Big Pharma and the Prisoner’s Dilemma



Today I downloaded and read a McKinsey Quarterly report entitled “A wake-up call for Big Pharma” (see link at end of this post).

It was a fascinating, insightful report.

It pointed out several changes that are taking place that are going to force a pharmaceutical industry that has been luxuriously wallowing in easily made profits, and relying on mergers and acquisitions to promote growth, into having to seriously considering radical changes that, if not self-imposed, would be forced, through the actions of smaller, more flexible companies that are hungry.

The authors of the report (Vivian Hunt, Nigel Manson and Paul Morgan) used the “Prisoner’s Dilemma”, from Gaming Theory, to describe the current situation with Big Pharma. That is – if no-one changes, all the Big Pharma companies continue to enjoy the same “wealth”, where if one of them was to make a radical move to adapt itself to a certain future, it would risk, for itself, a potential loss of market share to the others (albeit a temporary one). At the same time…if none of them make a change, the inevitable will be a future where their hands will be forced.

The conclusion of this is that, regardless, there is a fundamental shift on it’s way and that Big Pharma Executives need to be prepared to make changes to their strategies, explicit, rather than reactive.

Related Links:

  • McKinsey Quartely – “A Wake-up call for Big Pharma” (registration required)
  • The Prisioner’s Dilemma (Wikipedia)
  • The Prisoner’s Dilemma (Library of Economics and Liberty)
  • Big Pharma: sorry, the Golden Age is over! (
  • Big Pharma’s Uncertain Future (Strategy + business)

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