The traditional pharmaceutical industry is going through perhaps its biggest transformation since The Pure Food and Drug Act of 1906. Unfortunately, the entrenched "we have always done it this way" leadership mentality has been slow to react to the magnitude of changes taking place over the past two decades.

Every aspect of how drug companies have done business in the past is being re-evaluated, evolved, restructured or even dismantled. More importantly, companies are now realizing they have to come up with new ways to remain viable in this ever-changing market.

So what are these changes that are wreaking havoc on the pharmaceutical industry? There are two external (to pharmaceutical companies) environmental factors forcing drug companies to change the way they have done business in the past.

FDA enforcement

First, having been duped, criticized and often lax in their enforcement, the FDA has become increasingly demanding of new products seeking approval, more vigilant in their oversight of marketing and sales activities, and more rigorous in their manufacturing inspections. They aren't being overly zealous in their enforcement activities, but rather they are now doing what they should have been doing all along.

This means drug companies can no longer take advantage of lenient FDA oversight. This means delivering better, more definitive clinical data to support efficacy and safety in new drug applications. This means strict compliance with drug marketing guidance and regulations. This means attention to detail and uncompromised quality in manufacturing.

Healthcare reform

The second environmental factor is the ever-changing healthcare market. Well before the Affordable Care Act, the healthcare market was becoming more value driven. The sophistication of prescription drug formularies has been evolving and increasing over several decades.

Therapeutic expert-supported due diligence now critically assesses safety, efficacy and cost in the context of alternative treatment options. Where generic drug options are available and considered viable alternatives, they are not only placed "on formulary," but their use is encouraged, if not outright promoted by healthcare institutions or insurers.

This means drug companies now have an even greater burden of comparative proof of value and not just proof of efficacy and safety. This also means that physicians are no longer the primary decision-maker in terms of product selection for drug treatment.

The patient's insurance coverage and drug formularies frequently dictate which products a physician can prescribe. More importantly, these new decision-makers are less accessible and are less likely to be swayed by advertising and promotion. For drug companies, this means the traditional sales and marketing tactics of the past that targeted physicians are now all but obsolete.

We have only touched on a couple of examples of how these two major environmental changes impact drug companies today. In future posts, we'll look closer at what drug companies are dealing with to adapt, survive and thrive in this new environment.