Redefine pharma marketing for future
If pharma is to create a
new marketing and sales model that is fit for 2020, it will have to
begin by analyzing its own value chain to identify opportunities for
working more closely with healthcare payers and providers
The social, demographic and economic context in which the
pharmaceutical industry operates is changing dramatically. The shortage
of new products, the pressures exercised by payers on pricing and the
delivery of innovative products that prevent and cure diseases,
combined with an increasing shift to the delivery of personalized
healthcare to patients is transforming the way the industry operates
and is organized.
All these challenges have major ramifications for the way in which
pharma markets sells the medicines it develops. The industry has
traditionally relied on aggressive marketing to promote its products.
Many of the industry's biggest markets are now saturated with
sales representatives, and its selling techniques are becoming
increasingly ineffective. Hence, the fact that returns on detailing via
sales visits to doctors have begun to decline in the developed world.
Direct-to-consumer (DTC) advertising-the other big weapon in
pharma's marketing artiller-has also failed to
deliver on industry's expectation.
In short, aggressive marketing- whether to doctors or
patients-is becoming increasingly ineffective as a means of
stimulating demand for new therapies and overcoming reluctance to pay
premium prices for products that are deemed to offer only minor
clinical improvements. Industry critics are also becoming increasingly
vociferous in their complaints that it is wasteful or even unethical.
Big pharma has responded with various cost-cutting measures. Pfizer set
the pace in late 2006, when it said that it would cut 20 percent of its
US sales force. Other companies rapidly followed suit and, by October
2008, the industry leaders had announced plans to shed another 53,300
jobs, many of them in marketing and sales. However, both industry
executives and commentators recognize that the failings of the current
marketing and sales model cannot be addressed simply by reducing the
size of the sales force; the problems go very much deeper. It is
believed to stem from three incorrect assumptions, namely:
- Pharma alone determines the value of its products
- Products alone create value
- The buying and selling of medicines is based solely on
technical data like safety and efficacy, as distinct from subjective
criteria like quality of life.
If pharma is to create a new marketing and sales model that is fit for
2020, it will have to begin by analysing its own value chain to
identify opportunities for working more closely with healthcare payers
and providers. It will, for example, have to collaborate much more
closely with payers (governments, health insurers, employers or
patients) to ensure that it develops medicines which have real social
and economic value.
Moreover, the burden of proof will be much greater for specialist
therapies costing many thousands of dollars than it is for primary-care
treatments-and, as multiple products for treating specific
disease emerge, the pressure will only increase. For example,
Herceptin has long dominated the market for breast cancer, but with the
launch of Tykerb, GSK has produced a serious rival to the throne.
Pharma will have to supplement these new medicines with a
wide range of health management services in order to improve compliance
and protect the value of its products, as performance-based pricing
becomes a pre-requisite for reimbursement in its core markets. This
will entail the formation of numerous alliances with local service
providers and sometimes, even rival manufacturers-alliances
that are much more sophisticated than the arm's length
arrangements in which most companies currently engage. It will also
entail the development of a secure, interoperable technological
infrastructure, the management of new intellectual rights issues, the
creation of much stronger brands and the redefinition of the
The shift to performance-based pricing will dictate other
changes too, including the need for a more flexible approach
to pricing. The introduction of live licensing and increasing
importance of the emerging markets will reinforce this trend. And if it
wants to tap into the potential of the emerging world, it will have to
use differential pricing-both within and between countries.
Many of the industry leaders will also have to develop comprehensive
strategies for marketing and selling specialist healthcare packages, a
process that will require major organizational and cultural changes,
including the development of new skills and routes to market. One of
the biggest decisions these companies face will be what sort of
business model to use. Various new models are emerging, both inside and
outside the industry, and there is much that pharma can learn from
looking over the fence.
Lastly, most if not all, pharmaceutical companies will have to
transform their marketing and sales functions. By 2020, the role of the
traditional sales representative will be largely obsolete. Conversely,
the industry will have much greater need of people with the expertise
to build brands; manage a network of external alliances; negotiate with
governments and health insurers; liaise with secondary-care
specialists; and communicate with patients.
These are enormous challenges. Yet if pharma can overcome them, then it
will be able to slash its expenditure on marketing and sales.
Consulting healthcare payers during the development process will put it
in a much better position to ensure that the billions of
dollars it invests in R&D are wisely spent,
and eliminate the need to spend massive sums persuading
increasingly skeptical doctors to prescribe medicines whose clinical
superiority may be questionable.
Focusing on specialist medicines will provide new commercial
opportunities and reduce the risk of generic erosion. And creating
healthcare packages for treating specific conditions will safeguard the
value of good medicines, as well as providing new revenue streams and
garnering greater loyalty from patients.