Guest View: Pharmaceutical promotion at its productivity frontier
How do you market your products when the operating environment bans your marketing?
By on May 11, 2009How do you market your products when the operating environment bans your marketing?
Lost in forecasts and speculation about potential benefits and drugs from Pfizer/Wyeth, Merck/Schering-Plough, and Roche/Genentech is dialogue about how these new drugs would be sold when the whole fabric for pharmaceutical marketing is being shredded.
During 2008, according to the National Conference of State Legislatures, at least 20 states proposed new legislation requiring marketing disclosures by drug manufacturers, restricting direct-to-consumer advertising of prescription drugs by pharmaceutical companies, or prohibiting prescription information from being sold for commercial purposes. A special commentary in the March 31, 2009 Journal of the American Medical Association encourages professional medical associations to work toward a complete ban on pharmaceutical industry funding of sponsorships, branding, and continuing medical education (CME); the American Psychiatric Association has already begun to phase out these activities. Across the country, major academic centers and universities are revising conflict-of-interest policies with industry.
In the United States, more than 65,000 product liability lawsuits have been filed against drug companies since 2000. Much of the information from these lawsuits (and Congressional investigations) is made publicly available and flows freely throughout the world, completely revealing the promotional workings of the industry to anyone with Internet access or a television. European regulators have been raiding the offices of drug makers as part of a far-reaching inquiry into the sector. And issues around pharmaceutical sales force and market access are now so widely known they are clich. Despite spending somewhere between $30-$60 billion a year on promotion in the United States, sales of prescription drugs in the U.S. rose just 1.3 percent in 2008, slowing for the second straight year and continuing a downward trend in developed markets throughout the world. Pharmaceutical promotion, and its value as a business driver, has reached its productivity frontier.
The marketing services industry nameplates like Interpublic Group and WPP, who derive a major share of revenue from creating pharmaceutical advertising, branding and CME programs may not be of much help. They, too, are confronting multiple shifting paradigms and a disintegrating, commoditized business model. (WPP and Omnicom Group have each announced large-scale layoffs within the past several months.) Data to mine for insights and more precise targeting of promotional claims will also be harder to use: New Hampshire became the first state to prohibit the sale or redistribution of prescription sales information, and at least 12 states have similar proposals based on laws signed in Maine and Vermont. So data vendors like IMS Health and SDI, whose core business is selling market research and promotional optimization around this prescription data, are themselves challenged with a dim outlook for their services.
Prospects for market power and premium pricing objectives for commercial model innovation, something nearly all pharmaceutical companies, marketing services, and data suppliers are struggling with will happen when the current environment is transcended with different kinds of ideas. New market solutions will come from architectural innovation: linking elements from the digital and the physical, and industry and government, in ways that have never been linked before. Risk factor alignment through market alignment. Think Merck and Clorox aligned to create a new standard of care in respiratory health, or Pfizer and General Mills in a collaborative business model to change outcomes from cardiovascular disease, or Roche and Dole Foods connecting to change the epidemiology of diabetes worldwide.
There are few precedents for collaboration of this scale and complexity. But the shock from a world in transition should prompt radical changes in thinking and understanding, not minor tweaking at the edges. We need new capabilities, and to evolve the capacities of existing ones, to succeed systemically. New tactics, new techniques, and new concepts of operation will have to be prototyped and tested. New management skills to integrate thinking and decision-making will have to be established. The operating environment is radically different than what anyone has experienced before. It demands a different starting point. For the pharmaceutical industry, this is not an image problem to manage with public relations, but a structural problem to solve with a new vision for strategy.
Author:
John G. Singer, Founder, Blue Spoon Consulting Group, LLC
Phone: 917.538.4239 / john@bluespoonconsulting.com / www.bluespoonconsulting.com