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Pole position

The traditional brand positioning model which drives patient marketing is being squeezed, making structural changes inevitable

f1_car Gone are the days when physician- and patient-led brand marketing was the focus, instead the payer is now king.

On one side are fundamental socio-economic changes. While expenditure on healthcare as a percentage of GDP continues to climb in every country in the OECD (Organisation for Economic Co-operation and Development) and will do so for the foreseeable future, healthcare systems are struggling to cope with the rising financial burden of ageing populations and more expensive treatments. This is resulting in ever greater payer involvement in prescribing decisions. With the emergence of tools such as e-prescribing, the healthcare payer's influence over prescribing decisions is set to increase, rendering direct marketing activity from pharma companies even less effective.

On the other side is the the pharma sector itself. The capability for pharmaceutical companies to innovate seems to have gone missing in their greatest hour of need. While much of the M&A activity designed to buy-in capabilities and innovation will provide a short-term solution, it is questionable whether large corporate pharmaceutical companies can really foster the kind of biotech innovative entrepreneurship they need in the long term. The consequence is an ever more crowded marketplace with poorly differentiated products. This is made worse by the progressive invasion of generic pharmaceuticals, and the narrowing gap between branded and generic product capabilities.

While this may, as some have argued, lead to the end of the current sales model, what will really need to change is the approach to building and demonstrating true value to physicians and payers.

The new challenge
So the real challenge for pharma companies becomes how to build and demonstrate value for their treatments in the eyes of payers and physicians? This will be critical for market access, but also increasingly throughout the treatment's lifecycle.

Historically, pharma has focused on the financial value of treatments and their price based on a critical need to recoup significant R&D investment over the product's lifetime. However, pricing often bears little resemblance to a treatment's true value. Often the approach taken means prices sought do not take account of the functional and emotional benefits to the patient, or whether there are real improvements in patient outcomes. Instead, prices and value are based on comparisons with those treatments that already exist. This begs the question for the payer: is it worth it?

Unsurprisingly, a number of markets like the UK have created market access systems (eg NICE) based on the health economic benefit a treatment offers. Often this means expressing the benefit of a treatment in pure economic terms so that payers can determine value from the perspective of the patient, healthcare system and for society as a whole.

Pharmaceutical companies have recognised that health economic assessments are likely to become more prevalent, particularly if the newly elected Obama government takes steps to manage the struggling US healthcare system and spiralling drugs budget. Any change in the US would be a watershed moment given the US is the world's biggest and most profitable drug market, accounting for nearly half of sales at companies like GlaxoSmithKline (GSK) and AstraZeneca (Evening Standard February 27, 2009).

The real challenge for the pharma marketing model is to build a value story for treatments. This must go above and beyond health economics to establish the emotional and lifestyle benefits, as well as the pure functional or clinical value of a treatment to patients in the eyes of physicians and, more importantly, payers.

In addition to this, there is an increasing trend for payer groups to monitor product utilisation following launch, placing the onus on treatments to continue to prove their worth. Any new form of value definition will, therefore, need to be dynamic and supported throughout both the R&D process and the lifecycle of the treatment.

We are moving towards a world where pharma products will have to behave more, and not less, like consumer brands. This is despite the obvious difference that value for consumer brands is linked directly to user willingness to pay for that product. In pharma, separation of purchaser (payer) and user (patient, physician) makes this more difficult. It is, therefore, even more critical that pharmaceutical companies express the value of their treatments in a way that resonates equally well with both payers and physicians. Pharma brands will need to demonstrate the value of their products through differentiated brand positioning, similar to how consumer brands have to demonstrate value to both the consumer and the buyers of large grocery and retail chains.

Brand positioning
For pharma, the ultimate audience is not the patient (although there is direct to consumer advertising in the US and New Zealand), however, the patient will need to remain at the core of any brand in order to communicate and defend a brand's positioning to the payer and physician.

Many pharmaceutical companies will claim that they have already embraced brand positioning yet most brand positioning in the sector is generally expressed in terms of product features or functional benefits. In future, if marketing departments want to deliver compelling positioning that stands out, they will have to apply deeper thinking on where the real point of difference lies for their brand and how such product features translate into real patient benefits.

A key element for successful consumer-style positioning will be how each brand defines the patient population that will benefit from the treatment. In pharma, this target has typically been defined as broadly as possible and in pure clinical terms; despite the fact that clear differences in value exist across patient groups. While relatively simple to quantify, such definitions are inflexible and immediately hamstring any positioning by forcing the new treatment to demonstrate its value within the current constraints of the market. What has been missing is the deep patient and physician insights to help derive the core functional and/or emotional benefit from which compelling single-minded positioning arguments can be developed.

By using these deep insights to understand the different needs of discrete patient groups, it is possible to identify opportunities outside pure clinical definitions where a brand can demonstrate greater relevance and value by meeting better the functional and emotional needs of patients.

In addition to establishing a clear value story for payers, this approach also facilitates investment to establish the positioning of treatments as early as possible in their development (post phase 1 trials). This is as the positioning becomes less reliant on individual product claims and clinical trial outputs. In addition, by grounding the positioning in deep patient insight and delivering of discrete needs, it is easier to ensure consistency throughout the business and every communications channel by adopting an approach that focuses on developing single-minded positioning ideas and capturing them in a way that means they can be communicated and adopted broadly.

A rethink in how pharmaceuticals demonstrate value to payers through brand positioning will allow pharmaceutical companies to invest better in medicines that the market will value in the future.

Ultimately, the marketing function will need to take more of a lead to identify market opportunities based on the patient's functional and emotional needs and to help build the R&D development framework. Based on an assessment of unmet needs in the market, companies can then define an ideal target product profile that supports a compelling and single-minded positioning. The aim of the clinical development will then be to build support for the target product profile and credibility for the eventual product positioning. Finally, as development progresses, this clear specification of what will be valued by the market enables a clear value assessment to be made at each stage. This allows development to be halted sooner rather than later if needs cannot be met, thus limiting wasted investment.

Payer as king
Does this mean a change in direction or a change in emphasis? In reality the question is moot. The pharmaceutical sector is facing a new reality in which the payers' role will be critical and will need to be embraced rather than resisted. No longer can payers be treated as roadblocks to be overcome in order to gain market access. Instead, to compete in this new environment effectively, companies will need to pay more attention to their brand building process in conjunction with their health economic arguments to demonstrate the true value of their treatments to payers through compelling and single-minded positionings.

The Author
Richard Bates is senior consultant at Clear
To comment on this article, email pm@pmlive.com

2nd June 2009

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