In a recent WSJ article, Joerg Reinhardt, chairman of pharmaceutical giant Novartis AG, shared a fundamental business model innovation insight: “We need to add value – life prolonging or quality-of-life benefits – that are meaningful enough for payers around the world to say, ‘Yes, I’m willing to pay a premium over generic opportunities.’” To create such benefits, Reinhardt is devoting a higher percent of revenue to R&D than most competitors and consolidating researchers into four centers to increase synergies across teams. Reinhardt has business model strategy partially right. Healthcare payers should not pay a premium if that premium does not translate into real benefits. In the past, fear of generic drugs’ quality encouraged many people to favor branded versions. But after decades of safe generic drug production, “assurance” is no longer a differentiator for branded drugs. Unless the branded drug produces significantly better…