The New Pharmaceutical Frontier

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36 A ug u s t 20 03 PharmaVOICE Henry McKinnell, Pfizer’s CEO says the acquisition of Pharmacia means that the com pany is wellpositioned to become a transforming force in global healthcare. For Rob Benson, executive VP of Healthworld Global Business Group, this implies much more than the world’s top company, in capitalized value, flexing its financial mus cle. The essence of this statement appears to focus on real izing structural as well as strategic changes in the way the pharmaceutical industry does business around the world. “For an industry renowned for its traditional caution and conservatism this is significant, suggesting a new level of corporate intent as much as personal and commercial vision,” Mr. Benson says. Rising research and development costs, shrinking mar ket exclusivity for new drugs, reduced new drug applica tions — compounded by waves of patent expiration and costcontainment measures from governments and man agedcare organizations — all appear to be converging to challenge business growth ambitions. “In effect, these forces are creating the oftquoted per fect storm for pharmaceuticals,” Mr. Benson says. But to “change from a leader to a transforming force,” as Mr. McKinnell says, means deciding what needs to change and changing it. As the world’s No. 1 pharmaceu tical player with more than a 10% share of world sales, Pfizer is currently favorably placed to adopt such a pro gressive stance, and the potential implications affect all interested parties. Rising R&D costs, shrinking market exclusivity, reduced new drug applications — compounded by waves of patent expirations and costcontainment measures from governments and managedcare organizations — all appear to be converging to challenge business growth and CREATINGTHEPERFECT STORM FORPHARMACEUTICALMARKETING. strategic changes are coming at a critical time when many market forces already are changing the competitive landscape for pharma companies in North America,Europe,Asia,and elsewhere. IN AN EXCLUSIVE TO PHARMAVOICE, ROB BENSON,EXECUTIVE VP, HEALTHWORLD GLOBAL BUSINESS GROUP,DISCUSSES WHYTHE PHARMA INDUSTRY NEEDSTO ADOPT MORE RADICALWAYS OF COMPETING, BETTER ADDRESS ISSUES RELATED TO INNOVATIVETECHNOLOGY,AND WORKTOMEET EXPANDING CUSTOMER DEMANDS. The New Pharmaceutical FRONTIER 37 PharmaVOICE A ug u s t 20 03 VIEW on marketing “This perspective of a new scale and business impetus also chimes with quietly growing appeals for the pharmaceutical industry to adopt a differ ent way to compete,” Mr. Benson says. “Against this background, trans formation can be viewed as the emerging business model for growth. Part of its appeal is in its ability to be deployed in two critical directions at the same time and aligned to initially different objectives, strategies, and out comes that eventually meet to complement one another.” According to Mr. Benson, one direction is linked to necessity, the other to opportunity. Transformation in terms of necessity is clearly asso ciated with R&D and the arena of commercially meaningful, relevant, and innovative new product development, where immediate business negative challenges already exist for virtually all pharmaceutical compa nies. Mr. Benson cites several challenges that are directly impacting the industry including: average new drug development costs of about $650 million to $800 million; 20% of sales now spent on R&D; $25 billion in sales lost to patent expiration in 2002; and the 50% reduction in new drug applications to the FDA and EMEA compared with a decade ago. An important corporate factor is that while a transformed supplyside is an unavoidable imperative, he says, this is aligned mainly toward the long term in payback terms, even allowing for significant shifts in in house effectiveness such as smarter drug screening and external pipeline supplementation via thirdparty dealmaking. “Reality dictates that all of this must go on, but not to the disadvan tageous of balance of the other transformational axis that built on the opportunity of demand,” Mr. Benson says. “This is the truly market side of transformation that includes the belief that scale and potential business reach can deliver both immediate and longterm advantages and results.” The Transformation of Marketing Mr. Benson believes that the face of marketing as a central generator of sustained business growth needs to be embraced, rather than marketing as a peripheral contributor to the supplyside process. This shift in thinking has the potential to influence and change the pharmaceutical business end to end, from molecular discovery to enduring patient loyalty. “To advance this thinking requires separate acknowledgement of mar keting’s role, scale, and stillevolving best practices in a changing global healthcare marketplace with its growing enduser demands, from Cali fornian baby boomers to the emerging middle classes of India, Latin America, and beyond,” Mr. Benson says. “This requires marketing to be viewed as a real businesstransforming force on both a domestic and glob al scale.” This, however, doesn’t happen without the right corporate leadership. As J.P. Garnier of GlaxoSmithKline recently stated, in today’s global phar maceutical industry “timing is everything.” Pharma leaders have to accel erate uptake at launch and build profit layers from enhanced compliance, persistence, and customer loyalty through the life cycle, even recognizing the sales cliffedge of patent expiration and generic competition. “It needs to be restated because, while such perspectives have been expressed in the past, it is now of critical importance because global scale is different,” Mr. Benson says. “This is a defining period for the world’s $400 billion pharmaceutical industry, with fewer second chances for growth, something many of the world’s top 10 companies realize as they see their competitor’s fortunes rise and fall, sometimes within as little as 12 months. `Making the drug available’ is no longer a sufficient business model in a commercial world where pharmaceuticals still confront intensely high shareholder expectations.” The way ahead lies within the spirit of a marketingled transforma tion. It is an on going process and not an event or a set of finite actions. Mr. Benson says to achieve a marketing transformation, the indus To achieve a marketing transformation, the industry will be required to think bigger while increasing its ability to reach a higher level of effectiveness. 38 A ug u s t 20 03 PharmaVOICE VIEW on marketing try will be required to think bigger while improving its ability to reach a higher level of effectiveness by wiring together supply and demand, discovery and consumption, health professionals and patients, and so forth. “This concept is also evolutionary rather than revolutionary, bringing together already widely accepted and emerging business strategies,” he adds. Approaches for Business Growth Mr. Benson outlines three core business approaches that need to be integrated as a way to effect this marketing transformation and foster business growth: speed to reach the entire market, real brand creation, and market power. Speedto reachtheentiremarket.For more than five years, speed to market has occupied a central place within many pharmaceutical com panies’ growth plans, as these companies recognize the allure of shorten ing the 12yearsorso R&D timeline. “This strategy remains valid today as long as it is proportional to the opportunity and also recognizes the marketing focused dimension of optimizing the eight years or longer of patientprotected inmarket life of the brand,” he says. “Here, speed references the whole market presence of the brand, not only its steps toward active commercial availability. To fully realize its transformational potential, this strategy has to work in parallel with higherlevel brand creation and brand development.” Real brand creation. Consumer packaged goods continue to illus trate the transformational impact great brands can have on a business. The brand is the nucleus around which all activity occurs. It is both a phi losophy and entity in its own right: “A brand is for life.” “This is not a complex concept,” Mr. Benson says. “At its basic level, the brand is nothing more than the sum of all the memories and associ ations people have that surround the physical product. But brands define, brands differentiate, brands are incrementally valuable.” For the pharmaceutical industry to transform itself and seek greater growth, according to Mr. Benson, it has to fully embrace a comprehen sive belief in brands and their vital role in business throughout all deci sionmaking processes. This recognizes the everpresent supplyside con straints, the diversity of audiences, the marketing, distribution, and pricing controls. “These are all great reasons to think bigger and seek to create and build more real brands,” he says. “Creatively implementing this think ing, however, presents internal organizational and management chal lenges, which many leading pharmaceutical companies are now address ing, for example lifecycle management. This, however, is an often lessthansmooth task that’s compounded by the industry’s decentralized foundations where brands and branding are all too often confused as the same thing. Corporate leadership, realigned budgeting, and further inte gration of communication planning are all equally vital changes needed to elevate brands as true business assets. Brands are medianeutral but messagesensitive. Our industry now needs to focus more on putting the brandcentered message first.” Market power. Strong brands developed and marketed at speed can pave the way toward achieving new growth from business transforma tion. These dual strategies combine to a third approach, that of market power. “Put simply, market power is about building a sustainable and com manding company position within a defined therapeutic category, facili tated by closely integrated R&D and marketing planning and operational deployment,” he says. “This is aligned to the growth in lifecycle man agement now seen in many leading pharmaceutical companies. An important distinction though, is the scale, cyclical nature, and market ingled culture behind the marketpower strategy. A close analogy is cat egory management as adopted by the consumer packagedgoods indus try some years ago.” According to Mr. Benson, this trend will increasingly involve a chang ing portfolio alignment of product brands positioned and marketed with in a therapeutic area such that those brands can dominate regardless of prescribing patterns. Such a situation can only realistically work over time with effective corporate marketing and marketingled R&D innovation to provide the company with the right products, thus maintaining and protecting growth within an environment of planned new brand succession. “With industry consolidation continuing as a global newbusiness reality that’s yet to complete its course, scale and therapeutic franchise considerations will grow to overshadow much of the traditionally narrow R&D and tac tical chatter at individual compound or local brand levels,” he says. The goal of growth from business transformation, whether born out of necessity or opportunity, demands greater marketing scale and preci sion at the same time. In Mr. Benson’s opinion, this poses quite a chal lenge for corporations and their marketing partners. Common Trends So what can be expected to characterize this industrywide gravitation toward creating transformation or being forced to react to its growing heralds a new chapter of marketingled innovation backed by a new level of corporate purpose and leadership. 39 PharmaVOICE A u gu s t 2 00 3 VIEW on marketing impact? According to Mr. Benson, there are several interrelated areas of the pharmaceutical market that will increasingly determine and charac terize a business’ ability to deliver sustained growth and commercial suc cess over the next five to 10 years and beyond. Building corporateand product brand connections. Indus try consolidation and other factors, such as globalization and a tighter core therapeutic franchise focus, will require more companies to evaluate and decide on their desired corporate persona, underpinned by their pri mary product brands. “Thereafter the company’s role and deployment will require careful on going assessment,” he says. “But regardless of its visibility, this process in part further elevates marketing and brands to a higher status within the overall business.” Gaining deeper consumer insight. With a growth in directto consumer and directtopatient activity stretching (unbranded) beyond the United States to other key world markets in Europe and Asia, a new strategic global marketing front has opened up. The pharmaceutical industry has just started to explore and unlock its potential to drive growth from expanded diagnosis and treatment to enhanced compliance and loyalty. “The full scope of such patient mobilization, integrated multichannel communications, the power of new data, and the segmentation sophisti cation offered by new Web applications, all open new platforms from which tomorrow’s more sophisticated marketing can be leveraged to cre ate higher standards of accountability and business return,” he says. Developing closer stakeholder contact and affinity. Mar keting’s increasing scale and intensity leads to information growth and, from this, the creation of new ways to stimulate higherquality integra tion and dialogue between the diverse range of stakeholder groups and target audiences that make up the modern pharmaceutical market, espe cially as traditional salesforcetodoctor contact continues its decline. According to Mr. Benson, this can be, if managed correctly, a winwin sit uation for brand owners. Longer term strategic planning. The adoption of new strategic frameworks within which bigger brand marketing can be accommodat ed, organized, and operated will increasingly lead to more companies hav ing to more closely align lifestage planning and lifecycle management, especially as therapeutic category development increases. Mr. Benson believes that processes from environment conditioning to stakeholder contact and relationship management, strategic planning, whether at a category or individual product brand level, will require more cyclical systems as opposed to linear commercialization processes with a beginning, middle, and end. Greater strategic and executional integration. With more variables increasingly in play, knowledge management has the critical role of connecting markets, customers, and brands. This process has a long way to go, but a clear implication is the need for greater integration between what should happen and what does happen. “Far from being a perceived point of differentiation, integration, including that between global, regional, and local strategy and execution, will increasingly become the accepted bestpractice business pattern, facilitated by distinctive corporate leadership,” he says. “Without it transformation goals will be undermined.” Continuous measurements and ROI. Bigger scale marketing, extended planning variables, and more consistently defined executional directives, for example from global brand positioning to local advertising execution, increasingly will demand higher accountability linked to both efficiency control and ROI performance. According to Mr. Benson, this growing requirement means including both quantified metrics and an array of intangibles as pharmaceutical companies and brands seek to deepen their understanding and increase their influence over awareness, attitudes, and behavior, as much as sales and market share both within and around the markets they compete in. Lifetimecustomervalue.As a greater focus on demandled growth evolves within such areas as proactive category management and more assertive global marketing, parallel narrowcast efforts need to be inten sified at optimizing patient compliance and persistence leading to life time customer value, especially in the context of chronic conditions. “This has an impact on the precision of marketing, fueling require ments for the industry to more fully embrace CRM and permission mar keting, facilitated by Webbased solutions integrated to traditional com munications,” he says. Increased transparency and corporate social responsibil ity. The higher the industry raises its game and corporate profile, the more it has to take new initiatives to anticipate and neutralize negative images as much as accentuate the values it seeks to project. “Bigger marketing power has to translate as positive and responsible market power to all stakeholders,” Mr. Benson says. The Time for Change The pharmaceutical industry is still in the early, slow stages of its mar keting journey. This will accelerate and fundamentally change the indus try and build the business prospects offered by market power. “The rallying cry of transformation heralds a new chapter of marketing led innovation backed by a new level of corporate purpose and leadership,” Mr. Benson says. “One fundamental reason is that the pharmaceutical industry can no longer expect to achieve its growth ambitions by main taining a disproportionate emphasis on its supply side, vital as that is.” He adds that while R&D must be transformed, the marketingled demand side also must be expanded, not just because it can be trans formed to deliver results within a shorter time frame and consistently over the long term. This ultimately can enhance R&D productivity and the creation of a more marketinformed supply side that knows where it should be going and why. “With globally effective competitive advantage and higher business growth still the centerstage industry goals, this year could be the begin ning of the most interesting time for serious marketers to be in the phar maceutical business.” F PharmaVoice welcomes comments about this article. Email us at feed

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