Garland is the principal of Competitive Futures Inc., a futures consultancy, www.competitivefutures.com; e-mail egarland@competitive futures.com. This article draws from his forthcoming book, Fast Forward Thinking.

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Call for Papers WorldFuture 2006 Conference Volume The World Future Society is seeking fresh, insightful essays to include in a volume to be distributed to all attendees as well as to Institutional and Comprehensive Professional members of the Society. Papers focusing on the conference theme, “Creating Global Strategies for Humanity’s Future,” are especially desirable, as well as essays that address other significant issue areas, such as education, technology, the economy, the environment, public policy, societal values, and futures methodologies and best practices. Previous contributors to the Society’s highly regarded conference volumes have included scientists, scholars, futures researchers, professional futurist consultants, educators, executives, philosophers, and many others. Guidelines for submitting an essay for possible publication may be found online at www.wfs.org/2006volguidelines.htm. For more information, contact Susan Echard, vice president for membership and conference operations, at [email protected]. Deadline: Essays must be received by March 6, 2006.

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