Pharmaceuticals and Life Sciences Pharma 2020: Marketing the future Which path will you take? Table of contents Previous publications in this series include: Pharmaceuticals Pharmaceuticals and Life Sciences Pharma 2020: The vision Pharma 2020: Virtual R&D Which path will you take?* Which path will you take? *connectedthinking Pharma 2020: The vision # Pharma 2020: Virtual R&D 1 Published in June 2007 this paper highlights a number of This report published in June 2008 explores opportunities issues that will have a major bearing on the industry over to improve the R&D process. It proposed that new the next 11 years. The publication outlines the changes we technologies will enable the adoption of virtual R&D; and believe will best help pharmaceutical companies realise the by operating in a more connected world the industry, in potential the future holds to enhance the value they provide collaboration with researchers, governments, healthcare to shareholders and society alike. payers and providers, can address the changing needs of society more effectively. “Pharma 2020: Marketing the future” is the third in this series of papers on the future of the pharmaceutical industry published by PricewaterhouseCoopers. It discusses the key forces reshaping the pharmaceutical marketplace, including the growing power of healthcare payers, providers and patients, and the changes required to create a marketing and sales model that is fit for the 21st century. These changes will enable the industry to market and sell its products more cost-effectively, to create new opportunities and to generate greater customer loyalty across the healthcare spectrum. Table of contents Introduction 2 What will the healthcare landscape look like in 2020? 4 Recognising the interdependence of the pharmaceutical and healthcare value chains 8 Investing in the development of medicines the market wants to buy 10 Forming a web of alliances to offer supporting services 12 Developing a plan for marketing and selling specialist therapies 13 Creating a culture that is suitable for marketing specialist healthcare packages 15 Managing multi-country launches and live licensing 18 Adopting a much more flexible approach to pricing 18 Creating a marketing and sales function that is fit for the future 19 Conclusion 22 Pharma 2020: Marketing the future Introduction trends reshaping the pharmaceutical that, between 1996 and 2005, total marketplace).1 All these challenges real spending on pharmaceutical The social, demographic and economic have major ramifications for the way in promotions rose from US$11.4 billion to US$29.9 billion in the US (the only context in which the pharmaceutical which Pharma markets and sells the country for which expenditure on all industry (Pharma) operates is changing medicines it develops – the subject on which we shall focus here. major marketing and sales activities dramatically, as we noted in “Pharma is available).2 Another study suggests 2020: The vision”, the White Paper The industry has traditionally relied on that the true figure (including meetings PricewaterhouseCoopers* published in aggressive marketing to promote its and e-promotions) is closer to US$57.5 June 2007 (see sidebar, Seven major products. One recent study estimates billion in real terms.3 Seven major trends reshaping the pharmaceutical marketplace The pharmaceutical marketplace is changing dramatically, with huge implications for the industry as a whole. We have identified seven major socio-economic trends. The burden of chronic disease is performance of different medicines. where demand for medicines is likely soaring. The prevalence of chronic Widespread adoption of electronic to grow most rapidly over the next 13 diseases like diabetes is growing medical records will give them the years, are highly varied. Developing everywhere. As greater longevity forces outcomes data they need to determine countries have very different clinical and many countries to lift the retirement age, best medical practice, discontinue economic characteristics, healthcare more people will still be working at the products that are more expensive or less systems and attitudes towards the point at which these diseases start. The effective than comparable therapies and protection of intellectual property. Any social and economic value of treatments pay for treatments based on the outcomes company that wants to serve these for chronic diseases will rise accordingly, they deliver. So Pharma will have to prove markets successfully will therefore have but Pharma will have to reduce its that its medicines really work, provide to devise strategies that are tailored to prices and rely on volume sales of such value for money and are better than their individual needs. products because many countries will alternative forms of intervention. Many governments are beginning otherwise be unable to afford them. The boundaries between different to focus on prevention rather than Healthcare policy-makers and forms of healthcare are blurring. The treatment, although they are not yet payers are increasingly mandating primary-care sector is expanding as investing very much in pre-emptive or influencing what doctors can clinical advances render previously fatal measures. This change of emphasis prescribe. As treatment protocols diseases chronic. The self-medication will enable Pharma to enter the realm replace individual prescribing decisions, sector is also increasing as more of health management. But if it is to do Pharma’s target audience is also prescription products are switched to so, it will have to rebuild its image, since becoming more consolidated and more over-the-counter status. The needs healthcare professionals and patients powerful, with profound implications of patients are changing accordingly. will not trust the industry to provide for its sales and marketing model. Where treatment is migrating from the such services unless they are sure it has The industry will have to work much doctor to ancillary care or self-care, their best interests at heart. harder for its dollars, collaborate with patients will require more comprehensive The regulators are becoming more healthcare payers and providers, and information. Where treatment is risk-averse. The leading national and improve patient compliance. migrating from the hospital to the multinational agencies have become primary-care sector, patients will require Pay-for-performance is on the rise. much more cautious about approving new services such as home delivery. A growing number of healthcare payers truly innovative medicines, in the wake are measuring the pharmacoeconomic The markets of the developing world, of problems with medicines like Vioxx. *‘PricewaterhouseCoopers’ refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. 2 PricewaterhouseCoopers Much of this increase in spending has Too many cooks spoil the broth gone on the expansion of the sales force. However, many of the industry’s Between 1996 and 2005, the number of US sales representatives nearly doubled biggest markets are now saturated with to 100,000, although the number of practising physicians rose by just 26%. The sales representatives, and its selling market is getting very crowded in other countries, too. In a recent poll of British techniques are becoming increasingly general practitioners, respondents reported receiving an average of four visits ineffective (see sidebar, Too many a month and five promotional mailings a week. Similarly, one Malaysian doctor cooks spoil the broth).4 participating in a study of promotional practices in emerging countries was approached by 16 multinationals and nine local generics companies within a five- Hence the fact that returns on detailing week time span. (sales visits to doctors) have begun to decline in the developed world. The battle for market share has triggered considerable alarm. Some 20% of US Between 2004 and 2005, there was a and British doctors now refuse to see any sales representatives. The regulations 23% drop in dollar growth per detail in governing the behaviour of sales representatives are also getting tougher. Various the US, although detailing still accounts US states have passed laws requiring pharmaceutical companies to report all for more than half the market share gifts or payments to healthcare professionals exceeding $25, while Australia has new brands win during their first year of banned pharmaceutical companies from providing doctors with personal gifts, life. The picture is rather more varied in entertainment or lavish hospitality. Western Europe, but detailing plays a Several industry trade groups have likewise introduced new codes of practice much smaller role in stimulating sales in – and they are actively enforcing the rules. The Prescription Medicines Code of 5 these countries. Practice Authority (PMCPA), which administers the code of practice laid down by Conversely, detailing is still very the Association of the British Pharmaceutical Industry, is one such instance. The important in many developing PMCPA “names and shames” the most serious offenders, by reprimanding them nations. In China, for example, nearly publicly and publicising the violations they have committed in advertisements in three-quarters of the information the medical and pharmaceutical press. doctors receive about new medicines comes from meetings with sales promotional” information.9 And to US advertising and French-speaking representatives and conferences.6