‘About half of all products launched over the past 15 years have underperformed pre-launch consensus forecasts by more than 20%.’ It’s one of the findings of a recent study by L.E.K. Consulting, going back to 2004. This number is besides the cost of failure while discovering a successful New Molecular Entity.
Adding this to the cost of the product innovation and development, clinical trials and other regulatory expenses, the wasteful expenditure becomes mind boggling – for any unsatisfactory launch performance. In such a situation, the probability of creating newer blockbuster therapies is not getting any easier.
As is believed by many – and vindicated by several studies, new drug marketing cost is more than its R&D cost. Which is why, ensuring success of a new drug launch is critical to fund new drug innovation – on an ongoing basis. Consequently, leadership focus on high ‘launch success’ rate is so important – as the good old saying goes – ‘well begun half done.’
In addition, prudent optimization of the success rate of new products may also help the company avoid irresponsible pricing, while improving the profit margin. In this article, I shall deliberate on the impact of the cost of marketing failure on patients, in general. Alongside, the avoidable ‘soft ground’ that marketers may wish to avoid while delivering unmet value to patients.
Big Pharma’s Sales and Marketing spend is more than R&D:
According to another recent study of October 27, 2021, ‘in most cases, more of the dollars spent by drug manufacturers go toward selling and marketing costs than toward research and development (R&D) for new treatments, cures, or expanded indications and uses of existing drugs.’ For example, as the paper highlights:
- AbbVie, which manufactures branded drugs like Humira, spent $11 billion in sales and marketing in 2020, compared with $8 billion on R&D.
- Bayer, which manufactures branded drugs like Xarelto (codeveloped with Johnson & Johnson) and Eylea, spent $18 billion in sales and marketing, compared to $8 billion on R&D.
- Johnson & Johnson, which manufactures branded drugs like Xarelto (codeveloped with Bayer) and Stelara, spent $22 billion on sales and marketing, compared to $12 billion on research and development.
Therefore, just as R&D expenses have to be made more productive, so are the sales & marketing expenses, where the expenditure towards new product launches is a critical component.
Why a successful new product launch is important:
An analysis by Deloitte in this area, published on March 26, 2020, found that most new drugs continue with the revenue trajectory set at launch. It said, about 70 percent of products that miss expectations at launch continue doing so in subsequent years, and around 80 percent of products that meet or beat expectations continue to do so afterward. Thus, launch success of a new product is very important, both for the organizations and the patients.
A successful new product launch helps both the company and patients:
Correctly assessing and leveraging full commercial potential of a new product through its effective launch helps both the patients and the company. This subject was discussed in a recent article, published in the Fierce Pharma on October 25, 2021, in the context of many drug launch disasters. The areas of benefits, I reckon, include the following:
- Patients’ unmet needs are met at a reasonable price
- Manufacturer can recoup its research and development costs.
- Fund future drug discoveries.
- Satisfy investors with handsome returns.
- Creating a sound brand performance base – as a strong launch is arguably the most critical step in a new drug’s lifecycle.
New product launch failure is across the disease areas – from Big Pharma to Startups:
As the above December 18, 2020, study by L.E.K. Consulting points out that new products’ launch failure is taking place across the disease areas. These include, Oncology, immunology, infectious disease, ophthalmology, blood disorders, brain diseases, and cardiovascular and metabolic disease. Similarly, the companies responsible for such failure span across global pharma majors to biotech startups.
Why many companies are failing in this process:
To help ascertain the depth of this issue, let me start with the key objective of a new product launch, which is effectively delivering the holistic value of the brand which consumers would appreciate. Several papers also acknowledge, to succeed in this area, pharma players need to prepare their data-based launch plan with cerebral power and ensure that the strategy is working and is being executed flawlessly.
A large number of studies find, ‘many companies fail in this process, due to a combination of factors.’ Some of these are uncontrollable, but many of which are very much within a marketer’s control.
Examples of uncontrollable and controllable variables:
Uncontrollable factors include post marketing approval drug safety issues. Reports indicate, ‘One-Third Of New Drugs Had Safety Problems After FDA Approval.’ This is being reported even in recent times, like, ‘new safety signals that cropped up after the approvals of Novartis’ eye drug Beovu and Sanofi’s dengue vaccine Dengvaxia.’
Whereas, controllable factors include, poor product differentiation and other management missteps, besides ‘limited market access, poor understanding of market needs or misjudgment of competitive threats.’ For example, poor product differentiation and other management missteps were, reportedly, ‘the cause of trouble for Clovis Oncology’s Rubraca in the PARP inhibitor space, and Merck & Co. and Pfizer’s Steglatro in the SGLT2 field.
Key success ingredients to focus on:
Since long, various research, including one by Bain & Co dated October 2017, has highlighted that over 50% of new product launches are underperforming. This situation can’t, in any way, be accepted as a ‘thumb rule’ by pharma marketers, any longer. Mainly because: ‘When a drug misses its launch projections, there’s a high likelihood that it will never recover that revenue,’ as their study findings underscore. From this perspective, listed below are some of the basic areas to focus on for greater launch success, as I have experienced:
- Early launch planning – well before the regulatory approval for new products.
- Data-based and well-tested target-audience identification, the target markets’ selection and key opinion leaders need to be selected for greater focus in effective stakeholder engagement.
- Creating differentiated value-propositions that addresses targeted patients’ unmet needs, and, in tandem, offers scope for commensurate premium pricing, are vital.
- Product pricing should be based on quality of value delivery to patients that they can perceive and would acknowledge. Misvaluing a brand, and just focusing on those who can pay, may attract negative publicity, creating a key barrier to success.
- Current competition, their ongoing counter strategy, new market competitors and other launch challenges need to be carefully mapped, for strategic fine tuning or course correction, in time, wherever and whenever needed.
- Execution of the launch plan must be accomplished with military precision, as it were.
As the above Bain & Co paper articulated, ‘The most consistently undervalued factor contributing to a successful launch is the way leadership teams organize and the manage the launch process.’
It’s again not too difficult to understand that the net accountability of the cost of marketing failure, which is a major contributing factor to stifle the R&D funding, in many cases, squarely falls on pharma leadership.
Instead of taking corrective action in this critical area, most of them choose the easy path – increase new product pricing to achieve targeted revenue from a smaller unit sale of the brand. The net impact of which is on patients due to access barrier caused by high prices.
Such products, without clearly differentiated value propositions that patients would recognize, would further increase sales and marketing costs, and could even result in marketing malpractices. Under this backdrop, serious and thoughtful attempt in making all new product launches successful money spinners, as respective brands will merit, may help the pharma leadership to create a win-win situation for both the company and patients.
By: Tapan J. Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.