Pharmaceutical Technologies Co. (PT) is a developer and manufacturer of medical drugs in Beeland, It is one of the 100 largest listed companies on the national stock exchange. The company focuses on buying prospective drugs that have shown initial promise in testing from small bio-engineering companies. PT then leads these through three regulatory stages to launch in the general medical market, The three stages are:
1. To confirm the safety of the drug (does it harm hurnans?), in small scale trials;
2. To test the efficacy of the product (does it help cure?), again in small scale trials; and
3. Finally, large-scale trials to definitively decide on the safety and efficacy of the product.
The drugs are then marketed through the company’s large sales force to healthcare providers and end users (patients).
The healthcare providers are paid by either health insurance companies or the national government dependent on the financial status of the patient.
The Beeland Drug Regulator (BDR) oversees this testing process and makes the final judgement about whether a product can be sold in the country. Its objectives are to protect, promote and improve public health by ensuring that:
— Medicines have an acceptable balance of benefit and risk;
— The users of these medicines understand this risk–benefit profile; and
— New beneficial product development is encouraged.
The regulator is governed by a board of trustees appointed by the government. It is funded directly by the government and also through fees charged to drug companies when granting licences to sell their products in Beeland.
PT has used share price and earnings per share as its principal measures of performance to date. However, the share price has under-performed the market and the health sector in the last two years. The chief executive officer (CEO) has identified that these measures are too narrow and is considering implementing a balanced scorecard approach to address this problem.
A working group has drawn up a suggested balanced scorecard. It began by identifying the objectives from the board’s medium term strategy:
— Create shareholder value by bringing commercially viable drugs to market
— Improve the efficiency of drug development
— Increase shareholder value by innovation in the drug approval process
The working group then considered the stakeholder perspectives:
— Shareholders want a competitive return on their investment
— Purchasers (governments, insurers and patients) want to pay a reasonable price for the drugs.
— Regulators want an efficient process for the validation of drugs
— Doctors want safe and effective drug products
— Patients want to be cured
Finally, this leads to the proposed scorecard of performance measures:
— Financial – share price and earnings per share
— Customer – number of patients using PT products
— Internal business process – exceed industry standard on design and testing; time to regulatory approval of a product
— Learning and growth – training days undertaken by staff; time to market of new product; percentage of drugs bought by PT that gain final approval.
The balanced scorecard now needs to be reviewed to ensure that it will address the company’s objectives and the issues that it faces in its business environment.
(a) Describe how the implementation of a balanced scorecard delivers a range of performance measures aligned with the corporate strategy.
(b) Evaluate the performance measures proposed for PT’s balanced scorecard.
(c) Identify and analyse the influence of four different external stakeholders on the regulator (BDR).
(d) Using your answer from part (c), describe how the application of the balanced scorecard approach at BDR would differ from the approach within PT.