One Europe for pharma marketers?

pharmafile | July 6, 2005 | Feature | Sales and Marketing |   

Pharma economists will tell you that the world has a market 'top three'. The US is way ahead in the charts, with IMS Health putting its market value at $185 billion in the year to January 2005. Japan comes in at number three, with sales of $58 billion, while Europe captures the second spot – its five biggest markets alone account for $87 billion in sales.

Have you spotted the flaw in this outlook? While the US and Japan each represent one nation and one healthcare system, the same can't be said for Europe. Although there are cultural similarities, these are dwarfed by the fact that even the European Union now accounts for 25 different markets, nationalities, cultures and governments.

So why does the pharma industry persist in regarding Europe as one market? Can one marketing approach really work across such a diverse set of local markets? How do marketers take a global brand strategy, often dreamt up in shiny office premises in New Jersey, and based on a successful US domestic strategy, and make it work in Europe?

Perhaps more than any other industry, pharmaceuticals cannot exist in a one-market 'bubble'. It is by its very nature international. The cost of developing new products, not to mention the basic need for what it does, crosses borders and cultures.

From the US viewpoint, Europe as a whole is starting to flex its muscles as a powerful trading block. American economists are being forced to sit up and take notice of the expanding, developing economic power across the Atlantic. When Europe presents itself to the world as one economic whole, it is perhaps not surprising that many global marketers regard it as one cohesive 'region'.

But any marketer who regards Europe – from the Baltic to the Mediterranean, from the Atlantic to the Black Sea – as one simple 'European' whole, is heading for marketing oblivion.

Spot the difference

The first obvious reason why a 'one-size-fits-all' approach won't work is the diversity of healthcare systems across Europe. While the EU – which covers many of the major markets, but not all, let's not forget – is working towards as high a level of harmonisation as possible, a combination of history, market needs and different levels of wealth have created a hotchpotch of systems.

The actual healthcare system, and the attitude taken towards it both by healthcare professionals and by the general population, especially through their elected representatives, will have a huge influence on the success of any marketing approach. In addition, it is dangerous to assume that the distribution system in any one country will contribute towards the success of the marketing effort, even if the messages are well-thought through and correctly targeted.  

In France, for example, Europe's second-biggest market, patients expect medications to be prescribed. As a result, even basic medicines such as analgesics, can only be sold through pharmacies.

The opposite is largely true in Eastern Europe, where far more treatments are available without prescription. And in Southern Europe the rules are widely flouted anyway – many Rx drugs are de facto sold without a prescription in some countries, and indeed in the East.

Coupled with this are the obvious, and not so obvious, cultural differences. It is these that are most often missed by those planning global brand campaigns at some distance from the customers on the ground. The fact that geographical neighbours can sometimes have bigger cultural differences than those on different continents is missed in the effort to create convenient, homogenised marketing 'units' designed more for ease of planning than for achieving marketing goals.

Because of these differences, understanding the target market is the vital first step in tackling it, and that means looking at the local not regional level. It's not just healthcare knowledge that is required, rather a deeper understanding of what makes a particular society tick, because something as important as healthcare is bound to reflect more general cultural trends.  

How will social norms affect prescribing and patient behaviour? In which countries are political considerations paramount, and which are driven by more social or commercial factors? Understanding these points will give pharma marketers a chance of making inroads in each local market.

Pressure on healthcare budgets

To complicate matters further, the picture is constantly changing, as EU expansion, further moves towards harmonisation (and equally, resistance to it) and pressure on healthcare budgets result in extremely mobile goalposts.

The biggest change in the last year has been the accession of ten new countries, mostly in the poorer East, into the world's biggest free market which the EU constitutes.

This represents a huge opportunity – a population of 450 million – with the newer, perhaps less sophisticated members regarded as 'easy targets' especially as their membership translates into increased prosperity and purchasing power.

The flip side is that these economies, with their generally lower levels of regulation and reimbursement, as well as greater penetration of generics, are going to skew the overall economy.

Pricing is becoming an increasingly significant issue. Low reimbursement levels in the accession states are putting pressure on prices across the EU. This is good news for governments worried about spiralling prescribing bills, but not so hot for pharma marketers trying to achieve a reasonable return on investment before their market is nibbled away by generic competition. The spectre of parallel importing is a real fear.

At the time of accession of the ten new member states, Datamonitor calculated that government healthcare spending in these countries was two and a half times lower than in the existing 15 member states. If reimbursement levels are referenced against the average, the downward pressure on prices becomes irresistible.

Nowhere has this pressure been more marked than in the biggest market, Germany. At $25 billion in 2005, the sheer size of this market (which compares to the UK's $15.7 billion) means that to a certain extent, where Germany leads everyone follows.

The new German price fixing system, which took effect in January of this year as part of a government initiative to shave E1 billion from its annual healthcare budget, has threatened the concept of free healthcare. And this in a market which was already growing more slowly than the rest of Europe.

Alarmingly, for those seeking to launch new drugs with a reasonable chance of a decent return, the new system puts branded drugs in the same price bracket as older, cheaper drugs, unless they meet strict, 'breakthrough medicine' criteria. Unsurprisingly, the industry's reaction has been to question how future research can be funded under such a regime.

Not all doom and gloom

Even before pondering the difficulties of dealing with different healthcare systems and cultures, considering these factors, you might think it a wonder that anyone bothers trying to succeed in Europe.

Two things make it all worthwhile: first, the fact that, despite local disparities, Europe is one of the most prosperous regions in the world, with sophisticated healthcare systems and a population which aspires to ever better levels of healthcare; secondly, the potential for further growth is enormous.

The poorer parts of Europe may currently present a challenge in terms of price pressure, generics and parallel importing, but despite these short-term pressures, the longer term has a very positive outlook. EU membership will give the ten new countries – the majority competitive due to a low cost base – access to one of the world's biggest markets. Rapid growth and economic progress are sure to follow.

This in turn will create new markets for the pharma industry, because as wealth levels rise, so do healthcare aspirations and expectations.

From a marketing point of view, the mobility of labour that EU extension will bring will also help break down some of those cultural barriers which make dealing with Europe so complicated. Breaking down the 'national' barriers – physical and emotional – could open the door to truly pan-European marketing.

What about the brand?

Corporate pressure to recoup global investment costs quicker than ever inevitably leads global strategists – usually, although not always tucked away in corporate headquarters far away from the sharp end of the market – to take the view that brand consistency should override cultural considerations in different markets.

It is certainly true that the success of the global pharma industry has been built on the back of some impressive worldwide brand-building, and given the massive cost of getting a product to market, the desire to exercise as much control as possible on the brand proposition is understandable and in many cases justified.

So how do those charged with marketing a product across Europe translate this strategy into one which takes account of the local differences within what the pharma industry likes to call the homogenous 'region' that is Europe? In truth Europe has never been that and the expansion of the geographical centre eastwards, as a result of the lifting of the Iron Curtain and the accession of new states, means this is less true than ever before.

This contradiction is not quite as difficult to square as it might first seem. The answer lies in ensuring a consistent, strong and global brand strategy, but then giving local marketing teams the flexibility to implement strategies that take into account political, cultural and economic differences within each local market.

There are some common aspects to this – diseases don't differ much across borders, for example. But this is not the only driver of prescribing behaviour, and others such as medical practice and communication do vary between cultures, and the failure to realise this can result in not addressing those key drivers to prescribe.

Ensuring that everything local marketers do is driven by a consistent global brand proposition is one thing; forcing them down an implementation road which risks running into local resistance to the brand is quite another. The key is to create a set of tests by which local marketers must justify why departure from the global proposition is necessary – sticking to it has to be the default point.

Tackling Europe

Europe as a whole is growing in confidence, but that is also true of its individual nations. Whether we like it or not, the pharma industry is having to learn to operate in a world where smaller markets are becoming more influential, especially as their confidence grows.

European marketers need to have the confidence to challenge any attitude from elsewhere that Europe is one, uniform, mass. Just because the industry draws strength from being global, it must not be scared of standing up for a European point of view.

At a very basic level, imposing the same visuals, colours and language on a global basis is likely to be seen as 'cultural imperialism'. And while it's true European audiences will react better to a Europe-centric marketing approach than to a US one, any solution must be flexible enough to take into account diverse European cultures and markets.

It is not rocket science. If marketers can understand and meet the needs, aspirations and purchasing/prescribing drivers of customers in each market, while accepting that they will vary from one market to the next, they will succeed.

A combination of consistent product and brand positioning, coupled with the flexibility to implement these according to local market conditions, will win the day.

Advocates of the 'European Project' like to call the EU a 'single market'; that might be true economically but when it comes to marketing successfully right across the continent, this outlook is doomed to failure.