Our expert soothsayer looks into his pharmaceutical industry crystal ball and offers predictions on the most significant trends in marketing for the coming year.
In looking over the 2013 prognostications of several experts in pharmaceutical marketing, I’ve concluded that, for the most part, these experts tend to make predictions that align very nicely with their own businesses. Consumer-focused agencies see consumers playing a bigger role in prescription decisions; eCommerce firms see their wares as the critical point for everything; and medical communications companies tend to predict a future that places them at the center of the universe. Although this internal focus is understandable, I don’t believe it’s very useful—or accurate. What does the future hold for pharma? The trends, in my view, are pretty obvious:
Marketing Still Won’t Move the Markets
Each year I see pharma marketers dig deeper into pop marketing to find the key to success—but it ain’t there. Pharmaceutical markets are shaped by medical need and the ability of medicines to bridge the gap between what the market wants and what the products provide. I have argued for years that great marketing can’t help a poor product and that bad marketing can only hurt a good product for a short while. Rather than repeating my reasoning, I’ll just predict that in 2013 NOBODY will develop or implement a marketing or communications plan that really changes anything—except the fortunes of a few vendors. Successful campaigns will not be driven by marketers, but by good products with adequate support.
Payers Will Continue Stepping Up
After more than 20 years of trying, payers are finally flexing their muscles and really affecting markets, but as I’ve written in the past, it’s not because of anything they have done. In the coming year payers will disadvantage more big products, even market leaders, and take more steps to limit the use of some products, mainly because pharmaceutical companies have provided enough good competitive products that payers are now comfortable in intervening and physicians are fairly unlikely to protest. (Here’s a tip: find out if what you believe is “loyalty” by physicians is simply inertia; many physicians stick with a product simply because it’s easier than changing—it doesn’t mean they will fight to keep using it.)
Differential copays are a big reason for payer power, and payers have finally tapped into patient price sensitivity and are able to use it as an effective tool. But that only works when there are adequate substitute products, which have been made available by companies that launch fairly undifferentiated products into the market. Not that this is bad, but it means that you now need to compete on price, just like most other businesses. This, unfortunately, is something that most biopharmaceutical firms do very poorly.
To succeed in this new environ-ment of close competition and active payers, companies will need to fundamentally change the way they manage prices (not just set them) and the way payers are engaged. Currently “account directors” tend to be senior sales people and, for most companies, the way they learn about payers is through their account management functions. This must change. Just look at the scope of this: United Healthcare is larger, in terms of covered lives, than France, and Humana and Cigna are each larger than Belgium, Sweden, or the Czech Republic. Most firms call these nations “affiliates” and have “country managers” with a substantial infrastructure to support them—not account managers. Losing one big payer is a lot more costly than failing to get approval in a major foreign market, so companies need to engage payers at a different level and really seek to understand them, not just placate them or ignore them, which seem to be the two most popular choices.
Pharma Companies Will Devolve
Over the past few years there has been a lot of ink dedicated to discussions about the “new” pharma model—whether it’s “blockbuster,” “post blockbuster,” or whatever, the industry is looking for the next recipe for success. Although I don’t know what that recipe is, I can confidently predict that it is not in the direction most large firms appear to be heading, which is to behave more like banks than healthcare companies. There is a very strong probability that the “big pharma” model is passé, because the days of mass-market blockbusters may well have passed. This is partly due to the tremendous success of the past three decades when diseases such as hypertension, hyperlipidemia, type II diabetes, asthma, and many forms of cancer have been addressed by great products that actually leave little room for improvement (on a mass market scale). That model of big pharma served well to get these products developed and commercialized, and the world is better off for it and for them. But that success bred “copycats” who developed similar products that have, as previously mentioned, allowed payers to step up and play a bigger role in shaping markets.
The future of the pharmaceutical industry will likely not be decided by the traditional big firms that seem to be struggling with an identity crisis, but by the smaller firms that develop products that meet specific needs. These firms can then license out their products or partner with other firms to commercialize their products, something which is being done every day. Small firms that are funded by venture capital can link up with CROs to conduct their clinical trials and any of a number of other firms—either specialized firms that market within specific segments or CSOs (Contract Sales Organizations) or even full blown contract marketing organizations, which are popping up.
Big pharma, unfortunately, seems to have evolved into a group of companies with faction-alized departments that are so “specialized” that it is difficult to find two departments that are aimed in the same direction. Although some are likely to succeed, the original benefits of these large firms, such as their scale in terms of manufacturing, R&D, and marketing, don’t seem to hold much benefit anymore. A “virtual” pharma company can easily duplicate all of this without needing to deal with the burdensome bureaucracies that come with the bigger firms. In small firms people manage the business, while in large firms people tend to manage their careers. This is not a criticism of the people, but an observation about large firms in any industry. This behavior, which is reinforced by corporate culture in large organizations, works to the detriment of the large firms.
A lot of attention has been paid to the high prices that firms have been able to charge for some drugs with very small populations of patients, but firms need to understand that a small patient population does not automatically entitle you to high prices. But I’m afraid that some people just don’t get it. I predict that this year a firm (and it could be a large one) will launch a product for a small set of patients at a price that is simply too high for the market to bear, and that price is likely to be less than half that of the highest cost drugs. An “ultra orphan” drug can only be priced at those high levels when the product provides life-saving and life-altering benefits that are not available from other drugs and the drug has little or no other commercial use.
Companies with drugs that can treat conditions in a large patient population (such as asthma) and can also provide different benefits to a very small group of patients should be satisfied with the sales from the larger market and provide the benefits to the small market as a matter of course. Do not try to force your product into the smaller niche to get a higher price, as you risk upsetting the fine balance that exists in these markets. These “high” prices allow the development and delivery of drugs that would not otherwise be made available; they are not a reward for finding the smallest group of patients. That said, it is likely someone will make that misstep in the near future.
ACA Will Make Generics Bigger and Even More Important
Finally, as the Affordable Care Act is enacted we will begin to see the growth of all- generic formularies in selected health plans. The state-level insurance exchanges that will be used to spread the insurance benefit over a larger group of patients will also work to drive costs down as low as possible, which will itself force the payers to fall back more on the use of generics. Add to this the price sensitivity of consumers with lower incomes who will be accessing insurance through the exchanges, and you have the makings of the cheapest drug benefit imaginable—an all generic one.
My advice for the coming year is to sharpen your pencils and don’t get too comfortable with your current process or even current knowledge of the market, you—along with every company—will need to adapt to some new realities. To quote Giuseppe di Lampedusa from his novel “The Leopard”: “If we want things to stay the same, everything must change.”