Continuous Improvement or Insanity?

There has been enough said about the pharmaceutical industry’s business model having run its course and the need for companies to ‘transform’ the way they do business. Despite this, at industry conferences that I attended last month, it surprised me to see how few executives agreed.

I gathered from discussions that not many have been able to fathom where exactly in the scheme of things is the so-called transformation required. To my mind, there are some opportunities that the industry seems to have missed.

New product launches still define a company’s growth plan

India is a predominantly generic market with every category as commoditized as the next. In spite of this it is peculiar that companies continues to focus on products and rarely on establishing a sustainable difference that can help it break away from the pack.

While products (medicines) undoubtedly remain the mainstay of revenue, Indian companies did not diversify into services to augment their domination of therapeutic categories (through comprehensive portfolio spreads). With new products coming few and far between, Indian companies could have transferred existing equity into the services domain to create robust cash flows from “beyond the pill”.

Yet, nobody tried to redefine the term ‘product’ to mean anything beyond medicines.

We still obsess about visual aids, in-clinic detailing and call averages

Senior executives are unanimous in their opinion that the dynamics of the business have changed. The competition is fiercer, the customers are smarter, the choices they have are many and brand loyalty is a thing of the past. “Things are not the same as they were 30 years ago”, is a common refrain. And yet companies choose to operate in the changed environment in the same manner they did 30 years ago and expect different results. Albert Einstein called it insanity. Pharma calls it continuous improvement.

It is intuitive that if products define our success, selling them successfully to the doctors who prescribe it is a key requirement. Pharma marketing is about two things – information dissemination and relationship building. It is clear that customers have adopted non-traditional ways and means to seek information and build and share relationships. Then, why does the industry still insist on continuously improving its traditional methods?

Channel partners continue to be important only at the end of the month

Rarely have top executives engaged with channel partners to learn and adapt to the changed dynamic and customer profile of today. The business no longer has fixed demand patterns. This makes accurate forecasting a challenge. It is assumed that with FDI opening up in the sector, organized chains will dominate the distribution pathway as has been seen elsewhere in the emerging world. This throws up demands for service levels that are agile and cost-effective. Every partner will demand customization in packing, SKUs and delivery schedules. Pharma must realize that developing a nimble supply chain may soon be necessary to merely survive and not a strategic capability.

Flexible prices are still alien to us

We all know how important the pricing of our products are. The issue is when the only discussion that we have with our customers is on how we are a few paise less than the competitor. While discussing pharmacoeconomic discussions may be partially relevant in a commoditized industry, not one pharma company has explored point-of-sales messaging to patients to explain the importance of pricing.

If bags of chips in supermarkets can contain sliver-thin LED screens on their packets to explain the calorific content and play advertisements, why can’t pharma products use similar technology to carry corporate advertisements, patient-specific messages, KOL and patient testimonials or explain MOA of the product? Of course these will have to be worked out to pass regulatory strictures but imagine the value, trust and credibility that the company can create with the patient by doing so.

Why hasn’t the industry thought of variable pricing based on demand (capping it at govt mandated prices)? Just as soft-drink vending machines adjust prices based on the length of the queue of customers or the crowd around the machine, why can’t medicine prices fluctuate like the prices of airline and movie tickets based on demand?

The fact that this may sound incredulous and like science-fiction to many may vindicate my case that pharma has missed valuable opportunities to think beyond the pill. Senior leaders of the industry must put their heads together and think of disruptive ways to transform a tired-old business model that has shown signs of creaking to a halt. If not, the insanity of throwing more good money behind bad will continue.

8 thoughts on “Continuous Improvement or Insanity?

  1. “Thinking beyond the pill” must become an imperative in every day life.

    There are plenty of concepts and ideas around. It seems that in this industry still “everyone is doing what everyone else does!”

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  2. Salil….. very well scripted and reflective of the myopic view of the industry as it stands today. The time is not far when…..survival would depend on innovation and raising value for the expecting customer.

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  3. If only the guys right at the top knew the ropes! Apologies Sir, the show is run by a guy who doesn’t really know what his people do right down there, nor is he/she capable of doing it. Forget the head, even Business Unit heads come straight out of schools or with baggage from vastly different theaters.The un written yet oft repeated dictum is keep a lid on costs ( only down below!).First put all who run the show thru the paces right at the bottom, incognito ,for four consecutive quarters . That would be their greatest learning!

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    1. I agree that business heads and other senior executives must be more in touch with the grassroots. However, what I’m implying here is a need for an “out-of-box” view of the business. One tends to get lost in the details sometimes and fails to read emerging trends. As a result, they miss the bus. When senior executives wonder about the model and question the efficiency and effectiveness of it, it surprises me that they persist with doing the same thing. IMHO, the root cause is not a disconnect with the grassroots, but the unforgiving investor. Unfortunately, the industry misses having a gargantuan leader like Jack Welch. In case you’re interested, I’d like to draw your attention to an early post here http://salilkallianpur.wordpress.com/2007/05/28/10/

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  4. 30 years ago it was an attractive job to join as an MR and go up the ladder and the growth prospects were huge both within pharma and outside(having got trained as a pharma guy). More than that, engaging in competition with better skilled people and a good pool of professionals of Pharma, one grew not only professionally with designation, but with everything pay package, personal growth, prestige etc…so it was a good choice to make it as a career. 30 years ago, the good choices were becoming MR(read as sales job), bank probationary officer or becoming a professional in qualification and practice. Today it is not so. The options are boundless. The market is global. The options today for a better job and a career exists. Pharma stands nowhere near and against those options. When pharma has not taken stock of these and have not made the jobs attractive by doing innovative approaches and insist on their models and call it “continuous improvement”(I like this in your post) the result is what we see. Having said all these, I am hopeful and believe it is still not too late. Pharma has a huge potential in a place like ours. May be it is a good time now to start the second cycle of “Pharma attractiveness”. Let us hope that it happens sooner than later.

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