Negotiating in tense situations (1/2): An example from the pharma industry

When negotiating, you should always think twice before accepting the least worst option – and this is especially true if you are under time pressure.

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No one is immune to time pressure

If you behave reactively in critical situations, you are not alone. Even corporations can make questionable decisions when in a rush.

An example from pharma companies: Licensing in a hurry

An article published by the INSEAD business school offers the example of drug development. Pharma companies often license compounds when their in-house research is unsuccessful. To achieve the best results, these companies should proactively search for drugs with the best commercial and technical fit. To make the most of their licensing deals, they should invest time in improving the probability that the product will actually reach the market.

Research into licensing deals signed by big companies active in the pharma industry revealed that the companies concerned do not engage to any great extent in the proactive licensing of compounds. Management decides to do so only reactively when in-house development of new drugs has disappointing results. Such incidents decrease the share price; then if new licenses are agreed upon, the share price usually improves. That, of course, is good in terms of rewards for management.

Reactive licensing is not ideal

However, making such license agreements involves significant costs. Reactive licensing increases the probability that compounds will in any case be abandoned later in the development stages. This results in fewer drugs reaching the market and higher development costs for those which do become available. Overall, this translates into higher costs connected to drugs and treatment for society as a whole.

-jk-

Article source INSEAD Knowledge - INSEAD Business School knowledge portal
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Negotiating in tense situations (1/2): An example from the pharma industry

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