A mature approach to relationships with pharma’s customers
pharmafile | December 6, 2010 | Feature | Sales and Marketing | MSI, Paul Stuart Kregor, franchise management, pharma marketing
Commercial managers who are responsible for a number of brands face a constant challenge in choosing where across the franchise or portfolio to invest limited human and financial resources. How can you make this decision-making better?
The franchise can take a number of forms: the traditional therapy area portfolio with a number of constituent products, or a brand with a number of indications each requiring resource. At a local level, you may have a mature product portfolio where you need to decide on the level of investment and support.
So let’s outline some of the thinking required to effectively manage the franchise at a local level, including:
• Taking advantage of the move to more ‘total healthcare’ solutions to help deliver shared customer and franchise goals
• Adding true value by helping to develop better patient care pathways and so meet our customers agenda through our franchise commitment
• Working with purchasers who are increasingly looking at the use of our portfolio of drugs on a more macro basis.
Considerations for success
In the previous article, published in the October issue of Pharmafocus, general principles to managing the franchise were identified, which apply equally at global and local level. It is helpful to review these key principles again before we look in more depth at those issues, relating specifically to the franchise at a local level.
1. Brand prioritisation
Resources must be allocated to the strongest and highest performing assets. This entails detailed analysis of customer targets, brand relevance, and the brands’ impact on business results to identify which are stars and which should be pruned. For a detailed ‘how to’ approach see my earlier article.
2. Build, protect, and leverage brand assets to maximise the value of the portfolio
Once the portfolio is tightened, the remaining brands should be assessed for short term and long term growth opportunities. Brand managers must proactively manage their brands and determine the extent to which the brands can be extended organically or ‘lent out’ to grow new products or services.
3. Establish & empower a portfolio manager
Most businesses lack the management structures, systems, or processes to effectively manage a franchise or brand portfolio strategy. What’s needed is a dedicated brand portfolio manager. At the very least, a ‘brand steward’ can help address the marketing effectiveness conundrum. This individual can manage and monitor the portfolio’s performance (including individual brands’ contributions to the business), better understand what the company is actually spending in aggregate on brand and marketing support, and offer knowledgeable insights to guide resource allocation decisions.
Effectively managed, your franchise or brand portfolio has the potential to generate growth in your business. Combining a sound strategy with best practices in brand management will help ensure that the value of the portfolio, rather than simply the number of brands within it, grows over time.
Six of the ways in which portfolio management at a local level enhances growth are:
• Clear prioritisation of future focus
• Prioritisation by brand and product
• Concentration of spend on priority opportunities, brands and products
• Operational cost savings through simplified business
• Disposal of brand assets which don’t fit clearly within the portfolio
• Gap filling by product development and/or acquisition.
Opportunities
Healthcare systems around the world are undergoing fundamental change, as payors battle with the challenge of increasing demand for healthcare balanced against a need for financial restraint.
The good news is that the focus in many markets is likely to be more on ‘total healthcare’ system efficiency. In the UK, we have started to see the merging of social and healthcare budgets to avoid the potential for savings in one area, being lost as the expenditure is from another budget.
Following the publication of the government’s White Paper, we will see even more extensive changes to the NHS. Service provision and commissioning is being pushed out to primary care or the community. In many markets, as well as non-traditional providers being considered as alternatives to the existing structure; diagnosis, treatment and management pathways will be completely redesigned.
The importance of the various healthcare technology assessment functions will increase, as healthcare systems seek cost savings in the face of both short term and long term pressures.
However, as we have seen recently in the UK with the change in attitude to treatments for Alzheimer’s disease, a more holistic view to disease management will potentially become the norm.
The advent of approaches such as the ‘Joint Working’ initiative could also help the relationship between pharma and the NHS develop. NHS stakeholders are opening up to pharma in an unprecedented way; moving from an adversarial stance to ‘real’ co-operation. There is much common ground which presents the potential for some serious win-wins.
Pharma is acknowledged as having the skills and resources which could help the NHS to reach its objectives. This provides huge opportunities to help shape this new environment. The pharma industry is already seen as a partner in early diagnosis and screening (e.g. cardiovascular disease) and a partner in developing and monitoring adherence to guidelines (e.g. anticoagulant use) as well as providing value added initiatives such as patient education programmes.
Traditionally ‘added value’ has been about providing services which have been hard to link to tangible business performance. Now by realising synergies with our customers and franchises by demonstrating commitment to a therapeutic category, there is real potential for business gain – of course by adding value through education and services, but more importantly in helping to design and provide end-to-end management solutions. For example in the case of the development of a new care pathway, industry provided strategic planning expertise and support by facilitating clinician engagement and developing skills in relevant stakeholder groups.
At a local as opposed to global level we can make the most of the customer interface in managing our franchise. We may also build brand equity within patient and healthcare provider communities which will pay dividends for the existing and, if we take a more medium term view, the future portfolio.
The therapy area franchise
A number of companies have focused their activities in a relatively narrow range of therapeutic categories e.g. Galderma in dermatology and Novo Nordisk in diabetes, thus demonstrating a long term commitment to the management and effective treatment of patients.
This has provided benefits through developing and maintaining longstanding relationships with key stakeholders and developing stronger reputations in their respective areas of focus than some of their competitors.
There is no doubt this has driven product preference where differences are marginal. Better products will always win, but being able to leverage relationships and heritage is a strong defence when there is not a lot to choose between offerings.
However, traditionally this has all been about driving usage and preference but what this new environment allows us to engage with customers in service redesign. If we are ‘trusted’ then we are in a strong position to work with our customers in partnership to build more efficient and effective patient pathways, that could provide benefits to the customer and to established brands through more effective use.
The outcome of the redesign will depend on the customer’s agenda. It may be about cost, it may be about efficiency (and hence cost per treated patient) or it may be focused on helping to develop the new commissioning process, in whatever form it eventually takes.
There has always been a shared agenda in ensuring prescribed products are used effectively. The environment now is much more conducive to working together to achieve that, but on a far broader basis than just prescribing the most cost- effective treatment. We have seen effective examples of this in a number of chronic diseases and long term conditions.
If you have a number of products and expertise in a particular therapy area, you should maximise the benefit from customers’ interactions across the healthcare delivery system to build a true franchise. This can help your customers achieve their goals, and consequently, help you to meet your commercial objectives.
Mature products
An increasing number of companies have realised that the long ‘tail’ of mature and relatively non-promoted products present a significant profit maximisation opportunity.
Medicines management have begun to realise that older drugs ‘tick a lot of boxes’. They are generally cheaper than newer products, and have a strong heritage so any problems are well known and managed accordingly. Physicians trust these brands and are comfortable with how and when to use them, and what to do should they encounter any safety or tolerability issues.
We have long moved away from the view that ‘better is best’. The population approach to the prescribing of statins admirably demonstrates that in some instances and for some situations ‘80% is good enough’. That way more people can be treated for less, improving outcomes across a wider population, which is what modern healthcare systems are all about.
So managing the mature product mix may well appear like traditional portfolio management, but you need to be able to identify where and how we focus.
We are starting to see ‘basket deals’ for drugs i.e., market access being agreed for several drugs at the same time. The following quote from a NHS Medicine Management leader demonstrates that these key purchasers are now willing to go further than that.
“Basketing proposals are welcome if drugs are on the formulary. I would entertain an approach of a discounted basket of drugs which are a key focus for us,” said the PCT procurement lead. “We could in turn partner in maximising cost-effective use of other drugs in the portfolio.”
Pharma can potentially offer a range of cost-effective solutions to financially challenged PCTs (e.g. equalisation deals, franchise, population based). A pharma company could look at helping to promote use of certain drugs in its portfolio to reduce costs elsewhere in the health system (e.g. methotrexate in rheumatoid arthritis rather than the more expensive disease modifying drugs).
Consequently, when it comes to prioritising the medicines in our mature portfolio we will look at their importance (‘low’, ‘strategic’, ‘financially’) and their future (‘under threat’, ‘resilient’, ‘potential upside’) – but we also need to consider the scope for action (‘low’, ‘medium’, ‘high’) in a far wider context.
There is now a ‘scope for action’ far broader than ever before. You need to look at the whole patient care pathway to see if you can meet the customer’s agenda through more active marketing of one or a number of products. There should be a distinct shift away from purely selling commodities, in favour of offering solutions to problems. And not only at the clinician end; you may be able to facilitate moves towards more diagnosis and treatment in the community setting to win large pharmacy deals.
Using the key principles of portfolio management, while considering the value of an ability to create real synergies will provide us with a richer range of options – from ‘strategic imperatives’ to other more ‘opportunistic’ ones.
In conclusion
In the past franchise management at a local level for the most part has involved a product-therapeutic category approach, focusing on driving brand preference and usage for major promoted products.
The healthcare environment, particularly in the UK, is now more conducive to wider ranging involvement of healthcare companies in helping our customers achieve their health provision goals.
When it comes to franchise management, this provides any healthcare company with a wider range of options for establishing and developing a true therapy area franchise centred on our promoted products, where we address the customers wider agenda and achieve both parties objectives.
The mature brand portfolio should not be ignored either. Increasingly customers are looking for cost-effective whole care solutions.
The range of products in that ‘tail’ provides great opportunities to enhance the interaction with key customers and thus drive commercial gains.
Paul Stuart Kregor is director of The MSI Consultancy. He can be contacted at pstuartkregor@msi.co.uk. Alternatively, visit the MSI Consultancy website at www.msi.co.uk.
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