Forecasting for innovative products
Charles Hardcastle, practice executive, brand management practice with Campbell Alliance, on how a structured approach can improve forecasting in specialty markets.
By on Dec 7, 2009Charles Hardcastle, practice executive, brand management practice with Campbell Alliance, on how a structured approach can improve forecasting in specialty markets.
Accurately forecasting how a product will be received, where it will net the most profit, what hurdles it will face, and what competitors it will encounter is a challenging proposition in any industry, especially one as tightly regulated and competitive as pharma. The challenge is particularly difficult for innovative pharma products aimed at specialty or emerging markets. How do you come up with accurate analyses when there are no obvious analogues to learn from? If theres a trend, if theres a richness of secondary data, its much easier to see where a market is going and where your product could fit, says Charles Hardcastle, practice executive, brand management practice with Campbell Alliance. For specialty products, were assuming there is a shortage of, or no, market data. Were entering a market anew.
Thats why its imperative to have a structured approach, says Hardcastle. Forecasters must ask a series of questions, unpack them methodically, and do the first-hand research and market analysis when necessary. The three most critical questions are: What is the current market landscape? Where does the product fit? And what is the estimated value?
Hardcastle encourages pharmaceutical firms to start with a disease and competitive dossier that provides initial insight into the current accepted norm for managing the condition, the cost of entry into the market, the amount of money that must be spent to be competitive, and the future status of the market. Once the dossier is compiled, create a treatment flow model that delves into particular markets more deeply.
This requires face-to-face research with physicians, Hardcastle says, then a verification process through telephone interviews with physicians, patients, and pharmacies. For instance, if youve got a revolutionary productlets call it product Xin the pipeline and want to market it in Europe, you need to decide if youre going after an EU-wide market or individual markets in, lets say, Germany, France, and Great Britain. To make such a decision, start with the total population of each market, and then look at the disease itself and the prevalence rate within the population. After that, look at the detection and current treatment rates as well as patient compliance. How many patients currently discontinue therapy or diverge from their prescriptions?
After conducting initial research in each market and plugging it into a treatment flow model, you can estimate how many doses would be delivered per month and thus achieve an understanding of the volume of product X likely to be sold in a given market over a given period. Clearly there are some uncertainties, Hardcastle says. So we need to understand where the assumptions are and what the numbers are at each point in that treatment flow. Marketing research will help us understand where those numbers are.
Hardcastle says the key to answering question twoWhere does the product fit?is a compelling segmentation picture, one that breaks down patient profiles on one axismild, moderate, severe, stage 1, stage 2, stage 3, stage 4, etc.and a physician profile on anotherphysicians, pharmacists, clinicians, primary care providers. From this chart, pharmas can discern which segments are a priority, the so-called must-wins, which are segments to chase, and which are long-term opportunities. We need to dig down and really understand that segment in detail, Hardcastle says. Essentially. were looking here at the drivers and barriers of that segment. To help capture a segment accurately, Hardcastle recommends a target product profile, an effective way to measure physicians future prescribing. He also recommends looking at the competitive pipeline: Whos likely to challenge you in this market and how connected are they?
Finally, to answer question threeWhat is the estimated value?its essential to conduct payer research to gain an accurate picture of reimbursement. Then, talk with physicians and patients to see how they react to the reimbursement category your payer research findings have placed you in. For instance, ask physicians if, given a certain reimbursement category, they are likely to prescribe product X. Will patients, in light of the co-pay forecasted for X, switch over? This is so critical to the uptake of a product, says Hardcastle. You can understand the market very well, the competition very well, you can produce some beautiful uptake curves, but if you dont achieve reimbursement in your primary European markets, then uptake is simply not going to happen.
The last issue to consider is pricing options. Conventional wisdom says that a new product should be priced at a premium level. But thats not necessarily the best option today, according to Hardcastle. He says risk-sharing models are becoming increasingly popular, with patients using a product for three months and after those three months assessing if theyre achieving the benefit the data indicated. If yes, the patient pays for the medicine and continues the treatment. If no, the pharma covers the expense.
That option, as well as free giveaways to encourage uptake, should be considered long before a product is ready to be released. Indeed, the key to a strong forecast for an innovative product is looking into the future and modeling it with primary data, appropriate analogs, and realistic value assessments. How can we predict the future with great certainty? Hardcastle asks. A structured approach is a good starting point.