The healthcare landscape across the world is in quite a multi-polar state at the moment. What this means is that globally there isn’t a single trend that dominates the sector. In the developed world, the economic slump pushed governments to implement drastic measures to control healthcare costs. This has had a significant impact on pharmaceutical companies as they see more of their portfolio hemorrhage value as prices fall around the world. This development opened up avenues of opportunities for generic players, many from India as well as a few global ones as well.
What I find very interesting in this geography is that on one hand, governments increasingly became picky about supporting high priced patented products that bring only incremental value compared to off-patent products in the same category. On the other, they opened up their coffers to products that solve niche problems and unmet needs. It is probably a sign of the economic revival in the Western world, but this doesn’t seem like a balanced approach if the objective is to manage rising healthcare costs!
In the developing world, two trends are noticeable – the increasing acceptance of universal health care or the provision of health care by the state and the growing willingness of governments to protect their domestic industries against the vagaries of multi-national companies.
While the supply chain is more consolidated in the Americas and in the UK, pharmacies in the rest of Europe are quite independent as governments ensure margins and profits to pharmacists in exchange for active dispensing of generic drugs. There is a likelihood of the supply chain consolidating in the developing world as margins are threatened due to aggressive government policies.
As you may have noticed, a common thread here is the dominant role of the government in providing healthcare extends across the world and is likely to come to India soon enough. It’s important for the domestic industry to quickly learn and adapt from other markets where it has happened. These are more supply-side levers.
One the demand side, in the developed world, we see the emergence of niche products and newer therapies from smaller and more agile companies. The larger ones view these smaller players with interest. Big companies with barren research pipelines are actively seeking out smaller ones with more productive and differentiated assets. This might lead to some consolidation in the industry.
The void in healthcare from Big Pharma’s inability to look ‘beyond the pill’ is rapidly being filled up by either non-traditional players (large companies from technology, telecommunications, data analysis etc. who are diversifying rapidly into healthcare) and nimble start-ups with amazingly creative ideas to service unmet needs of customers.
Big Pharma seems content at the moment to wait and watch, probably with the intention of gobbling up the start-ups if their services gain acceptance. Pfizer buying a gene-therapy company and GSK collaborating with Alphabet (Google’s parent company) on bio-electronics, points to this mushrooming into a trend sooner than later.
Successful pharma/devices companies
While the merit of the products and pipelines helps analysts bet big on some firms than others, almost all of them define success by market capitalization, share price and dividends paid out to investors. These are hard metrics and easy to track and therefore gain prominence over softer ones like patient centricity, customer satisfaction and lives saved. Whether the softer ones should be considered as lag measures instead of as lead measures to measure success is as yet a debate that hasn’t surfaced. In the absence of that however, the most successful companies are the ones with sometimes the better product and more often the deeper pockets.
This is not a rant, but is relevant as the definition of success in pharma is rapidly changing. If you look at the Forbes ranking for the best (not successful) companies, very few big pharma companies feature in the top 10. You have companies like Celgene, Biogen Idec and Gilead on that list ahead of Pfizer, Novartis, J&J and Merck. So the really good companies are focusing on bringing in newer therapies to address unmet needs and niche disease areas. This not only allows them to dominate the market, but also charge a significant premium for those differentiated products. It seems pharma’s bet on biologics paid off after all!
The same is true in the medical devices area, as newer technology platforms are built with more innovative channels of access (eg: wearable devices working over the internet of things). Some of the larger companies are bringing in more focus to therapy areas that they are strong in and thus creating better and more efficacious products to better serve those patient populations.
Some of the better companies are also actively evaluating customer behavior changes and have realized that using a single communication channel is probably not enough and leads to unpleasantness over access to physicians. Adoption of multiple channels deploying digital technology to engage with customers is on the rise. Pfizer piloted virtual clinical trials a few years ago while Merck took an entire medical conference online and created a virtual experience for physicians to closely duplicate the feeling of being physically present at the venue.
What is urgently needed is a disruption of the current supply chain structure which is too expensive. As pharma faces pricing pressure across the world, innovation in this area will be explored. Also required urgently is pharma’s adoption of big data and predictive modeling techniques. Some start-ups in the healthcare arena are creating solutions that will allow companies to predict irregular patient compliance, matching patient genome types to the best suited medicine to increase efficacy etc. Hospitals, insurance companies and other payers in the developed world work with big data solutions to predict worsening of health outcomes, outbreak of epidemics etc. Pharma urgently needs to get onboard.
Pharma Marketing in India
India is a very rare market where the importance of branding and marketing continues despite the high degree of commoditization. Indian companies have also increased dependence on overseas revenues. However if companies were to focus on the Indian market alone, marketers must probably be aware of the winds of change that will circle the land if the government implements certain policies. While pricing pressures continue to challenge the industry, they definitely do not spell its doom as is often touted by over-enthusiastic media persons.
However, if the government decides to play a larger role in providing healthcare through its UHC implementation plan, attracts investments actively in the sector to build infrastructure in semi-urban and rural areas, becomes the biggest buyer of drugs and devices etc., will the industry be caught unawares? Are pharma companies still training large sales forces to influence physicians while in a few years they may cease to be the decision makers? Are companies concerned enough about building key account management capabilities to tackle such a development? Are these companies engaging enough with pharmacists and the trade channels to build relationships that will stand them in good stead as decision making power accrues to these stakeholders? Should branding and marketing be targeted only to doctors? Why is corporate branding so underachieved in India? If the govt asks physicians to prescribe only INN names and pharmacists have the power to influence brand choice and patients become more empowered to choose a brand, will the current investments in marketing, training and deployment suddenly be found wanting? The pharma business model didn’t change in the last four decades. That doesn’t mean that it won’t change over the next four years!
Marketing is by definition, a tightly integrated effort to discover, create, arouse and satisfy customer needs. This essentially means that the marketer must have an acute sense of customer behavior and must adapt accordingly to satisfy the needs of that customer. In our line of business, some of our customers (physicians) need just the right information at just the right time; some others (pharmacists) need just the right product at just the right time while even others (patients) need just the right information, support and possibly some reminding. Pharma marketing strategies in India today, do little to address these needs, much less satisfy them. As the market dynamics change due to macroeconomic and policy changes, each of these customer types will undergo significant changes in deciding power. Marketing needs to be ahead of the curve to be prepared. Unfortunately, pharma marketing today has a disproportionate focus on physicians while all but ignoring the other customer groups. This must change.