In the absence of rules, it’s incumbent on the industry to self-regulate, not hibernate

With patent expiries coming faster than new drug approvals, our industry has been going through some rightsizing pains and the message from the boss has been to learn to “do more with less.”

On top of that, pharma itself is being pushed towards a risk-sharing model as accountable care trickles down, leaving all stakeholders with more at stake over patient outcomes. This puts pressure on the price of drugs.

Accountable care opponents challenge that real outcome improvement is often beyond the control of any one party, especially the pill manufacturer. Pharma makes the pills, but can’t force anyone to take them. There are many other factors out of pharma’s control as well, such as patient adherence, effects of other comorbid conditions, poor diet, lack of exercise, and so on and on. It doesn’t seem fair to share risk when so much is out of our control as an industry, right? But imagine if you could control all of the above. Risk sharing could be very rewarding, from both humanitarian and financial perspectives. And, as a byproduct, our industry reputation would improve.

MAKING RISK-SHARING WORK


Now take a moment to view the client/vendor relationship in this context. When the client says “do more with less,” that message echoes through the ecosystem; agencies, publishers and vendors alike cut back and work harder. When everyone—from the agency that supports the brand and creates the messaging, all the way to media that delivers the message to the audience—is aligned with the same mission and outcome, great results happen. Risk-sharing is one way to align those incentives. But risk-sharing only works when media partners have the controls they need to truly influence meaningful results.

Succeeding with this model in the media world requires a risk-sharing win-win. Pharma’s part is to provide the autonomy its media partners need to truly influence media outcomes—which means that the drug-maker must step out of its comfort zone and cede control. What control does pharma need to hand over? The ability to make on-the-fly creative and message modifications, for a start. And the power to make a comprehensive choice of media delivery options (and, yes, this includes social media, user-generated content, and other “taboo to pharma” but powerful channels). In order to stand up as a good partner, pharma must let go of its own internal legacy of regulatory gun-shyness. While it may be uncomfortable, pharma must be willing to experiment and take chances even in the absence of clear FDA guidance. In the absence of rules, it’s incumbent on the industry to self-regulate, not hibernate. This approach could produce outstanding outcomes— but only after pharma cures its self-inflicted “obstructive conservatism.”

Without this media-channel empowerment, risk-sharing is mere risk-shifting, or the old efficiency squeeze. This strategy has only two outcomes: First, there is the unintended consequence. For example, your lead program generates leads, but the cheap leads are poor quality, so the few good leads are actually more expensive. Or you might find that the program is successful…right to the point where media partners put in so much effort to earn the client an ROI, they cannot earn one themselves.

UNLIMITED UPSIDE

The final key ingredient to a risk-sharing partnership is, of course, to motivate your partner with unlimited upside potential. The more risk they assume in growing your business, the more upside potential they should have. The more successful they are, the higher the percentage of profits they should capture. Are you as a brand prepared to share an increasing portion of your profits with a successful marketing partner? You should be if you ask them to take downside risk.

If the client is unwilling to take regulatory risks, cede control, and provide meaningful upside incentives, then “risk-sharing” is just a disingenuous form of denial that shifts the shackles of “obstructive conservatism” onto someone else. Real risk-sharing is based on the ability—indeed, the necessity—of taking risks and adapting to change. If the risk-sharers can’t touch the controls to adjust the course, then healthy change, with all its unlimited upside, is simply not possible.

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Ideashare, San Francisco, 06/29-07/03 2011

For more than 30 years, McKesson Corporation, the healthcare services and information technology company, ...