The recession and pharma: How to be frugal but still build business

Pharma Today: Emerging Markets, Generic Growth, Slowed Approval

By Dr Andree Bates on Mar 10, 2009

Weve all read the headlines and been infected with the economic anxiety that runs rampant today. The turmoil has the potential to affect our personal and professional lives in untold ways. But the pharmaceutical industry has been suffering for years, falling under the weight of stagnant returns, bloated bureaucracy, and increasing competition. Legal and regulatory agencies are getting stricter and have pharma practices in their sights. If there has ever a time to be frugal, it is now. Its a feeling thats spreading across the industry, and across the world, as companies scale back, reduce spending, and wait out the worst. But therein lies the problem. Without concerted effort, without devoting time, resources, and people to creating more drugs, developing new markets, and strengthening companies against competition, our major problems will remain. So what do we do? How can pharma be frugal but still build business? Pharma Today: Emerging Markets, Generic Growth, Slowed Approval For some time, the pharma industry has been shifting. The ground is moving under the giants feet, and todays economic morass only adds to the confusion and disquiet. Take the movement among markets. For years, pharma companies focused their efforts on the major markets of the US, Europe and Japan. But thats changing in significant ways: 2008 marked the first year the seven largest markets contributed only half of overall pharma market growth, according to IMS. In the US and the five largest European markets, sales growth in 2008 was expected to range from 4% to 5% - a historic low. IMS also forecasted Japan market growth at 1% to 2% in 2008, down from the 4% to 5% pace of 2007. Seven emerging markets, on the other hand, contributed nearly 25% of worldwide growth. These markets - China, Brazil, Mexico, South Korea, India, Turkey and Russia - have experienced profound growth in private health insurance, medicine innovation and primary care, even in rural areas. These emerging markets offer a major opportunity for pharma companies. But the widespread expiration of major patents, combined with a dearth of products in the R&D pipeline, means generics are swooping in to establish their dominance in traditional and emerging markets. Most of the large US pharmaceutical companies are facing more major patent expirations between 2010 and 2012. And with patented blockbusters dying off, companies are being challenged for replacements. But getting a new drug approved today is significantly harder than it was even a few years ago. The US FDA is adopting stricter regulatory procedures along the lines of the UKs National Institute for Health and Clinical Excellence. This process requires products to show superiority over reference agents, meaning its not enough to simply show efficacy versus placebo. And safety profiles are required to be much stronger. The increasing layers of scrutiny for getting drugs approved mean many are scrapped during the R&D process, cutting down the productivity of our pipelines. Taken together, its no surprise then that pharmaceutical growth is slowing. As the economies around the globe continue to contract, and the challenges facing the pharma industry increase, overall pharma growth can be expected to decline even further. A Frugal Change Companies are reverting inward as a result of todays economy - pulling back, scaling down, and hoping for the best. But while that may help in the short term, what about the long-range future? How will pharma survive without spending on new and more innovative approaches to drug development (i.e. not focused on chemical entities), or expanding into new markets, or other building techniques? Theres a disconnect here. People are translating frugal into tight. In reality, frugal means much more. Its a perspective, a practice informed by intelligent and rational thought. In its essence, frugal means prudent, not wasteful, wise in expenditures, and inexpensive. And thats just good business. With a smart business model based on frugality, companies can survive the tough times but also push forward, building a better business for today and tomorrow. What does this frugal business model look like? Reduced sales forces For years, sales departments threw thousands of reps into the field, based on the notion that more bodies would translate to more sales. What resulted instead were inundated markets, poorly trained reps, extensive turnover, and physician opposition. A frugal model cuts down on sales forces, trimming the fat to focus instead on highly trained reps that establish relationships with physicians. Relationship orientation Companies cannot survive on a sales-driven model any longer. With less reach and more regulation, long-term success comes from engaging with customers on a personal and professional level, building tight relationships based on mutual benefit. Focusing on relationships rather than sales numbers builds company reputation and business at the same time, and can reduce the expenses needed to convert customers. Embracing technology As sales forces shrink, reps must each do more. To maximize time and costs, companies are turning to tools like tablet PCs to enable closed-loop marketing programs, and online eDetailing programs to help make initial and ongoing contacts in the relationship. Emphasis on patient adherence Rather than spend exclusively on new drug adoption, companies are being frugal by paying attention to the customers they already have. Investing in patient adherence programs can yield big rewards by helping patients attain the best outcome from their meds, enabling physicians to better serve their patients and boosting the company with more filled prescriptions and better safety profiles. A frugal business is a smart business, one that maximizes existing resources. A frugal business also makes smart marketing decisions, including: Focusing on the Web The Internet is increasingly important as a marketing medium, and one that is highly cost effective. Todays frugal marketing models are focusing on web tactics, but also using traditional media to drive patients and physicians to the web. The ultimate objective, is to create meaningful conversations, and build those relationships with (and eventually sales) among consumers, doctors and pharma. The web is an optimal tool to facilitate long-term dialogue, and to keep front of mind as a helpful, informative, useful brand. Growing Word of Mouth Engaging consumers in relationships is key. Word of mouth is proof of that engagement, as customers talk about ads or products within their personal networks. Advertising that focuses on individuals is powerful, but advertising that targets larger networks, and encourages people to share information with people they know who might be suffering from a particular condition, is even more powerful. Plus, this type of advertising is inexpensive, and inherently more trusted than any traditional channel. Ways to promote and harness word of mouth include smart use of the web, health blogs, social media, and much more. Analytics to Promote Frugality Its critical in a frugal business model to keep close tabs on ROI and plan ahead appropriately for marketing endeavors. Many models exist to do this, but most are flawed because they fail to take into account current market data, or to validate this data against prescribing behavior and predictive algorithms. Without these steps, any insights gained are inherently limited and present an incomplete picture of your companys efforts. The Eularis analytics 94.8 system covers all of these bases, resulting in a comprehensive system you can use to track your marketing moves and ensure maximum return on investments. Eularis collects current up-to-date data, validates it against all brands in the category and prescribing behavior so the underlying real influencers can be identified, and then analyzes it with predictive algorithms that offer the highest degree of mathematical certainty possible. This system takes approximately eight weeks from beginning to end, requires minimal time from pharmaceutical marketers and has been found in independent studies to have an accuracy level of around 94.8%. Simply summarized, the Eularis system employs these key steps: Phase 1: Understand key issues for brand team or company Phase 2: Data Collection To Reflect Current Reality and Not Historical Phase 3: Validate Data Against Prescribing To Uncover Real Influencers Phase 4: Apply Predictive Algorithm Analytics and Dynamic Modeling Phase 5: Develop Implications and Report findings This unique diagnostic management tool provides real and actionable data on the strengths and weaknesses of brand activities and the implications for market share. Conclusion While the call to cut is ever-present today, pharma must keep in mind the ongoing challenges facing the industry and individual companies. Rather than simply put spending holds into play, organizations should adopt a frugal business model that eliminates waste and enhances company position. for the powerful support you need. For more information on the Eularis 94.8 Analytics system or any of the issues outlined in this article, please contact Dr Andree K Bates at Eularis www.eularis.com.