Pharma marketing and lifecycle management
Peter Mansell investigates how lifecycle management can become a vehicle for sustained revenue generation and margin improvement
Lifecycle management (LCM) was a well-established tool for optimizing the commercial trajectory of pharmaceutical products even when the industry was still churning out blockbusters. These, of course, are very different times.
The determined focus on value, budget management and outcomes in healthcare systems that face an explosion of costs from aging populations, chronic diseases and expensive innovations is forcing industry to rethink its commercial platform, customer networks, geographical emphasis and R&D machinery. It is also sharpening the emphasis on lifecycle management as a vehicle for sustained revenue generation and margin improvement, yet at the same time narrowing the range of options for protecting new drugs from early obsolescence.
With R&D productivity faltering and market access tightening up on several fronts, pharmaceutical companies need to get more out of the assets they have. In a more skeptical and cost-conscious market, though, attitudes are hardening to some of the traditional LCM strategies, such as new formulations or patent-extension maneuvers. (For more on patents and innovation, see Patent expiration: Innovate or die, New models for drug discovery and marketingand Understanding pharma’s drug development costs.) In parallel, an increasingly aggressive generics sector is putting product patent monopolies and market exclusivities under strain at the earliest possible opportunity. (For more on generics, see Dr. Bates Talkback: How to mount an effective defense against generics, Branded generics: The emerging market opportunityand Pharma’s evolution: From blockbusters and biologics to branded generics, medical devices and functional foods.)
As research and consulting firm Best Practices recently noted, early results from an ongoing benchmarking study “indicate that regulatory changes are undercutting the effectiveness of a number of proven strategies for extending pharmaceutical brand life, including fixed-dose combinations, new dosage regimens, contracting, extended release forms and publications.”
Yet with fewer products in the pipeline and more of these products edging towards the patent cliff, “strategies that can extend the commercial life of mature brands are critical to bio-pharmaceutical companies today,” Best Practices stressed. Used properly, it added, LCM “can add as many as 10 years and billions of dollars to the life of an established or mature brand.”
Extending value
Lifecycle management is about creating, maintaining and extending value in the marketplace. But it is also, crucially, about planning. That needs to start early enough in the drug development cycle to ensure products are tailored to a wide range of stakeholder needs and will not get lost in a thicket of perceived me-toos.
It must also be informed by company-wide input, so that value drivers are fully aligned from science to branding, manufacturing to marketing, pricing and pharmacoeconomics to market access, risk management and all the other factors that play into a more nuanced and flexible product offering appropriate to today’s market.
Philippe Ghem, vice-president, global brands lifecycle management at Grünenthal, sees a whole swath of trends that blunt industry’s ability to deliver on its R&D investment and its sales and marketing capabilities. These range from cost-containment measures, such as reference pricing to value-based access criteria (e.g., cost-benefit assessments), regionalization (e.g., of reimbursement decisions), consolidation in the distribution chain (wholesalers, pharmacies, hospitals), and globalization that encourages cross-border product sourcing. (For more on reference pricing, see Market access: China and international reference pricing; for more on value-based access, see The impact of value-based pricing on market access and patience compliance and Is value-based pricing an aid to market access?)
Probably the worst of these hurdles are market access demands and restrictions on pricing and reimbursement, Ghem believes. Payers are asking for comparative data on new products and many of these products are “not true innovations.” It is no longer “good enough to say, I have a new product that is better than placebo,” he comments.
While pharmaceutical and biotechnology products still benefit from 17-20 year patent terms and 10-12 years’ of market exclusivity, waning innovation, the proliferation of comparable compounds, earlier generic challenges and demand for more scientific information both pre- and post-launch have diluted the value of those protections and weakened first-launch advantages, Ghem points out.
Boosting in-market revenue
He lists a number of LCM strategies that can help to boost in-market revenues, expand margins, cushion the patent cliff and tighten intellectual property (IP) protection, including:
· developmental enhancements, such as new product indications or formulations;
· manufacturing improvements (e.g., better processes, making or buying in active ingredients);
· commercial strategies (geographic expansion, strategic pricing, disease management programs, authorized generics, prescription-to-OTC switches, divestiture); and
· legal/IP/regulatory maneuvers (patenting, trademarks, litigation, market exclusivity).
All the same, Ghem acknowledges, not all of these avenues are as clear as they used to be. New formulations such as once- or twice-daily dosing, for example, may no longer be seen as compelling additional benefits.
Rather, he stresses, companies should be focusing on combination products that offer synergistic advantages, such as lower doses, better efficacy and a cleaner side-effect profile. The bottom line must be real and measurable value for regulators, payers, healthcare professionals and patients.
While the LCM strategies described above extend right from clinical trial design into the post-patent space – and indeed, Ghem underlines the importance of treating LCM as a continuous loop back to new products moving through the pipeline – a successful product launch and a swift climb to peak sales still carry plenty of weight. First-year growth and market share can set the pattern for years to come, which is why a fundamental of LCM remains preparing the market and organization with the right vision, plan, resources and alignment to ensure optimal leverage once a product hits the shelves.
Preparing the market
That does not mean your product has to be a blockbuster in its first year, but it does need to “set a footprint,” observes Rahul Agrawal, senior director, global strategic marketing at Bayer. Otherwise, he warns, “people say, ‘We don’t see the value now. Why should it have a value one, two or three years later?’”
Achieving those ends still calls for “basic marketing” principles such as positioning and differentiation, however much the environment and the nature of demand for medicines may have changed, Agrawal insists.
These principles are being applied to a different customer base, though. With physicians no longer holding the reins, at least in the top five EU markets and the US, companies must communicate product benefits to payers, disease management companies, patients or patient organizations. They must be aware of the “huge peer influence” pharmacists or patient/consumers, for example, exert in certain markets, Agrawal notes. And they must ensure their basic marketing strategy builds on the full spread of stakeholders, carving out the relevant benefits in their development program from the time a product enters Phase II clinical trials. (For more on pharmacists, see The community pharmacy’s role in patient adherence; for more on patient organizations, see The power of patient groups.)
Moreover, the marketplace increasingly belongs to specialty products, rather than broad-based, high-volume drugs such as antihypertensives, which ups the ante further for achieving meaningful difference. “It’s not just efficacy and safety anymore,” Agrawal comments. Companies in the EU5, the US and Japan will also have to adjust their short- and long-term perspectives, settling for “a smaller piece of cake” that will “hopefully grow in size later on,” he observes. (For more on specialty products, see Forecasting for products in specialty market environments.)
Market segmentation
If these shifts in emphasis underline the crucial importance of market segmentation, that again is not so much a radical departure for pharmaceutical marketing as a repackaging of core principles, Agrawal stresses: “All the old rules still apply, but they have to be intensified.” (For more on market segmentation, see Pharma marketing: Successful approaches to market segmentation and Pharma marketing: Strategic approaches to market segmentation.)
Clear segmentation will also count in the fast-growing emerging markets of Asia or Latin America. These countries have pockets of considerable wealth as well as patients with no hope of affording Western-style drug prices, Agrawal points out. So it is a question of being socially responsible and expanding patient access, but also of making sure the wealthier segment of the population is properly targeted. (For more on emerging markets, see eyeforpharma’s Special report: Pharma's emerging markets and download Pharma Emerging Markets Report 2011-12.)
Agrawal cites management guru Tom Peters to the effect that a product is not a product until it is differentiated in the mind of the customer. That means applying suitably rigorous criteria at the pipeline stage to avoid products entering the market without a clearly thought out USP. “We definitely have selection criteria at the beginning,” Agrawal says. “What kind of drugs do we have? In which markets can they be used? If a market has an unmet need, one has to serve that need.”
While this kind of thinking should inform new product launches and the drive for launch excellence, there is also pressure in the current environment to keep innovating and regenerating the product offering once it is out in the marketplace. As Agrawal acknowledges, the trend is toward more servicing, more follow-up, more follow-through: not just diagnosing and treating a condition, but showing that it can be treated successfully. (For more on launch excellence, see Merging market access with launch planning.)
Proactive thinking
What all of this implies for the broader LCM strategy is, as Ghem underlines, proactive thinking that starts from a solid base of market awareness and then moves into a rational process of ideation, prioritization, market assessment and action planning. It is no use just launching the first indication and then thinking about what to do next, he says. Even at Phase I, companies should have a list of core indications and market opportunities. By Phase II they should be trying out a compound in different indications.
The initial indication may be selected on the basis of favorable pricing or positioning in the marketplace, but the decision needs to be taken early to ensure that maximum value is extracted from the molecule over its viable lifetime. That should also include end-of-lifecycle options, such as Rx-to-OTC switches or fixed-dose combinations. “If you start your clinical work too late, you will only have one chance to succeed,” Ghem warns.
These options are likely to require extra data, and trying to generate them three years before the end of market exclusivity may be cutting it too fine. If the data are not up to scratch, moreover, a company risks being left with no time to run another study that could improve the potential outcome.
To avoid these sorts of missed opportunities, Ghem envisages a four-step LCM planning process that proceeds from idea generation through to global alignment and prioritization of lifecycle management options, followed by presentation of these options to an appropriate internal body for a go/no go decision. A LCM plan can then be drawn up and implementation activities set in motion.
The LCM strategy must also be underpinned by input and commitment across corporate functions and from senior management downward, both globally and at the local level where key stakeholders and market dynamics may have a critical impact on return on investment. These needs are best addressed, Ghem believes, by a dedicated LCM group within the company, which can ensure a long-term perspective is maintained at all times.
At the moment, though, that is more the exception than the rule. Only a few companies to date have introduced a dedicated lifecycle management function, Ghem says. In most cases, the responsibility falls to the brand managers, who may find it hard taking a long view when they have more pressing challenges, such as impending product launches to think about.
For more on LCM, join the sector's other key players SFE Europe and eMarketing Europe on March 27-29 in Barcelona, SFE USA on June 12-14 in Somerset, NJ, and 6th Annual Sales & Marketing Excellence Latam Congress on June 28-29 in Miami.
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