Reaching for the golden rings

Aug/17/2008 07:48

While many believe the pharma industry is in a recession it’s interesting to note that some pharma companies appear to be doing very well while others are still struggling. For example investors seem to be excited about the new Amgen osteoporosis drug on the horizon, even though they have not filed for FDA approval yet. Amgen stock has been climbing despite the news that the FDA has asked them to add stronger warnings on one of their key drugs, Aranesp. Of course Amgen is warning the Street that the sales decline from additional warnings on Aranesp will continue into next quarter but the possibility of a new blockbuster is enough to move the stock upwards.

Meanwhile on the other coast Pfizer has not really recovered from the failure of their replacement for Lipitor and Lilly’s Cymbalta still has not come close to sales of its past blockbuster Prozac. Where are the gold rings and can pharma acquire enough gold rings to sustain current business models or are radical changes needed?

It’s estimated that a many of 95% of new products fail in todays marketplace. Pharma is starting to find this out the hard way even before products are approved and marketed. Good, or bad, data that is released before a drug is approved can mean hundreds of millions of dollars in lost market capitalization. In the past it was easy to come up with a new and improved product to replace aging blockbusters but now payers are asking for head to head clinical studies against generics to determine if new products warrant the additional costs to the healthcare system.

With the increased costs of drug development pharma either has to spend more on R&D, purchase more smaller biotech companies, or limit R&D funding to those products which show clear potential in efficacy and ROI. It’s getting harder and harder to achieve blockbuster status with products and pharma may have to change business models and sell a lot more of smaller market drugs than rely on a blockbuster to fund the organization.

Pfizer, when their replacement cholesterol drug failed, did the right thing and immediately began cutting costs. They ditched the inhaled insulin and started to streamline management layers to make the company more responsive and identify new molecules that could add quickly add to the bottom line. Lilly settled most Zyprexa litigation to put it behind them but they have never bounced back from the loss of Prozac with Cymbalta. I was at Lilly when we lost patent protection on Prozac happened and we were ready to respond with a plan we called Year X in which budgets were slashed across the board. The problem today with such planning is that assumptions made at the time these plans are developed could be outdated by rapid changes within the environment in which we market products.

Where does this leave DTC? Well as this author has written before I believe that DTC managers are going to have to do more with less, a lot MORE with less in fact. Patient segmentation models are going to have to be rethought as audiences become more and more fragmented. TV is becoming more expensive and less effective but is still a great way to build awareness. But does awareness today translate into new Rx’s? New drugs are viewed with skepticism by audiences who are used to bad news about pharma products as they go through additional clinical trials. Judicial Watch, for example, has stated that Gardasil, while approved by the FDA, is being marketed as a whole sale clinical trial. The story on CNN about a girl who got sick from Gardasil only fuels the debate about new drug safety.

based upon the new reality of marketing drugs to a skeptical audience it’s time for DTC managers to change the way they think about DTC ads. Once they do their due diligence and present, and re-present, the need for DTC dollars they are going to have to ensure that every dollar they spend directly goes to drive new Rx’s. This means clear, concise metrics that management can understand without the usual marketing confusion that most pharma executives don’t understand. It also means a focus on compliance. Current customers who drop out of the health care model are a huge loss of revenue that could be prevented if pharma is willing to invest in CRM technology.

For all this to happen though pharma needs to build DTC teams that are knowledgeable with specialities in eMarketing, DTC advertising and CRM programs. These teams are also going to be held accountable for correlations in DTC programs and sales. It’s going to be harder to stand up and say that we achieved our target awareness within the the audience if the sales chart slopes downward. That’s the bottom line now...sales; pharma will continue to add salespeople at the expense of marketing until marketing learns to communicate its value to the organization. It’s a fact that all pharma companies are sales driven organizations that views marketing as “two cocktail limit” people.