Regulatory

Business Strategy – Involvement of Regulatory Affairs

This article will focus on the important role Regulatory Affairs has in the development of business strategy.

Regulatory Affairs professionals have many skills to offer their company - more than just product registration and compliance. Regulatory Affairs people are central to everything that is happening and are therefore in the best position to have input into strategic discussions. These strategic discussions involve a comprehensive analysis of the business in relation to the industry, the competitors and the business environment in both the short and the long term. Regulatory people have: knowledge of the clinical data; established external relationships with key influencers eg TGA/FDA; knowledge of the competitive environment eg what is needed to get a product registered (eg clinical trial design); as well as an in-depth understanding of products in the same category and emerging products/therapeutic classes.

There are a number of business tools to review strategy and in this article we will consider Michael Porter’s five force model (“Competitive Strategy: Techniques for analysing industries and competitors” Michael Porter, Harvard University, 1980) and the role that Regulatory Affairs people will have in the strategic discussions.

Porter offers tools for investigating the five forces that determine the level of competition, and consequently, the level of profit in an industry.

Within the Strategic Framework Model, the five competitive forces within an industry are the:

1. Bargaining power of Suppliers
2. Bargaining power of Buyers
3. Threat of Substitutes
4. Threat of new Entrants
5. Intensity of rivalry among Competitors

1. Bargaining power of Suppliers

The Suppliers to the pharmaceutical and medical industry include: providers of raw materials and intermediates; manufacturing and production plants; overseas head offices that supply finished product; local co-marketing partners; third party suppliers of all aspects of the supply chain; and suppliers of clinical trial data needed for submissions (investigators, patients, CROs).

The role of Regulatory Affairs in strategic discussions is to give insight into these Suppliers. In formulating the business strategy discussion centers around the degree of influence these Suppliers have on a particular business and determines action plans to work effectively with these Suppliers.

In strategic planning meetings the following questions are considered:

• How much influence do our suppliers have?
• How robust are our secondary suppliers? Will they always be able to supply?
• Do we need another back-up supplier?
• Should we buy the supplier (backward integration)? Will our competitors buy the supplier?
• How much will it cost to switch suppliers?
• Can our current supplier provide the volumes we require?
• What factors will prevent our suppliers from delivering and do we have contingency plans?
• Will they threaten to withhold supply and will this have serious consequences eg delayed regulatory submissions (if data is not available; manufacturing issues and delayed product launches)
• How strong are our supplier relationships
• regardless of signed agreements, it is always people who do the work?

2. Bargaining power of Buyers

The Buyers in the pharmaceutical industry are the TGA, PBAC, PBPA; Tender Boards, Hospital Boards; Drug committees; Chief Pharmacists; Patients and family members; and Head office/Partners buying regulatory submissions.

The contribution of Regulatory Affairs is to give insight into the needs and behaviour of these Buying groups.

In strategic planning meetings the following questions are considered:

• What are the needs of the buyers?
• Who are the decision makers?
• How knowledgeable are the buyers and what demands are they making based on their knowledge?
• How much influence do we have over the buyers and what do we need to do to increase our influence?
• How price sensitive are the buyers?
• Will they always be buying from us?
• What volume do they buy from us versus our competitors?
• How strong are our relationships with the buyers?
• How can we add value to the buying process eg providing information services, bundling additional products, timely delivery, discounts, rebates.

These are all areas where Regulatory Affairs can make significant contributions to strategic discussions based on their knowledge of Buyers.

3. Pressure of Substitute products

The third competitive force affecting a company is the real or potential pressure of substitute products. Substitute products can perform the same function as the product eg a substitute for an original product is a generic, and likewise some devices and interventions can substitute for pharmacology.

Regulatory Affairs professionals have an in-depth knowledge of existing and emerging substitutes and can offer strategic advice with regards: the development, timing and management of a generics strategy; and the potential uptake by the market of substitutes.

4. Threat of new Entrants

New entrants can impact business and how significant they are depends on the barriers to entry. These barriers can include: regulatory policy: patents, regulatory standards; capital requirements and financial resources - manufacturing, R&D costs, marketing, sales, distribution; access to distribution channels: preferred agreements/tenders; brand reputation of the product/company and established business relationships.

In discussing the threat of new entrants and the barriers to be erected, regulatory professionals have the knowledge and contacts to ask:

• What information do we have about new entrants?
• What clinical trial data is being presented at conferences?
• What products are being registered in overseas markets?
• What strategy will the new entrants likely adopt?
• What do we know about the potential products?
• How good are the products versus our own?
• Should we consider leaving the market?
• What can we do to prevent new entrants from arriving?
• Can we make the regulatory conditions tougher?
• Can we block distribution channels?

5. Rivalry between Competitors

Rivalry occurs because one or more competitors either feels the pressure or sees the opportunity to improve position. Rivalry among firms takes the form of jockeying for position using tactics like: price competition, advertising battles or product introductions.

Regulatory Affairs professionals have a particular level of insight with regards rival companies. They understand the patent status of their portfolio and can offer advice on patent extensions (eg manufacturing and process patents) to prolong the product’s life cycle. They are involved in Code of Conduct challenges with rival companies and have an in-depth knowledge regarding the competitor’s supporting clinical data. And they can offer advice as to what rival companies are likely to do in the marketplace and are closely involved when companies go into battle using advertising wars or litigation.

During strategic planning sessions each of these competitive forces are analysed in detail. After the analysis of these forces, the business can then determine: its strengths and weaknesses with regards suppliers and buyers; where it stands against substitutes; its position relative to entry barriers; and its ability to cope with rivalry from competitors.

Businesses compete by understanding their sources of competitive advantage. Through using the Porter model Regulatory professionals can offer insight on how to compete more effectively within the industry.

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