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Comment on articleIn the illustrious past of the pharmaceutical industry, blockbusters hit, profits exploded and a heady sense of success was everywhere. Today? It’s a different story. Products and profits are stalled in a series of disastrous circumstances.
To maintain and boost business in today’s new pharmaceutical reality, companies increasingly understand the need to maximize profitability. Executives and leaders seek to get the most out of every current brand. To do this, more and more attention and effort is being placed in product lifecycle management, designed to enhance brand performance every step of the way.
But the way in which companies are embarking on product lifecycle management is limited. While companies find success with a few key strategies, the major changes needed to truly get the most from current products are ignored. In this article, we’ll examine the characteristics and shortcomings of today’s product lifecycle management, and the elements of a comprehensive and successful system.
Realities of Product Lifecycle Management
The anxiety in the pharmaceutical industry today is palpable. Due to a painful combination of internal and external factors, pharma companies face an uncertain future. The reasons why are increasingly familiar to executives and other leaders in the pharma field:
o Pipelines are empty, as the age of the blockbuster seems to wane.
o Costs are up across the board, particularly staggering are the sums needed to push a drug through R&D and effectively market the final product.
o Drugs get approved and into markets with a speed that means products have an increasingly smaller window of exclusivity.
o Generics are booming, and the legal environment increasingly favors generic competition over extended patent protection.
o Customer bases are more complex than ever, with pharma firms finding it necessary to market products to physicians, payers, and increasingly knowledgeable consumers.
With this dire situation, companies feel the pressure to maximize the value of existing brands and are turning to a tactic long espoused by experts and leaders in the field. Product lifecycle management just might be the panacea everyone’s seeking.
Executives agree: product lifecycle management is increasing in importance. But these same executives surveyed by CapGemini also acknowledge their own companies’ implementation of product lifecycle management leave much to be desired. Companies often use lifecycle management as a last ditch effort, a “Hail Mary” pass thrown at the point that generics are declaring victory. As a result, products are not managed effectively throughout their lives and don’t consistently perform for companies.
Why is this? Why are the absolutely essential activities of maximizing lifetime value of a product not put in practice? In reality, product lifecycle management is a difficult task. The root of its difficulty lies in its proactive nature. Companies naturally take reactive stances to their products as they move through their lifecycles, responding to ebbs and flows in profits, reacting to competition, worrying about the inevitable patent expiration. Product lifecycle management must be a proactive initiative. It must be a key organizational aspect of the company and not a burden, a positive force for profit and for the future of the business. And that’s a difficult transition.
Executives readily admit they need to do more when it comes to this kind of product lifecycle management. But what is truly in the realm of possibility for companies? How can the reactive turn proactive?
An illustrative way to determine how companies can get the most value out of brands comes from looking at what many companies do today for product lifecycle management. We’ll then examine how companies can push this further into the realm of truly proactive product management.
Usually companies focus on a few efforts in three key time periods to maximize profitability over lifecycle:
o Pre-Launch. In this time of clinical trials, regulatory approval, and product launch, companies are focused on accelerating the process and speeding up timelines. The goal is to begin generating revenue as quickly as possibly for products; every month and day that a product is off market means missed sales potential and increased R&D costs. In addition to enhanced speed during this time period, companies are looking at ways to make a major splash upon launch. Marketing activities target physicians and consumers to increase awareness and excitement for the product when it becomes available, and create a massive amount of sales.
o Patent Protection Period. In this time period, companies focus on ensuring sales are as high as possible through amplifying patient adherence, extending patient populations and planning patent defense measures. They create therapy franchises to dominate a therapeutic area and maximize profit. They plan for expansion in product uses, as well as improved and increased drug delivery methods. At the same time, companies are doing all they can to shore up patent defenses and ease the pain of the inevitable generic competition.
o Post-Patent. After patent expiration, companies seek to extend value through reformulation, OTC switching, and other lifecycle strategies. Time and money is spent on new branding and marketing efforts to capitalize on existing customers, and to make up for the losses that occurred in the face of generic competition.
These are good strategies. They often result in saved profits and decent protection against the threats of excess costs and increasing competition. But they are defensive measures. Effective product lifecycle management is about making the transition from reactive to proactive, from defensive to offensive. It’s about integration and company change, activities that enable the company to take advantage of opportunities, combine the best of company resources and rigorously apply them to existing and future brands.
Successful Elements of Product Lifecycle Management
So what does ideal product lifecycle management consist of? It’s about crossing the barriers of time and business divisions, about making some tough choices and relying on top talent. It pushes the tactics mentioned above even further, and challenges companies to think and act differently. It’s proactive and integrated, and consists of some key activities:
o Early Planning. Waiting until patent expiration approaches to do the kind of lifecycle and profit extensions the company needs and want will be counterproductive. From the very beginning of development, conscious thought and planning should be given to developing initial and follow-up indications for a drug. When a product launches, thought and planning should be devoted to post-patent reformulations and OTC switching.
o Cross-Functional Collaboration. Planning for a lifecycle can’t be done by just one division. Without the experience and knowledge of multiple divisions that crisscross a product’s life, executives in one part of the business will be unaware of the desires and requirements of others. Opportunities are overlooked and needs go unmet. With that said, companies can and do operate a product lifecycle management program without cross-functional teams, passing ownership from function to function over the product’s life. Some companies find that decisions are made quicker this way and can still be made early enough for full advantage. The key is to choose a system and stick to it, rather than simply approach product lifecycle management with an ad hoc approach doomed to fail.
o Expanded Point of View. Planning can easily be done in a vacuum in the siloed pharmaceutical industry. Leaders are often monopolized by daily work and unable to effectively participate in and lead broader planning. Again, this can mean opportunities are missed. Companies need to build product lifecycle management strategies based on a more expanded business sense and led by the best in the organization. Planning must occur with an understanding of market forces, customer needs, competitive activity, and the means to build profit, bringing all the forces together to plot a path for the product. A key tool in the arsenal of this planning is portfolio analytics.
o Profit Concentration. Cost is important through the lifecycle, but major management concerns about cost are often left until competition rears its head. Instead, companies focus on top-line growth throughout a product’s life. Companies should be focusing on profit as an overarching concern, with product cost considerations taken into account early in the development and launch phases.
o Clear Responsibilities. A key problem with many product lifecycle management initiatives is the uncertainty over leadership and ultimate responsibility. Who’s in charge of what, and who is pushing the strategies forward? Companies must empower a small team of people to develop and implement strategic programs for a product’s lifecycle, with clearly defined leaders and specific accountability. The people on the team must be talented in analyzing problems and creatively solving them, and they must feel comfortable acting as change agents and representatives for the product.
o Manage Life and Death. Products that are no longer profitable are never truly killed; instead they are left to wither and die on their own. In the meantime, however, they still draw on valuable organizational and financial resources. Part of an effective product lifecycle management initiative is managing both life and death. Companies that know when to cut products that are no longer delivering profit to the company are able to shore up company resources and improve business. Exit strategies such as licensing, product sale or complete withdrawal are all viable options that should be considered as part of a product’s lifecycle.
In sum, companies need to move from a collection of reactive strategies to viewing product lifecycle management as a key aspect of business, focusing on integrated leadership, comprehensive processes and maximized people power.
Conclusion
Product lifecycle management requires different thinking and working methods. That’s a difficult idea for many pharma companies to conceptualize, as organizations are often large and entrenched in old ways of doing things. But by working to change thought and action within the company, altering the reactive mode to the proactive, companies can find new means of financial success in the present and in the future.
Author:
Dr. Andree K Bates
Eularis
www.eularis.com
