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Pharma Branding At Tough Times

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“About two-thirds of drug launches don’t meet expectations. Improving that record requires pharmaceutical companies to recognize the world has changed and adjust their marketing accordingly.” This appeared in an article – “The secret of successful drug launches,” published by McKinsey & Company in March 2014. There isn’t any recent evidence, either, that this situation has improved now.

Even innovative drugs no longer guarantee a commercial success, as greater competition is building up there, as well. Today, the number of such drugs per indication has risen by 37 percent since 2006 making the task tougher, according to another article of McKinsey & Company, titled ‘Why innovative products aren’t enough for a successful pharma launch,’ brought out in August 2017.

Top marketers’ intimate involvement in these launches, backed by robust marketing strategies notwithstanding, large scale ‘brand failures’ or rather ‘branding failures,’ still remains unavoidable. Although, its telltale signs are more often visible immediately after launch, but may happen even several years after.

Pundits are just not scratching their heads, but doing extensive research to fathom why it happens. However, with changing times – the market dynamics and the research outcomes/inferences keep changing too. And that will be the focus of my today’s discussion in this article, while I explore various facets of the same.

Is pharma branding just a marketing exercise?

That pharma branding is not just a marketing exercise and its failure at any stage – from launch to even years after, I reckon, isn’t the sole responsibility of the pharma marketer. This is mainly because, doctors would ideally prefer to prescribe specific pharma brands and patients would feel confident to use those, because of successful construction of a positive brand bias. Which in turn creates a higher perceived efficacy and a low anticipated safety concern with the brand.

Although, it will be right to assume that good pharma marketers are solely responsible for the creation of this intangible brand asset, but the tangible intrinsic brand value should necessarily be ingrained into each dose of the same that patients consume, always.

Thus, tangible brand value creation, its maintenance, if not enhancement, span across many other functional domains of a drug company. Some of these include, unbiased reporting with expected disclosures of all clinical trial results, maintaining a robust and highly efficient supply chain network or high-quality manufacturing facilities, besides a few others. Evidences exist that irrational pricing could also result in a kind of brand failure. Considering these aspects in totality, creating a positive bias during a pharma brand-building process, is a collective responsibility, and not just of the marketers.

Why creating a positive brand bias is a collective responsibility?

There are ample examples to substantiate that creating a positive stakeholder bias during its brand-building process, is a collective responsibility. Let me illustrate this point by drawing a few examples of branded failures prompted by supply-chain network, disclosures on clinical development and of course perceived ‘irrational’ pricing that falls basically in the marketing domain. It is worth noting, similar incidents may also be related to the manufacturing process, even for top selling generic drugs.

Supply-chain: In the beginning of 2008, serious adverse drug events, some even fatal, were reported with Heparin (Baxter), which used to be widely used as an injectable anticoagulant. Around 80 people died from contaminated Heparin products in the U.S. The US FDA reported that such contaminated Heparin was detected from at least 12 other countries. The primary reason of the same was a serious breach in the supply-chain integrity.

Disclosures on clinical trial results: On 30 September 2004, Vioox (rofecoxib), a non-steroidal anti-inflammatory drug (NSAID) that had been on the market since 1999, was suddenly withdrawn by its manufacturer MSD, owing to concerns about its effect on cardiovascular health.

‘Irrational’ pricing: Like a lot of new cancer drugs, Zaltrap (aflibercept) wasn’t cheap carrying a price tag of USD 9,600 a month. But its price was quickly taken down. This followed some serious public flak, such as, doctors from Memorial Sloan-Kettering (MSK) wrote a blistering review for The New York Times in November 2012. They declared that MSK was taking the drug off the institution’s formulary, because less expensive and just as good alternative angiogenesis inhibitors were available. Although, Sanofi initially defended the price, it subsequently backed down, cutting down the price by half.

Manufacturing process: On September 13, 2019, the FDA announced that preliminary tests found low levels of N-nitrosodimethylamine (NDMA) in ranitidine (Zantac), a heartburn medication. Consequently, almost all companies, including Novartis (through its generic division, Sandoz), GSK, Apotex and many others announced its withdrawal from a large number of markets. Interestingly, these announcements came after a Connecticut-based online pharmacy informed the FDA that it had detected NDMA in multiple ranitidine products under certain test conditions. The NDMA impurity was believed to have been introduced by changes in the manufacturing process. There are several other well-reported examples, as well.

These examples vindicate that creating a positive brand bias remains a collective responsibility throughout the product lifecycle. And it involves several functional areas of drug companies. That said, let me now focus on the creation of a positive bias for pharma brands.

Creating a positive brand bias:

Skillful creation of a positive brand-bias, supported by high quality – tangible and intangible value offerings, is the net outcome of any successful branding process. It augments stakeholder confidence, leading to an increased prescription generation, alongside a favorable patient experience.

More often than not, a positive brand-bias successfully brings into being greater perceived brand-efficacy and higher perceived brand-quality, with lesser anticipated safety concerns. Consequently, the process invigorates an emotional bonding with customers for a long-term brand-loyalty. A positive brand-bias also creates a strong brand equity that often helps in working out a good pricing strategy for the company.

An interesting strategy prescribed – recently:

The October 8, 2019 issue of Fierce Pharma featured an article on creating a positive brand-bias with “Prime and prompt” marketing strategies, outlined by CMI/Compas.

According to Changing Minds: ‘Priming works by providing people with information that is easily brought to mind. The prompt that brings the information to mind can be an implanted and specific trigger or can be an associated term that will naturally bring back the primed information.’ Illustrating the point, it adds: ‘Prime-and-prompt can be a bit like firing a gun, where priming cocks and prompting pulls the trigger.’

Putting this concept in the pharma industry perspective, the CMI/Compas officials explained in the above article, ‘pharma marketers can create primes with product messages that condition people to recall their product when they need medicine or are diagnosed with a condition.’

Hence, a pharma marketer’s adroitness in the ‘priming’ strategy helps ‘prompt’ the desirable action, such as, going to a doctor to ask about a product. Hence, the persuasion technique is termed – ‘prime and prompt’, the paper explained. Naturally, the question that follows: what are the key principles behind this strategy?

Key principles behind ‘prime and prompt’ strategy:

As elucidated by the Changing Minds, when thinking and deciding, we are influenced by related information from the past. At that time, our memories would supply that information, which helps us understand, make sense, decide and act on the subject at hand. Thus, those things that come at the top of mind will have a more immediate and disproportionate influential effect, while those things which are long forgotten may have little or no effect.

It further adds: ‘Priming is driven by implicit memory, where recall is entirely unconscious as the person ‘just knows’ without having to think hard or otherwise put effort into remembering or working things out.’

How to apply the ‘prime and prompt’ strategy in pharma?

It’s no-brainer that to use ‘priming’ in the persuasion process, say for increasing prescription support, the marketers need to provide stakeholders with relevant information beforehand, and more importantly, in a different setting. And only thereafter, they need to focus on a normal brand persuasion strategy. One may most appropriately comment, this is easier said than done in the drug industry.

Taking a cue from the above interview with the CMI/Compas officials, some of the broad steps of the ‘prime and prompt’ strategy, I reckon, may be summarized as follows:

  • Consistent messaging through omnichannel media achieving target reach and frequency, as I had explained before.
  • For intended top of mind recall, a combination of print, digital, social, search, display at appropriate places and in TV, especially for OTC drugs, should consistently surround the target audience for ‘priming.’
  • According to a recent research, the most highly rated ‘priming’ spots for pharma ads for physicians are medical journals, conferences and the likes. Similarly, for patients, appropriate displays at doctors’ clinics and similar places also appeared to be one of the top-rated ‘priming’ spots.

Consequently, a well thought-out ‘priming’ strategy, skillfully executed – based on research findings, is expected to be effective. It will then help trigger desirable ‘prompts’ for the target-audience, augmenting a successful branding process. However, it comes with a caveat that the tangible intrinsic value of the brand, especially those which originate in other functional areas, don’t get compromised or changed in any way.

Conclusion:

Branding exercise in the pharma industry has never been more challenging, as it is today – both for innovative and generic drugs. As stated above, the number of innovative drugs per indication has risen by 37 percent since 2006, making the market competition tougher. Likewise, product proliferation with cut-throat pricing for branded generics, is also making the generic drug marketers grasping at straws, as it were.

In this challenging situation, creating a positive stakeholder bias for brands, as the net outcome of the pharma branding process, is a collective responsibility. Any non-marketing misstep in the tangible brand value offering, could sweep a brand away to oblivion – not just during launch, but at any stage of its life-cycle. Pharma marketers will of course be solely responsible to create the critical intangible brand assets, such as a positive stakeholder bias for brands.

At this tough time for pharma branding, several fresh marketing concepts like, ‘prime and prompt’ are now being seriously evaluated. Thus, I reckon, its also a time for astute marketers in the pharma industry to test the water, in pursuit of excellence.

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.

 

The Challenge of Holistic Value Creation With Pharma M&A

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Two mega deals, right at the dawn of 2019 gave a flying start to Merger & Acquisition (M&A) activities, in search of inorganic growth, by some large pharma companies. The two biggest ones are Bristol-Myers Squibb’s (BMS) USD 74 billion buyout of Celgene, and AbbVie’s USD 63 billion purchase of Allergan, as announced on January 03, 2019 and June 25, 2019, respectively. However, overall in the second quarter of 2019, there were, reportedly, only 22 deals – ‘the smallest quarterly deal count for at least a decade.’

As a strategic option for greater value creation to drive growth, M&A is being actively considered over a long period of time. The key focus of such value creation for the company remains primarily on enriching the pipeline of New Chemical or Molecular Entities (NCE/NME) for revenue synergy, besides cost synergy. This is understandable. But, for various reasons, alongside, a key question also comes up for debate – is the core purpose of such value creation to drive companies’ growth, primarily with more number new drugs, sustainable? The query assumes greater relevance in the evolving new paradigm. This is because, a basic shift is taking place in the core organizational purpose of value creation.

Thus, it appears, the nature of value creation through M&A would also matter as much. Can it still remain a drug company’s financial health centric, any longer? Should the M&A initiatives also not take under their wings, the value-offerings expected by patients from a drug company – beyond innovative pills? Would a holistic value creation through M&A would now be the name of the game? If so, how?  The discussion of my today’s article will revolve around these questions. Let me initiate the deliberation by recapitulating the key motivation behind M&A initiatives of the drug industry.

A key motivation behind the M&A initiatives in the drug industry:

While recapitulating one of the key motivations behind pharma M&As, let me refer to some interesting and recent studies, such as, the 2019 paper of McKinsey titled, ‘What’s behind the pharmaceutical sector’s M&A push.’ It also acknowledges, the use of M&A to bolster drug innovation is unlikely to change any time soon.

That many drug companies actively pursue the M&A option as a game changer for inorganic growth, is vindicated by the recent big deals, as quoted above. Since early 2000 and before, the companies that made the biggest deals to create new value synergies with, have been paying heavy deal premium to enrich their new product pipelines. Quite often it includes several new and emerging classes of drugs, as acquisition targets.

This also gets corroborated in the Press Release of the 2019 BMS deal, which says: ‘The transaction will create a leading focused specialty biopharma company well positioned to address the needs of patients with cancer, inflammatory and immunologic disease and cardiovascular disease through high-value innovative medicines and leading scientific capabilities.’

Lesser yield of traditional pharma M&A than the broader market:

This was emphasized in the June 06, 2019 article, published in The Washington Post, titled ‘Big Pharma Has to Bet Big on M&A. Investors Don’t.’ The analysis found, the returns from the big pharma deals ‘don’t look as good compared to the broader market’, although for very patient investors many of these have resulted in longer-term gains. To illustrate this point, the paper pointed out: ‘Of the eight biopharma deals worth more than USD 40 billion that closed in the last 20 years, only one delivered better returns than the S&P 500 five years after it closed.’

Naming Merck & Co..’s USD 47 billion acquisition of Schering-Plough Corp. in 2009, the researcher justified: ‘That deal is arguably something of an accidental winner. Long-term success didn’t come from any of the products that Merck targeted in the merger; instead, an afterthought of an antibody that was initially set to be sold off became Keytruda, a cancer drug that’s projected to generate USD 15 billion in sales in 2021.’

Innovative product launches no longer a holistic value-creation for patients: 

Thus, unlike yesteryears, enriching new and innovative product pipeline through M&A won’t serve the key purpose of value-creation for patients to treat deadly diseases in a holistic way. The primary reason for the same was articulated in the Deloitte Paper titled, ‘Disruptive M&A: Are you ready to define your future?’ The article emphasized: ‘The confluence of technological change, shifting customer preferences, and convergence across sectors is redesigning how products and services are developed, delivered, and consumed.’

Thus, mere acquisitions of innovative product portfolios, intended to provide better treatment choices for patients, may not meet the holistic needs of consumers’ while going through the disease treatment process. In depth understanding of such preferences with all associated nuances, is absolutely essential in today’s complex business scenario. Which is why, it calls for avant-garde type or ‘disruptive M&As’, that can help alter the business growth trajectories, making the disrupted company disrupt the competitive space, being game changers of the industry.

Calls for avant-garde type or disruptive pharma M&As:

Today, it’s crucial for any drug company to create a unique treatment experience for patients. This is emerging as a pivotal factor for the success of a brand.

Even most innovative products will need to be supported by disruptive back-office technology for market success. Thus, acquisition of disruptive technology to effectively augment the brand value delivery process is equally important, in tandem with enrichment of new product pipeline. This is expected to emerge as a critical driver in pharma M&A. Such takeovers, I reckon, may be termed as avant-garde type or disruptive M&As – for holistic value creation for patients.

‘Disruptive M&A’ creates a much broader range of possibilities and targets:

For a holistic value creation through disruptive M&A focus for target selection needs to be significantly different from the standard models of M&As – and not just about the quality of NCE and NME pipeline. The above paper also highlighted: ‘Disruptive M&A opportunities requires evaluating and assessing a much broader range of possibilities and targets than traditional M&A.’

With the right kind of target selection after a thorough analysis of the business model, disruptive M&A may help the acquiring drug companies to go beyond achieving revenue and cost synergies. It can also provide cutting-edge business capabilities, alongside enriching and expanding the talent pool, key business processes, and, of course, the state-of-the-art technology –inorganically.

Initiatives and focus of drug companies of this genre, are expected to be more in the coming years, primarily driven by a new type of value creation to offer a unique disease treatment experience for patients with their respective brands.

A new type of value creation for patients in healthcare space:

It has already started happening in the recent years. For example, Amazon, on January 30, 2018 , announced, it is collaborating with Warren Buffet’s Berkshire Hathaway, and the bank JP Morgan Chase to create an independent, nonprofit health care company ‘with the goal of increasing user satisfaction and reducing costs.’ They also announced the organizational focus on two of the following areas, which are interesting and unconventional:

  • Technology solutions that will provide U.S. employees and their families simplified, high-quality and transparent healthcare at a reasonable cost.
  • Draw on their combined capabilities and resources to take a fresh approach.

As the New York Time (NYT) reported: ‘The alliance was a sign of just how frustrated American businesses are with the state of the nation’s health care system and the rapidly spiraling cost of medical treatment.’ The report further added: ‘It also caused further turmoil in an industry reeling from attempts by new players to attack a notoriously inefficient, intractable web of doctors, hospitals, insurers and pharmaceutical companies.’

Although, this has happened in the United States, it sends a strong signal to the state of things to come sooner than expected in the health care space, dominated, so far, by pure pharma and biotech players, across the world.  New types of value creation for patients of similar nature, especially by tech greenhorns in the pharma space, can be wished away at one’s own peril.

Consumer-focused digital companies redefining healthcare value creation:

‘2019 EY M&A Firepower’ report also highlights the innovative efforts of consumer-focused, digital companies to carve out a solid niche for themselves in the pharma dominated health care space. With ‘effective deployment of their ‘connected devices, data analytics skills and deep consumer relationships, these new entrants are positioned to have access to important real-world data that could, in part or in full, determine future product utilization and payment,’ as the report emphasized.

Such fast-evolving development also prompt pharma players to act fast. And the most practical way of doing so, with a high possibility of success, is through disruptive M&A. Ongoing entry of consumer-focused, digital companies in health care increase the urgency for life sciences companies to act, now.

Conclusion:

Thus far, pharma and biotech companies have been engaged in a massive wealth creation for themselves by using their biological and chemical know-how for novel drugs and devices. This ballgame has to change now, ‘as the lines between health and technology continue to blur’, according to the EY Firepower report.

Capabilities of big data and analytics will increasingly be more essential for success, regardless of having a rich pipeline of NCEs and NMEs, even with the potential to achieve blockbuster status in the market. Thus, the ballgame has to change.

Against this backdrop, the key challenge of pharma players for a brighter tomorrow would undoubtedly be ‘holistic value creation.’ Its core purpose should be to deliver a unique patient experience, encompassing the entire disease treatment process – going beyond innovative drugs. One of the quickest routes to create this virtuous cycle, I reckon, is through ‘disruptive M&As – moving away from the traditional model for the same.

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.

Disruptive Impact of AI on Pharma Sales And Marketing

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Artificial Intelligence (AI) that refers to the ability of machines to perform cognitive tasks like thinking, perceiving, learning, problem solving and decision making, is poised to disrupt our world. Initially conceived as a technology that could mimic human intelligence, AI has evolved in ways that far exceed its original conception. This was articulated in the June 2018 Discussion Paper, titled ‘National Strategy for Artificial Intelligence’ of NITI Aayog, India.

The paper further highlights: With intelligent machines enabling high-level cognitive processes like thinking, perceiving, learning, problem solving and decision making, coupled with advances in data collection and aggregation, analytics and computer processing power, AI’s capability has dramatically expanded. So is its game-changing utility in a growing number of fields to enhance productivity – dramatically.

I also expressed this need in my article, “Indian Pharma To Stay Ahead of The Technology Curve,” published in this Blog on May 22, 2017. Nevertheless, despite galloping progress of AI, a kind of ‘Ostrich Syndrome’ still prevails in some sections of the industry. This attitude, if continues, may catch many drug companies off-guard, with serious repercussions on business. In this article, I shall focus on the possible impact of AI on pharma business, specifically on pharma sales and marketing, instead of being prescriptive in my deliberation.

A disruptive impact on pharma value-chain:

Currently, only a few drug companies have embraced AI-driven technologies to transform pharma value-chain elements, across functional areas of the organization. However, in the next few years, effective adaptation of AI, in the true sense, will be the key success factors for any player – nurturing a burning desire to succeed, consistently. This was, again, an important conclusion of the 2019 FICCI Report titled, ‘Use of Artificial Intelligence and Advanced Analytics in pharmaceuticals.’

While explaining its rationale, the report emphasizes – catalyzed by an exciting range of new, disruptive technologies a paradigm shift is taking place, challenging the status quo with the traditional pharma business model. AI is in the process of disrupting this status quo, especially in the following two areas:

  • Increasing stakeholder pressure to reduce costs and demonstrate greater value of drugs,
  • Evolving swing from treatment to prevention, and patient-centric treatments.

Prompts a critical need to re-imagine the future:

These inevitable shifts prompt a critical need to re-imagine the future, for each drug manufacturer. However, the good news is, some of them, predominantly the global ones, have started making sizeable investments on AI. On a deeper scrutiny, the FICCI paper finds that applications of AI are mostly taking place in the new drug discovery and the supply chain area.

Besides individual company initiatives in the R&D area, important collaborative arrangements on AI with academia, have also been announced, such as, ‘Machine Learning for Pharmaceutical Discovery and Synthesis Consortium (MLPDS). This is a collaboration between the pharma/ biotech industries and the departments of Chemical Engineering, Chemistry, and Computer Science at the Massachusetts Institute of Technology (MIT).

MLPDS is expected to facilitate the design of useful software for the automation of small molecule discovery and synthesis. As on July 02, 2019, reportedly, ‘33 Pharma Companies Using Artificial Intelligence in Drug Discovery.’That said,let me hasten to add that some companies are also testing the water, with all seriousness, in pharma sales and marketing functions. So, the AI wave is fast catching up, driving the drug industry to chart uncharted frontiers. In this scenario, would there be any scope of survival for laggards?

Should it happen faster in pharma sales and marketing, as well?

In my view, the answer is an emphatic ‘Yes.’ This is primarily because, the disruptive impact of AI won’t be any less in pharma sales and marketing. It will, therefore, be prudent for these professionals, not just to understand how AI works in their respective functions, but also the ways to effectively use various AI platforms and applications, to transform the traditional processes, fundamentally.

Moreover, when stakeholders, including patients, doctors, hospitals, health insurance companies and even governments, are directly or indirectly using a host of AI-enabled tools and applications for better outcomes, does pharma have any other option?

Areas in which the impact could be transformative:

The recent publication titled, ‘Boosting Pharmaceutical Sales and Marketing with Artificial Intelligence’ of ZS, analyzed this issue quite well. It emphasized, those functions in the drug industry where there exists a significant reliance on human functions, such as expertise and reasoning, the impact of AI can be transformative.

Sales and marketing are two such focus areas, besides other functions. Companies that use AI to orchestrate a cohesive customer experience, will drive stronger differentiation, better customer access and higher sales impact, the report highlighted. Thus, creating specific opportunities and requisite empowerment, are necessary for deserving people, to foster machine learning and human integration in sales and marketing. This, in turn, will help them gain insight into how to unleash the power and value of AI for achieving business excellence.

Some early adopters of AI in sales and marketing:

Recent reports indicate that some global pharma majors have started using AI in sales and marketing. Let me illustrate this point with two examples – Pfizer and Novartis.

In May 2017, Pfizer Australia, reportedly, adopted AI-powered digital analyst tool for sales and marketing decision making.This ‘What-if Simulator’, allows Pfizer to test and optimize a range of scenarios based on internal and external data sets. It helps simulate the impact of sales and marketing strategies, investigate assumptions and hypothesis difficult to test in the real world, and compare the outcome of various what-if scenarios in order to understand what’s contributing to business results. According to Pfizer, ‘the software will also help to understand deterministic and non-deterministic factors presented in its business operations, as well as see how variables within different questions impact one another’.

Another recent media report titled, ‘Novartis puts AI on the job to help reps say the right things to the right doctors,’ appeared in Fierce Pharma on January 09, 2019. It also confirms the keen interest of pharma in this area. Called “virtual assistant,”this application helps salespeople to make sure when they visit a specific doctor that they are talking about exactly what that doctor is absolutely interested in. “When you turn up at the right time with the right things to say, they’re more interested and put more value in it, and our people like the fact that AI is running in the background helping them plan their day,” Novartis official further elaborated.

Accept the dictum – ‘there is always enough room for improvement’:

Following this dictum, is the starting point for pharma marketers to seriously accept AI as a game changer in this industry, regardless of how successful the company is – in doing what they do, following the traditional business models. The core purpose of a drug company is to make sure that patients get what they want, in those disease areas where the company represents.

If a brand strategy is prepared based on research data collected a few months back, there could probably be a flaw in your strategy. This is because any recent offering to patients by a competitor, may have considerably changed what the patients want now. If a strategy is not based on virtually real-time information on what exactly the customers are looking for now, the result could be far from satisfactory.

The elements which are critical in creating ‘great brands,’ were nicely captured in the May 13, 2019 issue of Customer THINK on ‘AI in Digital Marketing.’ It articulated, ‘Great brands will be those that can think creatively, design effectively, and execute flawlessly to deliver seamless experiences woven together by machines and humans.  Using this approach, marketers and their marketing machines will stay gainfully employed.’ Thus, creative application of AI by astute pharma marketers will help achieving this goal.

Will AI ultimately replace pharma sales and marketing people?

This is a lurking fear in the minds of many. A related article appeared in the pharmaphorum on July 02, 2019, also wrote about a similar apprehension. The paper is titled, ‘Will AI make pharma marketers obsolete?’ It said: ‘Artificial intelligence, is sometimes seen as either a panacea or a destroyer – the fix for all humanity’s problems, or the apocalyptic scourge that will turn on us.’

I too reckon, AI can never replace people in pharma sales and marketing operations. This is because, there are two distinct elements in both these functions. One, the creative power of a professional that creates, develops, hones, and executes new ideas, strategies. It even decides how effectively AI can be used. The second element is the technological power behind AI. This can carry out a host of different very important, but routine and repetitive tasks – with a great amount of precision and virtually flawless. As the key sales and marketing professionals will need both, the AI can’t completelyreplace people in these two critical operational areas.

Some uses of AI in sales and marketing:

Eularis, in its ‘Blog, Comment & Insight’ of January 15, 2018, deliberated on this area. Just to give a feel of possible use of AI in different very important, but routine and repetitive tasks – with a great amount of precision, I am summarizing some of those points, as follows:

  • ‘Identification and Mapping’ of’ Key Opinion Leader (and up-and-coming Key Opinion Leader), which is constantly changing. Alongside, it can help scan and analyze all relevant journal articles, coming out each week, besides the same for ongoing clinical trials in the chosen field – flagging how changes and new additions can impact the KOL database.
  • Disease specific patient identification and physician targeting, especially in rare disease areas.
  • Helps identify individual preferences for content, channels and timing of information, that leads to allowing personalization at scale, and ensuring every customer is receiving what they want, when they want, and in the channel they want.
  • Facilitates utilizing the power of big data, AI tools and apps to identify which patients will cease adherence and how this can be addressed, thereby minimizing the loss of business for non-adherence.
  • Helps create custom messaging for sales reps to use for individual physicians based on what that physician needs at that particular moment in time.

Conclusion:

Use of AI-based technology in the pharma industry, basically means automated algorithms with the capability to perform all those tasks that are now being done mostly with heavy dependence on human intelligence. Thus, its possible use spans across almost all functional domains – from drug discovery, clinical development, supply chain and right up to sales and marketing.

Although, it is still challenging to figure out to what extent AI will transform the industry, one gets a strong signal that it is not just another ‘buzz word’ or a new kid on the block. The technology is surely spreading its roots across the health care space, pharma being an integral part of it. Which is why, according to ‘Executive Insight’ (Volume XX, Issue 60) of  L.E.K. Consulting, ‘all of the largest 10 pharmaceutical companies are investing in AI, and developments in applications are occurring across the spectrum of pharma business.’

In fine, to fathom the disruptive impact of AI on pharma business, I shall conclude by quoting from March 18, 2019issue of Healthcare Weekly. After a thorough analysis, the paper acknowledged thatAI is already redefining biotech and pharma. It concluded by stating, ‘ten years from now, pharma will simply look at artificial intelligence as a basic, every day, technology. The only question is how long pharma executive will wait till they jump on the wagon and leverage AI to improve their operational efficiency, outcomes and profits.’

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.

Creating Satisfied Patients Begins With Developing Satisfied Employees

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‘The core issue in health care is the value of health care delivered,’ wrote Michael Porter in a paper titled, ‘Value-Based Health Care Delivery,’ published by the Institute of Strategy & Competitiveness of Harvard Business School (ISC-HBS) on January 15, 2014.

Building on this concept, EY in its 2018 edition of ‘New horizons: Executive insights on the future of health’ articulated: ‘Value-driven care means delivering the best clinical outcomes with optimized costs, while delivering a satisfying experience for patients and providers.’

Creating a ‘satisfying patient experience’ – or ‘satisfied patients’ for its brands, being the ultimate objective of a drug company, I shall add an interesting dimension to it, in this article. And that is: Will it necessitate creating satisfying employees within the organization to achieve this goal? To build a right perspective in this direction, let me begin with the core concept of Michael Porter on this subject. This starts with – what is generally regarded as ultimate ‘value’ to patients, in healthcare delivery?

Defining ultimate ‘value’ in health care delivery:

Porter defined this ‘value’ as ‘patient health outcomes per dollar spent’. He also made some key assertions in this context, which I am summarizing below:

  • Delivering high and improving value is the fundamental purposeof health care.
  • Value is the only goal that can unite the interestsof all system participants.
  • Creating positive-sum competition on value for patients is fundamental to health care reform in every country.

Are these assertions attainable?

To create ‘Value-Based Health Care Delivery (VBH),’ the people would also need a ‘Value-Based Pharma Industry (VBP)’, delivering ‘Value-Based Medicine (VBM)’, for all. The three key principles for any VBM are considered as follows:

  • Thoroughly selected values must be based on the best research evidence available and applied as treatment options. 
  • Values for patients are converted into measurable utility values to facilitate the integration.
  • The cost-utility level expected from selecting a particular treatment option is the basis for decision-making.

In other words, the whole purpose of offering a VBM is to provide cost effective, science-based healthcare that incorporates patient values. Nonetheless, effective implementation of both VBH and VBM would entail a radically different leadership mindset, with quite a different set of success requirements, both globally and locally.

To drive home this point, let me illustrate just the third point of the Porter’s model of VBH, as quoted above. This clearly articulates: ‘Creating positive-sum competition on value for patients is fundamental to health care reform in every country.’ But the current reality of ‘competition’ in the drug industry is far from what it should be, as evident from one of the Brookings studies.

How competitive is the pharma industry to reduce cost of health care?

The Brookings paper titled, ‘Enabling competition in pharmaceutical markets,’ published on May 02, 2017 shares its research findings on the subject, which in a broader context include the following points:

  • Over the years, industry participants have managed to disable many of the competitive mechanisms and create niches in which drugs can be sold with little to no competition.
  • When manufacturers can earn high profits by lobbying for regulations that weaken competition, or by developing mechanisms to sidestep competition – the system no longer incentivizes the invention of valuable drugs – incentivizes firms to locate regulatory niches where they are safe from competition on the merits with rivals.
  • But, health care system performs well when competitive forces are strong, yielding low prices for consumers, as well as innovation that they value.
  • Weak competitive forces often lead to a lack of market discipline with high drug prices and are more damaging to in the pharma consumers than some other sectors.
  • Without strong competitive conditions, healthcare expenditure will continue to grow, inviting public demand for drug price regulation through legislation.

These findings provide enough reasons to ponder how to overcome the barrier of ‘Creating positive-sum competition on value for patients’ to move towards VBH.

The good news is, VBH concept was soon put to use:

The good news is, soon after publication of Michael Porter’s paper – ‘Value-Based Health Care Delivery’ by (ISC-HBS) on January 15, 2014, it was put to practice by the American College of Cardiology (ACC).The article titled, ‘A New Era of Value-Driven Pharmaceuticals’, published by Health Standards on May 21, 2014, reported it.

The article wrote, at the end of March, the American College of Cardiology (ACC) and the American Heart Association (AHA) issued a joint statement saying they “will begin to include value assessments when developing guidelines and performance measures (for pharmaceuticals), in recognition of accelerating health care costs and the need for care to be of value to patients.”

The authors pondered, ‘are we entering a new era of value-based medications or value-driven pharma?’ There are several such reports. For example, another article titled, ‘Value-based healthcare’, published by the ‘Centre for Evidence-Based Medicine (CEBM)’ observed, value-based healthcare has emerged as a field of its own – feet firmly founded in ‘Evidence-based Medicine’ or ‘Value-Based-Medicine.

VBH concept is slowly gaining acceptance:

EY in its 2018 edition of ‘New horizons: Executive insights on the future of health’ also reiterated this point. The paper mentioned, ‘the trends of reducing costs and improving outcomes show no sign of receding, and new models for delivering health care are only adding pressure to traditional brick and mortar facilities.’ It further highlighted, some pharma companies have started systematically reviewing the business processes, procedure and patient interface within the organization to identify and eliminate waste and inefficiency.

But, still a lot of ground to cover:

In this regard, EY Health Advisory Survey 2017 came out with several interesting findings based on the responses of 700 qualified healthcare professionals. One such finding is, although high importance is attributed to creating both – a good ‘patient experience’ and a meaningful ‘patient engagement’, but a lot less is done on the ground. This was supported by the following data:

  • 93 percent of respondents reported, they are undertaking ‘patient experience’ initiative that year, but only 26 percent of them selected patient access or satisfaction as one of the top three for the same.
  • Although 81 percent of the professionals said ‘patient engagement’ is considerably important to them, but most of the top initiatives undertaken by their organizations don’t directly involve soliciting and analyzing patients’ needs and wants.

‘Employees satisfaction’ a prerequisite for ‘patient satisfaction’:

The same EY Health Advisory Survey 2017, found many respondents articulating that ‘employee satisfaction’ is a prerequisite to ‘patient satisfaction’. However, its importance gets diluted whiling translating the same into reality, as vindicated by the following finding:

  • 51 percent of respondents believe that employee satisfaction in health care drives patient satisfaction, but only 35 percent said that their organizations have already initiatives underway to create more positive work and environment. Interestingly, only 10 percent of them have undertaken any employee satisfaction survey soliciting employee input.

It is quite apparent from this situation that leaders of respective organizations don’t walk the talk, especially in this critical area. Harmonization of ‘patient satisfaction’ as a critical success factor for delivering VBH, with the core business value of the company, is not taking place. A deep-rooted belief that success in developing mostly transactional and partly emotional relationship with the heavy prescribers is the only ‘magic wand’ for business success in pharma. Thus, the old habits die hard, even today.

Conclusion:

Despite several barriers in its way, for a long-term survival in business, hopefully, many pharma companies would willy-nilly move towards delivering ‘value-based health care’ through ‘value-based medicine.’ This would necessitate having a clear goal to create an increasing number of satisfied patients for the brands. There are ample evidences today that ‘employee satisfaction’ is a basic prerequisite to ‘patient satisfaction’, where many drug companies are lagging behind, significantly.

Only the movers and shakers in the senior leadership of pharma industry can break this status-quo. It may be initiated with – example-setting activities, which should enable giving shape to developing a set of standard operating procedure – culminating into the culture and value for the organization.

Nurturing humane approach to employee commitment for creating satisfied employees is the primary step of this important initiative. Then, encouraging their active participation – willingly, to bring patients at the center stage of pharma business, should be the ongoing process.  It’s, therefore, imperative to note - the goal of creating ‘satisfied patients’, should always begin with developing ‘satisfied employees.’

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.

Adopt A Hybrid Business Model For Better Sales – Not A Large Field Force

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For aggressive business expansion or to attain greater market access, creating a large sales force has been the thumb rule in the pharma industry, since long. To meet the challenge of changing market dynamics, going for a thorough re-engineering of even a rattling sales and marketing machine, is still considered a risky proposition.

Many studies have captured the common reasons of such hesitations. For example, the McKinsey article titled, ‘Cutting sales costs, not revenues,’ finds that field force being a major growth engine for sales, since long, the thought of overhauling it fills senior executives with dread. Thus, to keep sales flowing, companies will make piecemeal ongoing repairs as long as they can – ‘no matter how patched up or spluttering that engine may be.’

Nevertheless, some compelling business reasons have now prompted several pharma players to accept the ground reality – fast-evolving over the last one and half decades. Many of them have realized that in today’s changing market dynamics, a leaner and smarter sales force (or field force or medical rep, or MR) will fetch the desired results than ‘flabby’ and larger ones.

In this article, I shall not discuss the obvious reasons of downsizing, such as to record profit under trying circumstances, or when per rep productivity keeps declining consistently, or during a change in the promoted product-mix, or a decision to reduce focus on volume intensive-low margin generic brands. But, what I shall discuss is, the reasons for an urgent need of creating a hybrid sales and marketing model, during this changing paradigm.  

It begins with accepting a change in the business environment: 

If the objective of sales force size reduction remains limited to cost-cutting for short-term improvement of the bottom-line, it could be grossly counterproductive, possibly with many unforeseen consequences. Field staff will continue to remain one of the key growth drivers in pharma and biotech business, but not the sole mechanism to increase brand prescriptions. Finding a well-integrated alternative model would begin with acceptance of a significant change in pharma business environment.

Undoubtedly, a perceptible change is noticeable today in pharma stakeholders’ mindset. This change is being further fueled by rapid increases in their usage of various digital platforms and networks. For example, many patients are trying to be reasonably informed of even various disease treatment options and the cost of each, much before they visit a doctor’s clinic or a hospital. The nature and quality of their interaction with health care providers, including doctors, are also changing. Patient-experience during a treatment process, and the value offerings that come with a pharma brand, will have increasing relevance to business performance – more than even before. Anything going against the patient-interest will possibly be shared with all, mostly in social media, which has a potential to precipitate serious consequences.

As this trend keeps going north, pharma market dynamics would change, commensurately, making pharma’s key business success factors significantly different with medical reps no longer being the sole prescription generators. A new hybrid – digitally empowered sales and marketing model is, therefore, the need of the hour. In this new ball game, as a growth driver, the role and size of the field staff will be quite different, where the senior management warrants a new vision for pharma business.

The situation warrants a new vision for pharma business:

In this changing situation, to generate more prescriptions from doctors by deploying a large field force, could prove akin to swimming against a strong tide. Whereas for achieving business success at this time, pharma players would require creating a well-oiled augmented value delivery system for enhanced customer experience, primarily for patients during their entire treatment process.

While creating this sleek and effective system, it would be necessary to cut unproductive or less productive flab in the frontline, with great precision. However, this process must be dovetailed with implementation of other communication and customer engagement platforms, mostly digital, to achieve the set objectives.

The new strategy being augmented value delivery to customers, the process would entail, besides innovative and modern tools, a different genre of field staff members, possessing some critical skill-sets. The goal of need-based field force downsizing complemented by new synchronous measures for operational synergy, must not only be clear to senior management, but also be explained to all concerned.

What would ‘augmented value delivery’ to customers lead to?

Another McKinsey article titled, ‘The few, the proud, the super-productive - how a smart field force can better drive sales,’ articulated: ‘Indeed, our perspective on the past five years is that leaders that used field reductions to actually rethink the commercial model – rather than taking a “blunt instrument” approach to cuts – are reaping rewards.’

As the current pharma sales and marketing models are undergoing a metamorphosis, globally – this transition phase throws several tough challenges – from defining new roles and capabilities for field staff to creative use of various interactive communication platforms.  As the McKinsey article underscores: ‘new capabilities need to be added even as we continue to use the tried and true current model, albeit with less success.  It further adds: ‘The inconvenient truth: we will have to sweat the current model and build the capabilities for the future in parallel. Those hoping for a ‘flip the switch’ transition, are likely to be disappointed.” With his, I reckon, will emerge a robust ‘augmented value delivery system’ for the business leading to:

  • Higher profitable sales through satisfied customers
  • Increase in sales per employee ratio
  • Containing/reducing sales and marketing spend as a percentage of total revenue.

Several initiatives to translate this concept into reality is now palpable, globally. A few examples may suffice to drive home this point.

Downsizing field force complemented by new measures for synergy pays:

Here also there are several research studies to bring home this point. One such is the paper titled, ‘Big pharma proves that oncology pays as workforces shrink,’ published in ’Vantage’ of Evaluate on July 23, 2018. The researchers touched upon this area while discussing the workforce productivity for Bristol-Myers Squibb (BMS). It found that a substantial shrinking of its workforce, alongside some other important measures, has given BMS a big boost in sales, with a dramatic impact on its overall performance. As the study indicated, even investors will find this fact hard to ignore. Let me hasten to add that ‘downsizing workforce’ mainly involved sales and R&D staff in this analysis.

The article further highlighted, during the period of 2007 to 20017, the management teams of some other pharma majors, as well, such as GlaxoSmithKline), AstraZeneca and Eli Lilly, either reduced their workforce significantly or kept flat. According to this study the changes in the workforce of these 4 companies are as follows:

Workforce Bristol-Myers Squibb GlaxoSmithKline AstraZeneca Eli Lilly
2007 42,000 103,483 67,400 40,600
2017 23,700 98,462 61,100 40,655

However, even in the year 10, all the four companies - Bristol-Myers Squibb, GlaxoSmithKline, AstraZeneca and Eli Lilly posted not just sales growth, bit all-round performance improvement, as may be seen by clicking on each.

Having deliberated on the impact of downsizing field force, let me now focus on powerful complementary measures for augmented value delivery to customers.

Today’s reality for pharma business in India can’t be wished away:

The EYstudy titled, ‘Reinventing pharma sales and marketing through digital in India,’ captures the current situation quite well. I am quoting below just a few of those:

  • Today’s tech-savvy physicians are relying far less on reps and more on digital devices for healthcare information. Only 11 percent of healthcare professionals in India prefer in-person visits from a company representative, according to a 2016 study by Health Link Dimensions. Likewise, many patients arming themselves with medical knowledge available online, gradually relying less on only physicians’ decision-making. Thus, the rules of engagement need to be redefined.
  • With a shift in focus toward more complex or specialty medicines, pharma companies continue to add new layers of MRs to increase geographic coverage. The increasing number of MRs and the number of brands under each of them have drastically reduced the time and quality of sales pitches – from being scientific to mere brand name reminders.
  • Physicians’ place at the center of the pharma ecosystem as almost the sole-decision makers, is very likely to become a thing of the past with the emergence of a broad array of customers with a new mindset.
  • New tech-based entrants providing information platforms, analytics, e-consultation services and access to medicine online are challenging pharma’s value creation story.

Enhancing customer experience needs a hybrid business model:

The new market dynamics, demands cutting-edge brand-value augmentation measures, enhancing customer-experience with some tangible benefits. These telltale signs can only be ignored at one’s own peril. Let me also illustrate this point with the findings from another research study.

According to 2015 Oncology Customer Experience Tracker of ZS, “Oncology companies can add USD 50 – USD 75 million in incremental sales for every USD 1 billion in current sales by delivering a better customer experience.”

This vindicates that creating a better customer experience should be the key goal of pharma’s augmented value delivery system – going much beyond the traditional communication of key product features and its clinical benefits. This new concept is fast emerging as the fulcrum – not just for creating a strong brand pull, but also enhancing the public image of the organization. And can be achieved with a right blend of:

  • ‘Must do’ mindset of top management,
  • Expertise in well-targeted – multi-channel content making,
  • Expertise on data-science and analytics to churn out the right information from a large pool of data,
  • Wherewithal for effectively using the right digital platforms, either directly to customers or through a leaner and digitally-skilled sales force having a ‘can do’ attitude, as the situation will demand.

Some companies are testing the water:

Conventional ways to improve Sales Force Effectiveness (SFE), especially with soft skills, besides, of course product knowledge, is not new to the pharma players. What they need to do is change the primary focus of increasing sales through delivering mostly the key intrinsic value of the brand, to increase profitable sales by delivering augmented brand value, leading to enhanced customer satisfaction.

This is a major shift from the traditional paradigm and would surely entail application of digital technology and data science. As I wrote before, many companies have started adopting this approach – mostly with one baby step at a time, right or wrong.

Observation and findings of an India specific study: 

Noting that ‘Indian pharma’s journey to a digital world has just begun,’ the same EYstudy, as quoted above, reported the following findings, among a few others:

  • Lack of a clear digital strategy/value proposition and change management are the two key barriers to embracing digital.
  • Whatever was being done manually earlier is now being done digitally. But we are not adding additional value. On the other hand, companies globally are now cautiously moving toward being digital practitioners.
  • Indian pharma majors will need to grow into integrated health care providers – offering both products and services, forging patient-centric partnerships and demonstrating value to a broad array of customer groups.

The good news is, some of the key observations of the study also include the following:

  • Some are using digital technology to capture untapped and unstructured data, to make their sales and marketing decision making process more agile and robust.
  • Powerful apps with dynamic, meaningful content and the right value proposition are gaining popularity.
  • Several players, while staying within the realms of regulatory boundaries, are enabling patients to actively manage their care. 

Conclusion:

As we look around, many drug companies, especially in India, continue to remain focused on the age-old transactional sales and marketing models, delivering the intrinsic brand values, irrespective of the changing pharma market dynamics, especially disregarding what today’s customers in the knowledge economy look for. Traditional training and incentivizing a large, and often flabby, sales force on product and rupee value territory-sales against the target, are the general ways to achieve these. The focus on achieving the internal sales targets, regardless of the processes being contentious or not.

Modern time warrants a different conversation altogether – creation of a unique customer experience – with augmented value delivery systems. Achieving this goal would entail astute applications of modern technology, complementing the reach and impact of the right-sized field staff efforts, and leading to improvement in ‘sales per employee ratio.’

Thus, I reckon, higher sales or the need for an expanded market access, may not necessarily entail a larger field force, but a new breed of leaner and especially skilled MR to deliver the needs of the changing healthcare landscape.

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.

Pharma’s ‘Value Delivery System’ Still Tuned To A Self-serving Mode?

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Just as any other industry, pharma business is also primarily a ‘value delivery system.’ Its each and every employee need to understand and internalize this basic philosophy of the business. This organizational mindset needs to be created by the very top – setting examples for others to embody the same. The top could encompass the promoters themselves, or the professional CEOs – truly heading the organization and not working under the shadow of the promoters, or even the Board of Directors of professionally managed companies.

Although, this mindset should prevail pan organization, pharma sales and marketing functions are usually responsible to deliver a well-thought out set of brand values and associated services to doctors, patients and other stakeholders, effectively.

Against the above backdrop, I shall explore in this article whether it is happening in the pharma industry. If yes, is the ‘value delivery system’ is tuned to a self-serving mode, wherever it is happening? If so, to what extent it is denting the reputation and image of not just of the companies concerned, but of the drug industry as a whole. Before I proceed further, let me elaborate on what exactly I mean by the ‘value delivery system (VDS).’ 

Value Delivery System (VDS):

Creating more and more customers and retaining them, as long as possible, is the core purpose of any business, as was articulated by the management guru Peter Drucker, decades ago. Thus, like others, pharma organizations, as well, require making it happen in a sustainable way for business excellence.

The entire organization – starting from product and service development activities, right up to the frontline sales and marketing, should always be engaged in delighting the customers with the values they expect – driven by this mindset. It is worth noting that value expectations of pharma customers, are expressed in various ways. These need to be properly captured, analyzed, interpreted, packaged and effectively delivered during each company- customer contact, such as, while interacting with doctors, patients, hospitals and Government.

Thus, the term ‘Value Delivery System (VDS), encompasses an integrated chain of processes within an organization. From this perspective, it should get ingrained in the culture of a pharma company – without any broken links – between the functional areas and the integrated value delivery process.

Who is deciding what patients would value in pharma?

In the real world, ‘customers point of view’ or ‘what the patients would value’ in a product, is decided by the pharma companies – derived generally from the published clinical trial results of the products. Accordingly, these are woven around the brand features and benefits.

The value delivery system of the company packages these in a way that it thinks would generate increased prescription demand and delivers to all concerned. These values, which are overall financial business performance-centric, are mostly ‘self-serving’, and was working very well to meet the internal objectives, until recently.

How to ascertain value for patients in pharma marketing?

One way to ascertain these factors is to ask patients directly. But this process has certain limitations. This was once aptly articulated by Steve Jobs in an interview, where he said: ‘I think really great products come from melding two points of view -the technology point of view and the customer point of view. You need both. You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.’

Taking a cue from it, I reckon, drug companies need continuously generate and analyze enough relevant data, from multiple sources, for an in-depth understanding of what patients will value. Making these values an integral part of the product and services, in a creative way, pharma should aim at delighting the customers through effective delivery.

The article titled, “Reclaim The Glory Of Value,” published in the eyeforpharma on January 08, 2019 also reiterated that such ‘value’ must always be defined by the customer.  ‘And true value can only be achieved by understanding the world of the patient and solving the issues most critical to them.’

The external impact of product centric value assessment:

This financial result focused value delivery system got exposed to the stakeholders, since sometime. Overall business performance, though generally slowed down, some companies did produce extraordinary results, even after remaining tuned-in to the self-serving mode. Nevertheless, what got dented most is the pharma industry reputation, with a long-term impact.

Although, the survey capturing fast declining reputation of the drug industry, was done in the United States, it is apparently no different in other countries. Consequently, the quality of general public’s trust in pharma started getting murkier. Strong headwinds are now limiting the pace of progress of the industry, with many governments, including India, taking stringent policy measures to protect the patient interest.

The only way is to ‘reverse the pyramid’:

The only way for the pharma industry, in general, is to take a fresh look at their business approach, which still remains a value delivering machine. The companies need to think afresh while arriving at the ‘value for the patients’, by reversing the business pyramid – positioning the patients’ core values at the top, and delivering them to all concerned with well-crafted content, on the most effective platforms.

Tuning VDS in sync with patients’ core values, is fundamental:

It has been well established today the delivering values built around the quality, efficacy and safety of a brand can no longer ensure the best clinical outcomes for patients. This holds good even when the conventional sales and marketing activities are carried out through a large sales force and backed by huge financial resources. The main reason being, the pharma value delivery system is not delivering the core value that modern day patients expect.

Many patients of the new generation value empowerment and desire greater involvement in their end-to-end disease treatment process. For example, when they want understanding and help on how to manage the high treatment cost to survive from a life-threatening illness, some companies try to compare the ‘cost of treatment’ with the ‘cost of life’, which is an undiluted self-serving value.

It may sound absurd, but I have witnessed the top echelons of pharma companies saying so. This can possibly happen only when they feel contended with a smaller patient base fetching higher profit due to high drug prices, though unaffordable to most patients. But this model is not sustainable. It would further damage already dented pharma reputation, drawing more ire from stakeholders, including the government.

Thus, tuning VDS in sync with patients’ core values is fundamental in the emerging scenario. The question that follows what then are the core values of the new generation patients?

Two ‘core values’ that patients generally expect:

In my personal view, there are the following two ‘core values’ that consumers of medicines would generally expect during their end-to-end disease treatment process. However, the signals of such expectations – direct or indirect, may come in different ways and forms that need to be properly captured by the pharma companies, with the careful application mind:

  • Value of unique product and service offerings: The need for this value arises right in the beginning, when patients are in search of a solution for prevention, cure, or management of a disease. It is, primarily, the difference felt by the customers between the product and service offerings of one pharma company from the other. While finalizing the choice for the resolution of the problem, patients may take into account one more important factor. This usually covers the quality of their interaction with the doctors, including the pharma companies, though their respective patient engagement platforms, if any.
  • Value of a unique patient experience: After making the final choice, patients would value to feel a unique experience during the entire span of the treatment process. The quality of a brand, its effectiveness, safety, affordability and accessibility, among others, would be the individual components of the whole experience. What would matter most is the residual impact, created by the sum total of each of these components. And this value may be termed as – the unique patient experience.

Effectively delivered, the wholesome impact of patients’ treatment experience will be a lot more than the sum total of each the individual components, as mentioned above. Conversely, any hurdle faced by patients even with one component of this value chain, can potentially create a bad patient experience. This may adversely affect both patients and the concerned pharma company, in tangible terms, which I shall discuss below. Thus, the perceived value of ‘unique patient experience’ is very high, and can’t be wished away, any longer.

Tangible gain of pharma for doing so, or vice versa:

Let me illustrate this point with an example – drawing from the above core values and a self-serving value delivery system.

As we know, non-adherence to medication is one of the important reasons for poor clinical outcomes, besides progression of the ailment – further compounding the disease burden. Ample research studies indicate that ‘high cost of drugs is the biggest barrier to medication adherence,’ or, at least, one of the major causes of non-adherence.

Patients pay for non-adherence by their deteriorating health conditions. Alongside, pharma companies also pay a high price in terms of lost sales and profit, besides dent in reputation – for this single factor. Another research report estimated an annual revenue loss of USD 637 billion for non-adherence to medications for the treatment of chronic conditions. The same report highlighted, globally, revenue loss has increased from USD 564 billion in 2012 to USD 637 billion in 2015, with US-based revenue losses increasing from USD 188 billion in 2012 to USD 250 billion in 2015. Otherwise, this could have been a significant tangible gain for pharma.

Conclusion:

Pharma business, just as any other industry, is a value delivery system. This system needs to be optimized, both for tangible financial gains and also for building company reputation. Creating increasingly satisfied patients, including other stakeholders, should be the prime drivers for this optimization process.

Two core values – built on signals, suggestions and indications coming from the bottom of a conventional business pyramid – the patients, need to be effectively captured, analyzed, packaged and then delivered through the VDS. In no way, these values are to be based on what the top of the pyramid thinks, based on only clinical trial results. Such values are usually self-serving in nature, the long-term impact of which is not quite favorable, either. Reversing the pyramid, patients should be allowed to play a pivotal role for the company in the core value creation of a brand, in innovative ways, for subsequent delivery on appropriate platforms.

This will create a win-win situation, both for business growth and also in delighting most patients with access to high quality and affordable novel treatments, for a healthy life. However,considering today’s reality where most pharma companies’ ‘Value Delivery Systems’ are still tuned to a self-serving mode, a serious introspection by individual companies seems to be an urgent need. More proactive players in this game, will emerge as winners with better business performance, in tandem with improved corporate image and reputation.

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.

Pharma Policy Execution Gap Limits Access To Affordable Medicines?

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“The cost of new drugs is putting increasing pressure on people in both rich and poor countries”- was eloquently expressed in an article, titled “Why do new medicines cost so much, and what can we do about it?”. This was published by “The Guardian” on April 09, 2018.

Almost synchronically, expressing concern on this issue, the World Health Organization (W.H.O) advised the world leaders ‘to take bold new approaches’ for increasing access to medicines for all. A UN high-level panel on ‘access to medicines’ spent almost a year deliberating over related issues. The panel members were from pharma companies, as well as civil society and academics. The final report coming in September, backed de-linkage of the costs of R&D from the eventual price of the drug. Notably, the author who is also the health editor of the above publication, feels that any positive outcome in this direction is unlikely to materialize soon.

The majority of big pharma constituents, with the possible exception of GSK, whose then chief executive Sir Andrew Witty was unenthusiastic about the UN report. Probably because, it supported governments’ right to invoke ‘a get-out’ from the World Trade Organization’s TRIPS agreement. This is to bypass drug patents and make cheaper versions of the respective generic equivalents, in the interests of public health, in accordance with the 2001 Doha declaration. However, the author is hopeful that, “as happened with AIDS, each new crisis over access to medicines – whether concerning a common liver disease or a rare cancer, and particularly over the antibiotics that are under threat and vital to all our lives – is likely to put pressure on companies to find ways to bring the costs of medicines down.”

Stakeholder pressure for increasing access to medicines continues. Even in smaller developed countries, such as Switzerland, a section of the public demands that “Swiss authorities must act to make lifesaving drugs more affordable by introducing compulsory licensing.” Or, one can now see reports saying,“Irish patients are being denied access to nine drugs that are widely available across Europe, largely, on cost grounds.”

Nevertheless, regardless of mounting pressure for drawing a reasonable symmetry between cost of, especially new drugs and their improved access to patients, ongoing status-quo continues. In this article, I shall dwell on this concern from the Indian perspective, focusing on an agonizingly stark implementation-gap related to the current Indian pharma pricing policy.

Under pressure, pharma now recognizes the need for affordable drugs:

Coming under intense pressure of patients and other stakeholders, even the largest trade association of Big Pharma has recently changed its stance on this issue, though clearly sharking any responsibility for the same. It just recognized the need for affordable medicines for improved patient access to treatments by saying: “Too often patients have to fight to access breakthrough medicines that are revolutionizing how we fight disease.” It also accepted the fact that “many Americans are struggling to afford their medicines.”

“We can improve patient access and affordability by moving toward a system that prioritizes results for patients. Biopharmaceutical companies are working with insurers to develop innovative and flexible ways to pay for medicines that focus on results, lower out-of-pocket costs and enable patients to access the right treatments the first time” – it added.

What it really means: 

What it really means ‘treatment outcomes-based drug pricing’ or ‘value-based drug pricing (VBP)’. In other words, a situation where drug prices are set in line with their real and demonstrated clinical and economic value to patients, against other available products. This model will also ensure that patients’ money doesn’t get wasted from drugs that aren’t effective on them. The VBP model is, thus, significantly different from product pricing, based on ‘undisclosed’ cost of ongoing innovation for new drugs.

Is this Big Pharma’s new way to change optics?

The intent for imbibing VBP, as expressed by the above pharma association, throws open the door for discussion of its core intent. Is the intention real, or another Big Pharma way of changing general optics on the sensitive issue of new drug pricing? This doubt creeps in from the findings of some important studies on this issue. One such is an interesting paper, titled “Pricing for Survival” from KPMG. The analysis highlighted very limited application of VBP concept, and also why it is not yet viable – despite the hype being created around it.

According to KPMG, “there were 25 drugs engaged in various types of VBP with payers in the fragmented United States market as of September 2017. The problem is, these models appear to be limited in applicability to disease states with more standardized protocols and dominated by drug therapies with single indications – notably osteoporosis, diabetes and hepatitis C.” To date, VBP models seem to be facing several constraints, such as it is appealing mostly to payers that are fully integrated with healthcare delivery i.e., closed-loop payer-provider health systems or integrated delivery networks.

“The takeaway is, when it comes to specialty and orphan drugs, outcomes-based pricing simply faces too many barriers at present” – the article elaborated. Be that as it may, let me now explore the relevance of VBP in India.

Any relevance of VBP in India?

VBP has been tried in a health care environment where payers and drug companies are two critical players for access to affordable medicines, as we see in the KPMG study. Under any value-based pricing agreements for pharmaceuticals, both payers and pharma companies agree to link payment for a medicine to the value achieved, rather than volume.

Whereas, in the Indian healthcare scenario, as we are experiencing today, payers are mostly individuals.  Despite various well-publicized health schemes, expenditure on health, including drugs, remains by and large ‘out of pocket (OoP)’ – for a large Indian population. Hence, copying western framework for implementation VBP in India, would call for scores of ‘pharma – individual payer agreements.’ This would be a daunting task, if not impractical, to even try it out.

In this context, let me touch upon the Ayushman Bharat scheme that was launched by the Prime Minister on September 23, 2018, but just in one of the 29 states of India – Jharkhand. If, or as and when it will cover the entire country, the scheme is expected to bring 107.4 million families and more than 550 million people under health insurance coverage. However, the work seems to be still in progress.

There are three financing models for this scheme – insurance model, trust model and hybrid model – and the 19 states that have come on board for the scheme’s implementation in the country, have chosen a trust model, according to the Union Health Minister. The minister also reiterated: “Things are still unfolding. Only when the letters reach the beneficiaries will they understand and react.”

Nevertheless, the Union Health Minister himself, just like his counterparts in the previous governments, exhibited confidence that the country is “moving towards universal health cover with Ayushman Bharat scheme,” – as was the headline of the above media report.

Going by the past and current outcomes of several such government schemes in the country, and what the minister himself articulated on September 17, 2018, a large section of the Indian population still remains  apprehensive on the fast pan-India rollout and overall success of this ambitious health scheme. Hence, at this stage, I reckon, it may not be relevant to discuss the application of VBP model on Ayushman Bharat project. I wrote about such apprehensions in this Blog on June 18, 2018.

Having said that, VBP still remains relevant when we look at the government’s intent captured in the National Pharmaceutical Pricing Policy (NPPP) 2012,’ as I shall discuss below.

VBP and the policy implementation gap:

For making the point clearer, let me keep the Ayushman Bharat scheme aside because of its associated uncertainties. Even in the current health care environment of high OoP expenditure on drugs, especially on high priced new drugs, if one tries to make use of the VBP model, it is very much possible.

This is because, the National Pharmaceutical Pricing Policy 2012, under point 4 (XV) on ‘Patented Drugs, categorically states:  “There is a separate Committee constituted by the Government order dated February 01, 2007 for finalizing the pricing of Patented Drugs, and decisions on pricing of patented drugs would be taken based on the recommendations of the Committee.”

Curiously, even 6 years down the line, no meaningful decision has been taken on patented drug pricing in India by the successive governments. As I wrote in this Blog on December 12, 2016, Price Negotiation For Patented Drugs: Still A Policy Paralysis.

Parliamentary Standing Committee intervenes:

Six years after the constitution of the committee by the Department of Pharmaceutical (DoP), the long-awaited report was eventually submitted with a vague formula for pricing patented drugs in India. Intriguingly,the issue remained as such, until the Parliamentary Standing Committee’s August 2016 report was placed before the parliament. It strongly criticized the DoP’s efforts to recommend measures in regulating prices of life-saving patented drugs, despite government assurances for the same.

On September 23, 2016, media reported: “Upbraided by the parliamentary standing committee for its gross negligence and lackadaisical attitude, the department of pharmaceuticals has set about seeking suggestions from different ministries on price regulation of patented drugs.”

According to reports, a new inter-ministerial committee was formed thereafter, under the chairmanship of one of the Joint Secretaries of the DoP to suggest a new mechanism to fix prices of patented drugs in the country.
The other members of the committee are Joint Secretary – Department of Industrial Policy and Promotion (DIPP); Joint Secretary – Ministry of Health and Family Welfare; and Member Secretary – National Pharmaceutical Pricing Authority (NPPA). But, the saga continues – at the cost of patients’ health interest.

Conclusion:

As it appears, there still lies a clear opportunity for Indian drug pricing policy makers introduce VBP concept for patented drugs in the country. Following this model, the prices of new and innovative drugs under patents can be set in line with their real and demonstrated clinical and economic value to patients, over the available existing products. Health Technology Assessment (HTA), for example, could be an effective tool in this process.

Additionally, the VBP model could also minimize, if not eliminate the risk of patients paying a high a price for new drugs coming through incremental innovation, adding too little clinical and economic value over existing drugs. There may, of course, be some teething trouble or even important issues in arriving at consensus on value-metrics for VBP. But, this can be sorted out through meaningful engagement with concerned parties.

Strikingly, even after 6 years since the NPPP 2012 was announced, nothing tangible has been made known to stakeholders on the execution of ‘patented drug pricing policy’ in India. An avoidable policy execution gap continues, limiting access to affordable new medicines to a vast majority of the Indian population, even today.

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.

Creating ‘Shared Value’ in Pharma – The Way Forward

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Many Pharmaceutical companies, both global and local, are struggling with a plethora of critical challenges. With the industry reputation diving south successful navigation through this headwind has become an onerous task, more than ever before.

Under this backdrop, the article, titled “Creating Shared Value” of Michael Porter and Mark Kramer, published in the Harvard Business Review (HBR) in its January – February 2011 issue, becomes very relevant to analyze the situation.

The paper says: “Companies are widely thought to be prospering at the expense of their communities. Trust in business has fallen to new lows, leading government officials to set policies that undermine competitiveness and sap economic growth. Business is caught in a vicious circle. A big part of the problem lies with companies themselves, which remain trapped in an outdated, narrow approach to value creation.”

The authors also articulated that pharma players, generally focus on optimizing short-term financial performance, overlooking the greatest unmet needs in the market as well as broader influences on their long-term success. They questioned: “Why else would companies ignore the well-being of their customers and the economic distress of the communities in which they produce and sell?”

Porter and Kramer advised the companies to bring business and society back together – redefining their purpose as creating “shared values”. It means generating economic value in a way that also produces value for society by addressing its challenges.In this article, I shall explore in this area.

Not CSR or Philanthropy, its engaging business as business, for social progress:

Creation of “Shared values” for a business is quite different from “Philanthropy” or “Corporate Social Responsivity (CSR)”. Philanthropy usually involves ‘donations to worthy social causes’ and CSR is primarily directed at compliance with community standards and good corporate citizenship. Whereas the creation of “shared value” means integrating societal improvement into economic value creation, making social improvement as an integral part of with a business model.

To create “shared values”, it is imperative for business organizations to create “social value” through active participation in addressing the social issues and needs related to the business. Or in other words, the creation of “shared values” would entail striking a right balance between “social value” and the “business value.”

An article titled “What Is the Social Value of Pharmaceuticals?”, published by FSG on February 13, 2014 dwells on the business relevance of creation of “social value” in the pharma industry. It writes,creation of “social value” corresponds to effecting positive change along the major societal challenges, such as affordable health care, by working more in collaboration with other stakeholders to address the needs of the underserved through commensurate value creation. This entails engagement of a business as a business, not as a charitable donor, nor through public relations, for social progress.

A resolution to create “shared value” in the pharma industry:

An interesting article, featured in SFGATE of the San Francisco Chronicle on July 11, 2018, elucidated that the reputations of drug makers have taken a hit over the past few years as the public and politicians have called out the companies for high prescription drug prices that even Americans are facing. Recently, President Donald Trump, reportedly, singled out the top pharma companies of the world  for raising the list prices on some of its prescriptions.

Possibly it’s a sheer coincidence, but on the same day, an intent of creating “shared values” with the society got reflected in the statement of the president of the Novartis Institutes for Biomedical Research. The officialexplained, why his company has a ‘contract with society’. He admitted that: The cost of health care, which has been rising has left many on the hook for a larger amount of their prescription drug cost that can place a big burden on patients in many countries, including the United States.

Consequently, the pressure from the people who need medications is now on the pharmaceutical companies for doing right, he added. Thus, Novartis feels:”We have a contract with society, and society is our shareholder. A company like ours exists to have a definitive impact on life threatening diseases, to keep people alive and healthy for a long, long time, full stop” – the official concluded.

A laudable intent, but is it credible?

The concept of pharma having a contract with the society ‘to keep people alive and healthy for a long, long time,’ is laudable, but is it credible? This question arises because, just before public articulation of this intent, the same company, reportedly, entered into USD 1.2-million contract with President Trump’s lawyer, Michael Cohen, allegedly, to provide access to the US President.

The exact reason for the same is being investigated by competent authorities, including the US Senators. However, another report highlighted, “Novartis is among the drug companies that has put through significant price increases for its products since Trump took office in 2017 – in some cases more than 20 percent.”

Another  repot of July 09, 2018, quoting a tweet of the US President, poured more cold water on the warm intent of pharma’s ‘contract with the society.’ According to this article President Trump tweeted: “Pfizer & others should be ashamed that they have raised drug prices for no reason. They are merely taking advantage of the poor & others unable to defend themselves, while at the same time giving bargain basement prices to other countries in Europe & elsewhere. We will respond!”

Consistently declining pharma’s image and public trust:

Many believe that due to such hyperbolic statements and conflicting actions of pharma, over a long period time, are driving down the public image and trust on the industry, in general, from deep to deeper level, which has not found its bottom, just yet.

The reality gets reflected in various well-recognized polls, conducted even in the top pharma market of the world, which is also one of the richest nations, globally. August 2017 Gallup Poll on ‘Business and Industry Sector Ratings,’ features pharma industry at the very bottom of the ranking, just above the Federal government.

The concern gets reverberated in the February 03, 2017 article titled, ‘How Pharma Can Fix Its Reputation and Its Business at the Same Time,’ published in the Harvard Business Review (HBR). The paper observes that the worrisome mix of little growth potential and low reputation prompts the pharma players, among other actions, developing new treatments for neglected populations, and pricing existing products at affordable levels – avoiding corruption and price collusion.

How will “shared value” creation help pharma?

The process of creating “shared values” will involve creating “social value” with all sincerity and a clearly defined purpose. Its outcome should be measurable, and the impact felt by the society. In tandem, striking a right balance between “social value” and the “business value” would call for a metamorphosis in the concept of doing business.

There aren’t too many examples of creation ‘shared values’ by pharma companies, yet. However, to illustrate this point, let me quote one such that was originated from India, which I had the privilege to observe closely. This initiative is ‘Arogya Parivar (healthy family) of Novartis in India.

‘Arogya Parivar’ is a ‘for-profit’ social initiative developed by Novartis to reach the under-served millions living at the bottom of the pyramid in rural India. As Novartis claims, since its launch in 2007, ‘Arogya Parivar’ is proving to be both a force for improving health in rural communities and a sustainable business. ‘Arogya Parivar’ is a commercially-viable program and began returning a profit after 30 months with sales increasing 25-fold, since launch. After successful implementation of this initiative in India, the company has created similar programs in Kenya, Indonesia and Vietnam, according to Novartis.

Conclusion:

The concept of ‘shared values’ emphasizes that business success of a company is closely related to the progress, development and wellbeing of the society where it transacts the business. This can be achieved by striking a right balance between the social need and the business need. In the pharma space too, the value creation in the business value chain may need to be redesigned to meet the ‘social value’. This happened as in the case of ‘Arogya Parivar’ initiative of Novartis in India.

Creating robust business models based on ‘shared values’, in sync with the business-specific needs of the society can help make more profit in areas where there is none, at present. It will also facilitate achieving additional growth of the organization and improve long-term competitiveness.

Consequently, pharma can earn recognition of the society as a powerful contributor for containing suffering and even death of many ailing patients, by increasing access to affordable medicines for those who need these most. This, in turn, would help pharma companies to improve their public image and reputation. Let me hasten to add that provided, of course, no countermeasures are taken by them, surreptitiously, as I have discussed above.

The good news is, some pharma players have already initiated action in this direction. Thus, I reckon, many of them would soon realize that creating ‘shared value – based’ business models are the way forward for sustainable business excellence.

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.