Stuart Read and Saras Sarasvathy examine how a US pharmacologist is helping the world’s poor.

The Big Price of Small Pills

The next time you pick up a prescription, take a look at the price of the product. Not the portion you pay after insurance, but the actual price. Pharmaceuticals are expensive. And that translates into good business. Industry profits are in the 20% range, and with the aging population driving demand, today’s global pharma sales are expected to more than double, reaching $1.3 trillion, by the year 2020 . For context, that is more than the gross domestic product of the entire country of India .

Counter Intuition

An opportunity of that scale attracts entrepreneurs by the score. But none quite like Victoria Hale. She wants to not make money making pharmaceuticals. Yes, you read that correctly. Her firm, Institute for OneWorld Health, describes itself as a nonprofit pharmaceutical company. OneWorld is her solution to the problem facing people in countries like India who simply cannot afford many modern pharmaceutical treatments. Clearly a worthwhile endeavour, and worth understanding the foundation of such a venture as well.

Recycling Science

Hale comes from the industry. She has a PhD in pharmacology from the University of California San Francisco (one of the top medical schools in the US), and has worked for both the US Food and Drug Administration and Genentech. Those experiences enabled her to see “opportunity”ù where others saw waste. Every day, patents on profitable pharmaceuticals expire, enabling anyone to produce and distribute the compound without paying a royalty. Every day, research and development projects are cancelled because the resulting product could not find a profitable market. Useless to large pharma firms, these events could offer technology OneWorld could employ, at a price OneWorld and its customers could afford.

Taking the First Step: Kala-Azar

Also known as “Black Fever”ù, Kala-Azar (formally Visceral Leishmaniasis) is a disease transmitted by sand flies. If left untreated, the resulting internal organ damage is nearly always fatal. Half a million new cases are estimated worldwide annually, largely in India, Bangledesh and Nepal. Starting with an ‘off-patent”ù antibiotic, OneWorld assembled partners from the commercial, nonprofit and government sectors to develop, test and approve Paromomycin ? a compound capable of curing a Black Fever victim for less than $10. Paromomycin distribution started in 2007 in India, and if Hale has her way, the compound could eradicate the disease completely.

Making the Opportunity

Entrepreneurs are often described as ‘creative’, but perhaps ‘creators’ is a more apt term. Had Hale not dragged a solution from the dustbins of pharma and built partnerships to create a new business model that gets cheap remedies to “unprofitable”ù markets, it is unlikely that the need would be served today. In other words, while so many aspiring entrepreneurs search for opportunities just waiting to be discovered, real entrepreneurs roll up their sleeves to make them. And so new opportunities come to be that otherwise did not exist and so, of course, could not be found. A Cure for the Common Job Hale’s next foes are diarrheal disease, malaria and Chagas disease. Her success against Kala-Azar offers her new means in these next challenges. She has new knowledge, new partners and even new money. OneWorld has received more than $100 million in grants from notables such as the Bill & Melinda Gates Foundation and the Lehman Brothers Foundation. Save the world? Drive a major industry? Why not do both?

Written by Stuart Read, professor of marketing at IMD and Saras Sarasvathy, associate professor of business administration at the University of Virgina’s Darden School.  Art is credited to personalfx, through stock.exchng.

Publication:
British Airways Business Life
Author(s):
Stuart Read
Saras D. Sarasvathy
Relevant Principles:
Bird-in-Hand (Means)
Affordable Loss
Crazy Quilt (Partnerships)
Pilot-in-the-Plane (Control vs. Predict)

pdfBABL OneWorld