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David Laws examines today’s industry trend of offering services ‘Beyond the Pill’. In the first installment, David looks at the intent and objective of such services and asks, who really benefits from all of these value adds?

By David Laws on Nov 5, 2013

There is a long history of pharma providing services in support of their products and while these efforts have typically been small in scope and scale they were at least part of the marketing approach.

However, these projects were always seen as being on the fringes, at least for traditional pharma marketers, to support the mainstream marketing efforts if you like, and the resources and benefits that were allocated to them relatively insignificant. Certainly none of them, even adherence programs, were significant enough to change the focus of the traditional sales and marketing approach used right across the industry.

Perhaps it was just not the right time and all the effort required did not justify the return, but maybe now, with all the commercial pressures the industry is under, the time has come at last.

I’m not so convinced that this is the case, but there certainly is a whole lot of activity and talk about value added services right now. We will have to wait and see if all this talk turns into something that can significantly help pharma meet the challenges it is facing as the healthcare environment evolves.

If I look back to when I first started in the industry, the mindset at that point, particularly coming out of the US, was that the value pharma brings is in the pill. Indeed, in the US, the legal folks were very keen to limit what value pharma brought to healthcare other than the pill. And any additional services at that time were ‘better’ (from a legal and compliance point of view) if they were closely tied to the pill. The idea of delivering value to physicians in particular sat uncomfortably with pharma.

So historically pharma looked for ways to add value, with the pill as the focal point. Patient support programs, education, disease awareness and adherence programs. That sort of thing.

Most of the time these initiatives were done using third parties with the funding coming from pharma, and as I mentioned before, very closely linked to the pill.

The benefit most patients receive if they stay on therapy for an extra 3 months is, not a lot.

In my opinion, most of the ‘value add’ was added value for the industry. Sure, there were benefits to patients, perhaps even payers. But it was peripheral value only, because these services were after all in support of the products and were primarily targeted at physicians, the bulk of the benefit was received by pharma themselves both in terms of additional product sales but also as a competitive differentiator.

Now I know not everyone is going to agree with this statement and I am more than happy to enter into a discussion, in fact, I would welcome it, but the reality is that the benefit most patients receive if they stay on therapy for an extra 3 months is, not a lot. The benefit to the healthcare system of a patient with a chronic disease staying on therapy for even an extra 6 months is very limited. In both cases, continued drug sales for pharma and the extended use of their product historically produced an incredible benefit in terms of increased sales and revenue.

Attaching services to the pill was the primary focus for pharma and this continued to be the situation until quite recently.

So, what happened?

I wish we could point to a defining moment, but I think it was a gradual process over a number of years, but one of the critical turning points that helped drive the change was the industry’s desire to become more Customer Focused.

Customer Focus seemed to have been the flavour of the month a few years ago and it was tremendously useful, not in terms that it has been widely adopted, which it hasn’t, but it did alert the industry to how customer perceived them. It forced the industry to ask customers how they saw them and what they could do better. And one of the outcomes was a realization that indeed the industry was not delivering value to customers outside the pill, and this was becoming unacceptable to customers.

The balance of power and influence has shifted and is shifting more, to include a much broader set of customers including patients, patient advocacy groups, retail pharmacy, nurses, payers, insurers and others.

We probably need to stop there for a moment, because we are now talking customers.  A few years ago it would be safe to say that customers were health care professionals, predominantly physicians, perhaps hospitals and pharmacy. In the US, payers as well. But, overwhelmingly, customers were physicians. Take a look at the percentage of resources allocated towards HCPs and you will have to agree.

So if we think of physicians as the key customer, adding value to the pill in support of physicians was the focus. Continuing Medical Education (CME), conferences, advisory boards, speaking engagements, patient support materials, HCP and patient web sites and the like were all seen as adding value to physicians. And these things still do today.

Over recent years though, the balance of power and influence has shifted and is shifting more, to include a much broader set of customers including patients, patient advocacy groups, retail pharmacy, nurses, payers, insurers and others. So when we start talking about VAS in the new world and the rapidly changing market environment, we need to be clear whom we are adding value to.

One of the big challenges in healthcare is not only the abundance of stakeholders but also the diversity of their goals and objectives and, as a result what they perceive to be value add from pharma. Often, what one group perceives as valuable is at odds with what another perceives and may even be at odds with their objectives.

Today the industry has a set of new customer types who have a different view of value, and the experience pharma has had working with HCPs in this space is of limited value.

So we need to be clear what the value proposition is going to be for each customer either in support of the pill or in addition to the treatment in support of better patient outcomes.

This is a significant challenge for todays’ pharma marketer, and frankly, one, which is probably outside the experience of many of them – an urgent area for training and up skilling.

A lot of what we are seeing today is focused on the financial benefits of VAS to the various stakeholders. Clearly payers or insurers are becoming a much more influential stakeholder in healthcare and I see pharma looking at how it can deliver value add to this now important customer by demonstrating the financial benefits.

Let’s take adherence initiatives – another red-hot topic in healthcare today. There is a compelling case for adherence, it is clearly a ‘win- win-win’ for almost everyone, but what I see on an almost daily basis, is a business case for adherence built around the financials. Reduced costs for the healthcare system (read payers), increased sales and revenues for pharma, supporting HCPs in ensuring their treatment regime is followed etc, while impact on patient care and health outcomes seems to come lower down the list.

Does this mean that the majority of adherence programs are a value added service aimed at payers and insurers (and pharma)?

How do HCPs benefit from adherence? If we expect them to play a role in ensuring patients stay on treatment, show me how we are freeing up the time required and rewarding them for doing this vital work. And patients? They get the benefit of improved patient outcomes. Maybe. Could we genuinely say that the majority of adherence programs as we see them today are value add for patients?

I am seeing lots of initiatives in VAS’s that focus on delivering financial benefits and are therefore of particular value to payers, so is it fair to say that this new focus on services is aimed at the payer?

I am not sure that is pharma’s primary intent. However, it is clear that pharma needs to deliver more value to payers.

What about other customer groups and how can pharma add value ‘to the healthcare system’ not just specific customer types?

Are they a way of differentiating one company from another, or ensuring better access for their medications or something else?

To recap, Pharma has being doing VAS’s for some time albeit focused on supporting sales of their pills. It is now moving to demonstrate financial benefits to customers of services that also may have a benefit to patients but for the most part still with a connection to the pill.

We are seeing a move to add value without the connection to the pill so we could call these initiatives ‘Beyond the Pill’ services, and with them comes the difficult question of how these initiatives deliver value back to the vendor – pharma, if not in the form of increased sales of the pill. Are they a way of differentiating one company from another, or ensuring better access for their medications or something else?

If we move away from supporting products, then perhaps pharma should be looking at developing services that are independent of products into Beyond the Pill either for free or, more likely, at a price.

If pharma heads off into these uncharted waters then there is considerable impact on the business model with all that that entails. Perhaps pharma will choose to stick with adding value to its products after all.

Let me know your thoughts and comments.

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Questions or comments? You can share you thoughts with our audience in the comments section below, alternatively you can email the author directly at david@globalpartners.com.au.