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Don't get frozen out

Published on 04/12/03 at 04:42pm

A fundamental change is underway in the European healthcare sector. The traditional autonomy of the physician has yielded to more rigid controls. Higher quality and cost-effectiveness in the context of treatment outcomes has assumed significance with disease management emerging as the preferred method of planning.

Quality management techniques that have become relevant in recent years are Healthcare Technology Assessment (HTA) and evidence-based medicine. Both practices have influenced the choice of treatment and have enforced tighter control through published guidelines and protocols imposing care 'pathways'.

HTA's main application is in the product-testing arena whereas evidence-based medicine is based on the concept that the care given should be that which has been shown to be the best as a result of organised studies of effectiveness. It also offers quality management at the treatment level.

Despite this paradigm shift in the healthcare mindset, the pharma industry has failed to respond appropriately. Its 'single product-type' focus and long-established physician-centred marketing techniques run the risk of becoming largely irrelevant. Pharma companies are principally single-product-type companies and are, therefore, limited to simpler HTA programmes to determine product efficacy.

However, with healthcare providers increasingly emphasising evidence-based medical benefits, companies will have to stop promoting products in terms of their benefits within individual procedures. Instead they will have to market their products based on the advantages derived from their use in packages of care.

However, it is important to realise that planning is now practiced at every level of the healthcare framework. In other words, the real decision makers are administrators and planners rather than professionals in the care environment. Pharmaceutical companies will accordingly have to remodel old sales and marketing strategies targeting planners rather than doctors.

Disease management

In its initial incarnation during the mid-1980s, disease management was strongly endorsed by the pharmaceutical industry. During a period when company sales were being squeezed by spending restraints, the disease management sector was viewed as being full of potential.

The pharmaceutical industry recognised that its therapeutic capabilities could be leveraged to expand from simply drug sales into the enormously lucrative sphere of patient care as well.

Expanded pharmaceutical activity, not surprisingly, resulted in higher prescription rates but little else. Failure to deliver anticipated, improved outcomes coupled with the realisation that the main contribution of pharmaceutical involvement in disease management was higher costs, led to the idea falling out of favour.

Accused of over-exploiting the idea solely to pump up sales volume, pharmaceutical companies moved away from disease management and specialised disease management teams were made redundant.

Humbled by the experience, pharmaceutical companies are now understandably wary of ideas similar to disease management and of its dealings with secondary healthcare. However, current exigencies demand that reverting to marketing of products as components of integrated solutions is the most pragmatic way forward.

Pharmaceutical companies are now  going through tough times and existing drug portfolios cannot sustain growth. Product pipelines are contracting and new drugs may not be able to sustain current share values.

Compounding the problem is the fact that fewer drugs are gaining regulatory approval. In this environment the limitations of traditional marketing approaches are likely to be harshly exposed.

Short-term reprieve

As pharmaceutical companies scramble to assure shareholders of continued financial viability, increased market consolidation is the likely outcome. At one level, consolidation ensures that companies can significantly expand their market share. At another level, it instantly equips companies with an expanded product line. Such tactics are expected to offer a short-term reprieve, but are unlikely to resolve the fundamental single product-type issue.

Intensifying merger and acquisition activity is projected to temporarily conceal entrenched problems in the pharmaceutical industry.

"Shareholder confidence will be boosted by growth spin and the company management will be totally absorbed in immediate problem-solving to be able to make any significant strategic moves," says research analyst Gordon Blackwell from Frost & Sullivan.

"It is unlikely that the pharmaceutical industry will be a prime mover in fashioning any evidence-based market change or of taking any leading part in the re-emerging disease management trend."

Companies have mostly persisted with traditional marketing methods, convinced of the continued relevance of existing sales approaches to the primary care sector. They have clung to the practice of using a battalion of sales personnel to build relations with general physicians. In view of the power shift from doctors to management/planners, this model appears outmoded. Statistics show that between 1998 and 2001 ROI promoting to primary care physicians and patients dwindled from $22.2 to $17.0.

Some companies are trying to adapt to evidence-based healthcare trends by appraising their products against placebos as well as other competitive offerings. This procedure is likely to become mandatory following EU inclusion of added therapeutic value as a stipulation for market approval. Other companies are integrating a service component in certain disease fields such as the asthma clinics managed by GlaxoSmithKline.

However, such attempts are fairly rare and sales and marketing techniques continue with largely tepid responses to evolving healthcare developments. Among the criticisms that have been levelled are that the techniques continue to be locked into the 'big sales force talking to doctors' syndrome.

Another note of censure is directed towards unduly high marketing spend. Solutions centred on the development of targeted pharmaceuticals or tailored drugs are seen as a way of battling your way out of the current problems.

Traditional promotional methods that employ old, outmoded or irrelevant communication tools continue.

"Rather than investing in solutions-based communications planning, companies appear to seek comfort in convention, using high-cost, low-risk strategies, but without achieving any significant affect in the market place," says Mr. Blackwell.

Excessive spending on marketing activities has been a common feature of the pharmaceutical industry. There has been untenable growth in promotional outlays, which has, in many instances, frequently exceeded product sales. This has created a situation where either sales and marketing activities will have to become more cost-effective or else spending will have to be slashed.

When promotional spending by the 14 leading pharma corporations is balanced against corresponding sales figures, an interesting fact emerges. The firms deriving optimal use of its promotional outlays are not the larger ones. For example, in terms of promotional ROI pharmaceutical giants GSK and Pfizer clearly under-performed competitors in 2001.

"These companies do have the excuse that they need to promote a diverse number of products and have to be less focused than firms operating in fewer therapy areas, but, for example, in comparison to the smaller Wyeth, performances were significantly worse," says Mr. Blackwell.

Targeted treatment solutions

Business models that replace standard blockbuster drugs with targeted pharmaceuticals or tailored drugs are regarded as a way to emerge from the current rut.

The concept of targeted treatment solutions aims to treat patients with specific disease states. Expected results include new development techniques that lessen the gap between target identification and marketing from over 20 years to three to five years. Significantly reduced R&D costs to the extent of almost 75% and improved shareholder profits are other possible affects of adopting tailored treatment solutions.

"As diseases can be understood and defined much more accurately, rather than making standard drugs for patients with similar symptoms but different diseases, companies will be able to develop targeted solutions for patients with specific disease states," adds Mr. Blackwell.

This new business concept will require companies to implement fundamental changes, execute new methods to research and advance treatments, as well as employ novel sales and delivery techniques.

A variety of tools will be used including modelling, simulation and advanced computing. New medicines will be designed not through traditional methods but through more convenient and rapid biological techniques of research and discovery.

Following this new model will require the building of closer working relationships with regulators, healthcare payers and patients. It will also mean developing novel sales and marketing methods.

Among these new techniques is the use of a smaller but more effective

sales force, qualified to network with specialists and general practitioners. Other areas that will need to be developed are outcome-based pricing plans and patient monitoring programs that operate in conjunction with electronic medical records.

While targeted solutions might constitute a way out of the current problem, several concerns still remain. For instance, supporters of tailored drugs have yet to deal with questions of cost and infrastructure problems of harmonising patients to drugs.

There are problems arising from the slow developmental pace of novel technologies such as genomics and proteomics. These technologies have made slow progress with output failing to match the hype. At present, the immediate likelihood of a dramatic advance in application still seems doubtful.

Packages of care

Ultimately, discounting the emergence of targeted solutions, companies will be required to market products as constituents of packages of care. This would be an onerous undertaking, especially with outcomes changing on a patient-by-patient basis.

It has been suggested that companies that learn how to make such tailored drugs could triple shareholder value by 2010 and, if the market takes off more rapidly, could enjoy almost double the growth the industry enjoyed at its peak. However, such predictions may be optimistic.

The trend, especially after disease management fell into disfavour, was for the pharmaceutical industry to retreat to their core activities of manufacturing and marketing ethical drugs.

This shift was borne out by the experience of Stuart Disease Management Services (SDMS), a division of Zeneca Holdings, SmithKline Beecham Healthcare Services and Merck-Medco Managed Care LLC. They were nominated by the American Academy of Family Physicians as good illustrations of the most significant disease management organisations, being arms or spin-offs of pharmaceutical companies.

The subsequent dilution of their activities revealed how pharmaceutical firms had reverted to focusing on their core strengths. Most pharmaceutical companies remain cautious about becoming deeply embroiled in disease management programmes. However, a few pilot schemes reflect the growing willingness to revive the idea.

"These are often done via company spin-offs and alliances using the synergy generated by a function other than pharmaceutical manufacturing as a basis for integrated activity," says Mr. Blackwell.

For instance, Roche has successfully combined its pharmaceutical and diagnostic activities to build programmes where its diagnostics capability positively augments its therapeutics proficiency. Pfizer has leveraged its information technology subsidiary to design care programmes that use the company pharmaceutical products.

Similarly, the collaboration of its health management subsidiary with an IT organisation has enabled Schering-Plough to meld therapeutics with a significant IT component for effective asthma disease management services. This represents an example of how different sectors of the healthcare industry can form a strategic partnership for managing disease.

Other pioneering initiatives include the Patient Self Management: Diabetes scheme being sponsored by Aventis Pharma. Eli Lilly too has established diabetes disease management initiatives with a fully replicable, community-based model programme that is expected to usher sustainable enhancements in diabetes care in Russia. Both cases illustrate how major pharmaceutical companies can be involved in disease management without excessive commitment. All these innovative projects underline the opportunities that exist for pharmaceutical companies in the disease management sector.

Adapting to new needs

"Pharmaceutical companies could become isolated from the healthcare provider sector by its single product-type concept," warns Mr. Blackwell.  "Unless they re-enter the disease management area with viable strategies, they could become dependent on a range of partners that are offering care packages."

Some companies could be forced to depend on disease management service companies providing care packages to incorporate its products into disease management programmes. This would inevitably cause attrition in profit margins.

From a long-term perspective pharma companies will have to market products as part of integrated solutions. In view of the changing decision making dynamics within the market, the pharma industry would do better promoting products at the management and planner level rather than using a 'selling to doctor' method.

"It is necessary to aim marketing efforts as far up the planning chain as possible and to fashion messages in an appropriate language for the audience," Mr. Blackwell concludes.

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