Marketing Insights Newsletter

Special Issue: Pharmaceuticals

Marketing Medication

Article by: Christian Neckerman, 101 Magazine (2004)

Consumers are asking their doctors for prescription drugs by name. Pharmacists are recommending generic substitutions for brands doctors prescribe. Reimbursement organizations are encouraging patients to buy over-the-counter drugs instead of prescription medications. These are just a few of the changes that have intensified competition in the pharmaceutical marketplace. In spite of these new influences, and even though the return-on-investment is diminishing, drug makers continue to spend more money on ever-larger sales forces. Here, six industry insiders share their views on how pharmaceutical companies can serve all of their customers more effectively while spending their marketing dollars more wisely.

Q: Physicians, pharmacists, hospitals, managed care organizations and consumers. How would you rank them in terms of their degree of influence in the prescription decision process?

Reiss: It depends on the therapeutic area. For example, if you're talking about lifestyle drugs, then the physician and the customer are equally important. The doctor needs to prescribe, and customers need to come into the office. On the other hand, if you have a product for intensive care or chemotherapy, then physicians in hospitals are very important. Health authorities continue to gain in influence overall, but are most important in highly competitive areas because they decide on reimbursement, so you have to justify your price and prove your product is just as good as others on the market.

Apruzzese: They're all influential but I think a more fundamental question is what constituency is the most important for pharma to focus on. My answer to that is the constituency you make the product for. The industry is in the situation it's in now because pharmaceutical companies forgot who they make product for. They know everything about how the body works, but for years they've ignored the way consumers think.

Capelle-Van Houtte: I think you need to differentiate retail vs. hospitals. Hospital pharmacists and medical directors are more and more important due to budget restrictions. Hospital physicians have less and less power in the equation. In general, this is at the level of the specific hospital, though certain hospitals are merging in Belgium – from 300 ten years ago to a much smaller number today. The central pharmacy is critical. For the consumer market, the rank depends on disease area and product type. In neurology, for example, the specialist is the only one who counts. For vaccines for conditions such as migraines, there's a growing role for the consumers as they get more information from the Internet, magazines and discussion with physicians. The third most important category is a mixture of depression and antibiotics. Here we see a mix of information from the physician plus the consumer. The retail pharmacist has a growing role as a patient counselor.

Q: When it comes to allocating dollars against appropriate target audiences (influencers in the prescription decision), what do you think is the right mix?

Track: It's anticipated that by 2008, close to 50 percent of existing resources will have migrated to the digital world. As new channels of marketing and selling gain acceptance, rigorous analytics and thorough ROI analysis will be key factors in determining the optimal marketing mix. This must be done on a product-byproduct basis as well as on a market-by-market basis. This includes a radical change in the existing sales model. Salespeople will become more of relationship managers and value-added partners to physicians.

Apruzzese: Today, we're spending too heavily on acquisition and not focusing on retention. There's a strong emphasis on new prescriptions. But, adherence drops off significantly within 12 months across all categories, including chemotherapy and chronic medications that will save patients' lives. Up to 60 percent will drop off within a year. Think about any other industry with a churn rate like that. If cable television lost 60 percent of its households every year, it would be a disaster.

Reiss: If you look at new product launches, the most common mistake pharma companies make is they look at the current market and say, "Well, this company in this field spent so much, so, we'll double it or put one-third more." There is no substitute for good research and pilot testing to optimize resource allocation—you need to know your key targets and understand the key strategic imperatives for each group in order to allocate activities to the right people to get the right return. Today, too little attention is paid to sound market research.

Capelle-Van Houtte: We have not yet found the optimum. I don't think there is an optimal mix for all products. It really depends on the players, their role in the market and the decision process. Even for one disease category, an optimal mix would be hard to find. You would have to monitor and control the impact of all promotional initiatives—including sales force effectiveness, advertising, mailing—on an individual basis. All we can monitor is key customers and their potential.

Q: What channels of marketing communication do you think are underutilized? Which could be exploited to greater advantage?

Track: The Internet is re-inventing our relationship with customers globally because it's immediate, boundaryless, and available 24/7. New channels for communicating with customers are also emerging. Progressive pharmaceutical companies increasingly are adopting digital marketing and technology-enabled selling as legitimate channels of communication.

Schenck: The Internet probably is becoming the single, most important channel for consumer CRM. In terms of our professional audiences, the whole area of direct marketing, including response mailings, call center activities and e-mail marketing, offers great opportunities too, for lead management and extra frequency, for instance, when tightly integrated with sales force activities. Reiss: While there are restrictions in what you can do, key opinion leaders (KOLs) are also underutilized by pharmaceutical companies. The key is to treat the KOL relationships as true working relationships—it's not about fun and sponsorships, it's about focusing on science and the advancement of treatments. If we coordinated the development of our agendas, exhibits and symposiums with their medical departments, and focused more on scientific data, clinical trials and results achieved, we could get much more out of them.

Ciarelli: It's not necessarily a channel that's underutilized. We need to increase the overall mix and shift to more direct marketing activities for both health care professionals and consumers. Look at examples in consumer goods. Marketing dollars should be allocated not only to communication activities, but also to discounts and refunds such as Novartis' moneyback guarantee or Pfizer's 7th prescription free.

Capelle-Van Houtte: There are two. The Internet, especially for physician and pharmacist is the first. The Internet is not yet the "automatic reflex" for physician and pharmacist – it's a question of communication and training. We are doing that, but it is still underdeveloped. Scientific meetings between key opinion leaders or guest speakers and local physicians need to be held to teach them how to use the Internet. But these groups are oversolicited with meeting invitations. Direct to consumer advertising is underutilized too. We intend to pursue the Health At Work project with big employers. Here, it's hard to prove ROI and very expensive. The industry is very reliant on public relations DTC, not advertising or direct mail. . It's very hard to justify if you're not first to market in Europe because you cannot use the brand. But DTC is important to try for certain consumer-driven categories.

Q: The pharmaceutical industry is facing the "prisoner's dilemma" when it comes to reducing the size of its sales force. If everyone cooperated and reduced their sales forces, the industry as a whole would benefit. If only one does it, that company is risking share of voice, share of market, etc. What's the solution?

Apruzzese: Someone has to take a leadership role and change it. Whoever does, will have the first-mover advantage.

Schneck: Several middle-sized and smaller companies are scaling back on their general practitioner detailing, in line with their product focus. Other companies are looking at lifetime customer value versus individual product sales. Many companies are putting CRM approaches in place to counter the access-to-physicians issue. The only way we will solve the dilemma is through selective piloting with rigorous metrics, followed by broad implementation and internal communications programs.

Reiss: It's quality not quantity that matters. Sales reps need more training in both scientific and selling skills. A lot of sales people don't know the basics of negotiation or how to talk to the individual doctor's needs. Several reps I know do that, and they have no issue seeing doctors or getting enough time with them

Q: If pharmaceutical companies could start with a clean slate, what would be the ideal approach in today's environment for marketing prescription medication?

Schenck: A stronger integration between sales and marketing, and more targeted marketing and customer support initiatives. Regarding the sales force, hire reps with more distinct skill sets, such as managed-care negotiating skills, and hire relationship managers with key prescribers and opinion leaders, instead of the traditional "super-detailers." Also a greater investment in customer profiling and non-rep interaction channels tailored to the various audiences.

Reiss: Externally, we have to rebuild trust with our customers—this can only be achieved through honesty and transparency. Internally, we need to create an environment with shared responsibility and trust so our people can make better decisions. Also, focus on the marketing basics—research, coordination, continuous tracking and monitoring—and do it right.

Q: Among your competitors, what have you seen that is really innovative? Who will play a lead role in shaping the industry over next five years?

Schenck: In terms of the marketing mix and ROI, we believe we can learn a lot from the leading Fast Moving Consumer Goods players; while in terms of customer focus, we can leverage best practices from companies like Amazon.com, which achieves one of the highest customer satisfaction levels across any industry.

Q: What factors do you feel prevent the industry from changing its marketing activities quickly?

Apruzzese: The first thing you have to have is credibility, and the pharmaceutical industry is starting from behind the goal line. There's a remarkable chasm between the perception of the industry and what it's truly trying to do, which is to improve the quality of life. Over the last seven or eight years, the view of the industry has declined dramatically to a point where it's just barely above tobacco and oil. Some studies show that the public has a higher regard for handgun manufacturers than for pharmaceutical companies. That's a significant problem.

Capelle-Van Houtte: In Europe, growth and mergers of the pharma companies lead to more procedures and internal constraints. It has become less dynamic. Marketers need to know how the market is evolving and be in line with the sales force to provide the right, relevant answers. The sales vs. marketing split is real. Marketing has been in an ivory tower. They need to get into the field.

Ciarelli: One word: success. While declining, the margins are still strong. As long as we are earning a positive ROI on our increasing sales investments, we will not have the sense of urgency to change. Having said that, I do see more drastic changes over the next several years than we've seen in the last ten. We'll see consumer product practices migrate into pharmaceuticals. More consumer branding will become the norm — especially in certain therapeutic areas. More team work and integration across consumer, physician and managed care marketing will be required. Tighter segmentation and targeting will help us focus on those customers we can do well with.