For many years, pharmaceutical companies decided what their products were worth, and priced them accordingly. The industry has traditionally relied on aggressive marketing to promote its products. In the last decade, the average marketing expenditure multiplied 3 folds in the US. Yet another source suggests that the rise (including meetings and e-promotions) is actually nearly 6 folds in real terms. Aggressive marketing – whether it be 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.
Today healthcare policy-makers, pharmacists, payers and patient groups are now playing an increasingly important role in the valuation process – and this trend will accelerate, as healthcare expenditure everywhere continues to soar. Many policy-makers and payers have started trying to measure exactly what they are getting for their money.
Patients have become more influential than before as access to reliable healthcare information increases. The number of people using the Internet to find healthcare information has increased dramatically over the last decade. Numerous blogs and online forums have also sprung up to cater for increasingly information-hungry patients. They include sites such as patientslikeme.com, which enables patients to compare symptoms and side effects; medhelp.org, where doctors and patients work together to create “wikis”; and various disease-specific forums for patients with conditions like cancer and epilepsy.
Here is a glimpse of how healthcare be on the coming future.
Health 2.0 Revolution – The next stage is the so-called Health 2.0 revolution, which is the proliferation of electronic personal health records. Microsoft and Google have both launched services to help people create and store their own personal health records on the World Wide Web. But there are many other, smaller companies offering similar services, including myPHR.com, medicalrecords247.org and ihealthrecord.org.
Cheap gene sequencing and disease disposition analysis – 23andMe (which is backed by Google) charges just US$399 to analyse people’s DNA and tell them how likely they are to suffer from more than 90 health conditions and inherited traits. Other service providers are providing comprehensive reports. Cheap gene sequencing and disease disposition analysis will fuel popular demand for targeted medicines and personalised healthcare.
e-Medical Records, e-Prescribing and Remote Monitoring – By 2020, electronic medical records, e-prescribing and remote monitoring will give healthcare payers and providers in many countries access to extensive outcomes data. Doctors will then be able to determine which medicines are particularly safe, efficacious and cost-effective in different patient populations, and include such information in their treatment protocols. They will also be able to revise the prices they pay upwards or downwards, depending on how specific medicines perform over time.
Pay-For-Performance – The industry has already been forced to take the first steps down the path to pay-for-performance. In the UK, for example, reimbursement of Velcade, Johnson & Johnson’s new cancer treatment, is contingent on proof of a measurable reduction in the size of a patient’s tumour. Similarly, payment for Lucentis, Novartis’s therapy for agerelated macular degeneration, is subject to a dose-capping scheme under which the company bears the costs of treating any patient who requires more than 14 injections. The British government now plans to extend this approach, with a flexible pricing system under which the prices of new medicines can be raised, if they prove more effective than initially expected.
So what will be the marketing and sales strategy?
Good medicines will still be the cornerstone of any pharmaceutical company’s marketing and sales strategy, but they will not be sufficient in isolation. By, 2020, prescription therapies will be only one of the components in a collection of products and services from which patients can select. Furthermore, as the balance of power shifts from Pharma to healthcare payers and patients, the definition of what constitutes a “good” medicine will expand. In addition to clinical considerations like safety and efficacy, it will include qualitative criteria – such as the extent to which a treatment makes patients feel better, enables them to keep working or reduces the cost of caring for them.
By 2020, pharmaceutical companies will therefore have to collaborate much more closely with everyone in the healthcare arena to provide a range of products and services from which patients can pick and choose all but the core prescription, both to differentiate their offerings more effectively and to preserve the value of the medicines they make. More specifically, they will have to:
- Recognise the interdependence of the pharmaceutical and healthcare value chains
- Ensure that they invest in developing medicines the market really wants
- Form a web of alliances to offer supporting services
- Develop comprehensive plans for marketing and selling specialist therapies
- Create organisational cultures that are suitable for marketing specialist healthcare packages
- Manage multi-country launches and live licensing
- Adopt a more flexible approach to pricing; and
- Build marketing and sales functions that are fit for the future.
By 2020, the pharmaceutical, payer and provider value chains will be much more closely intertwined
By 2020, the pharmaceutical marketing and sales function will be organised around brands
Marketing and Sales Model for 2020
If the pharmaceutical industry has 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 (be they governments, health insurers, employers or patients) and providers 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 states emerge, the pressure will only increase.
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 prerequisite for reimbursement in its core markets. Instead of trying to stimulate prescription sales, its task will be to help patients manage the disease lifecycle. 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. Any company that launches a new healthcare package will have to negotiate price increases in line with the extension of the terms on which that package can be marketed. 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 organisational 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.
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, they 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 sceptical 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.
(This article is an abridge version of a full report from PwC)