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Rich pickings

Small pharma companies have to live on their wits to compete, making the most of what big pharma leaves behind

As major pharmaceutical firms merge and consolidation continues, the marketplace constantly evolves for marketers in the healthcare sector. Clearly, being an outstanding marketer at a top 10 pharmaceutical company requires a specialised set of skills and aptitiudes, but what about the marketers who earn their living working for the smaller players?

Competing against the huge resources and budgets of the global players isn't easy and smaller companies need to be smarter in their approach.

The pharma industry needs its smaller players. They can fill in the commercial niches that larger firms choose to ignore. They are nimble, can make decisions quickly, have energy and enthusiasm and can be innovative and creative in a way that big companies can't. In short, they possess the dynamics that encourage innovation in the marketplace.

Large players, by contrast, tend to be more structured and controlled in a way that encourages development and marketing activities aimed at big-market opportunities.

However, they are sometimes hindered by a level of bureaucracy that can stifle innovation and limit good ideas and opportunities for entrepreneurial types.

Indeed, some big companies are trying to avoid this by creating the impression of a small company environment. A few years ago, GlaxoSmithKline divided its discovery research among small, internally competitive centres of excellence to try to replicate the `small company feel'. More recently, it has broadened this intiative, throwing open its doors to potential R&D partners as it looks to establish drug discovery tie ups with small- to medium-sized pharma and biotech firms, and academic partners.

Which strategies are most effective for smaller pharma companies and how can they ensure that their products and services are taken up?

Marketers at smaller companies can often be more creative and responsive than are their counterparts at larger firms - it will usually be easier to react quickly to market developments, news stories and the like. Yet, because resources will be that much tighter, and the marketing budget will be proportionally smaller, it is important that marketers target their resources effectively.

Market intelligence will play a part, but an understanding of the NHS' procurement processes, the different levels of sophistication in terms of managing and delivering medicines and indeed the various formal and informal networks within the NHS will enable pharma marketers to focus their efforts much more effectively.


Financial threshold
Analysts put the threshold at which big pharmaceutical companies will support new drugs at about $600m a year in sales. This leaves open huge therapeutic and diagnostic opportunities for smaller companies that are happy to work with and develop treatments that are worth much less per annum.

Niche markets present small companies with great opportunities free from fear of competition from big pharma players. Opportunities for smaller pharmaceutical companies to build portfolios of niche medicines are opening up as a result of the pursuit of blockbuster drugs by the major multi-national pharmaceutical companies.

Major pharmaceutical companies have invested their time in developing blockbuster drugs and have not put as much sales and marketing effort behind smaller, often already existing products.

A good example is the acquisition last year by King Pharmaceuticals of the US rights to two medicines, and a salesforce of 375, from the Elan Corporation for $750m.

The two medicines - Sonata, a hypnotic, and Skelaxin, a 40-year-old muscle relaxant - had combined sales of $238m in the US in 2002.

Shire Pharmaceuticals made a similar move when it paid $31m in 2004 to acquire the patent rights to Fosrenol, which reduces high blood phosphate levels in end-stage renal failure. Such acquisitions enable smaller and middle-market pharma companies to build a portfolio of established drugs and to generate sufficient sales to fund new drug research.

In short, there is now a large range of products which are no longer of interest to big pharma. Those drugs simply fall below their threshold. However, the smaller players should be more than comfortable with drugs generating $200m to $400m a year.

Intelligent thinking
The trick to competing successfully against the bigger firms is to work smarter. Smaller players will never be able to go head-to-head with major pharmas - nor should they want to - but they can use size to their advantage and work intelligently to exploit opportunities.

Accurate market intelligence is crucial to the success of this type of approach, and pharmas need to look to use the advanced tools and information now available to create an integrated
intelligence process.

A lack of information is not generally the problem - indeed, pharma companies are typically drowning in raw customer data. The key is to convert data into useable intelligence that can improve strategic and tactical decision-making.

When it comes to creating opportunities for reps to find the right channels into the NHS, one important strategy could be to use business intelligence to start identifying those Primary Care Organisations (PCOs) that don't have a strong relationship with GPs in terms of prescribing. If the PCO has a strong commitment to formulary, then it can be much harder to get a new drug
on the list.

NHS Networks
Furthermore, in the context of marketing effectively to the NHS, an understanding of how internal structures and processes operate, and their likely impact on pharma marketing, can be a real boost for smaller pharmas.

One of the ways to mitigate the relative shortage of strategic input is for PCOs to collaborate with neighbouring PCOs and other NHS organisations as part of a network where learning, strategic development etcÖ can all be shared between the various elements of the NHS.

Such networks should not be viewed as statutory organisations; rather, they are networks that rely on local statutory NHS bodies for support. Networks are at different stages of development around the country and in some areas, effective networks are starting to exert a powerful influence on local services.

The Department of Health sees a key role for these organisations in an NHS where resources, responsibility and decision-making are devolved increasingly to the frontline. This means that networks can provide a powerful forum for strategic planning and have real influence on commissioning.


Measuring results
It's important to remember that, as with all marketing initiatives, individual results must be reviewed in the context of all of the factors that may have contributed to the success - or failure - of the campaign. Feedback from the various campaigns, and how much the marketing budget has contributed to the sales process in terms of conversions, should enable the marketing director to refine the company's marketing process to deliver better results.

A marketing director at a small company could feasibly use business intelligence to divide the company's marketing team into two divisions, for example, macro and micro. The macro division will focus on major market trends such as competitive drugs, clinical positioning and lifecycle concerns. The micro division might look at individual demographics: formularies, PCOs, and so on. This approach should lead to improved messaging and better coordinated campaigns with salesforce capabilities, which will lead to improved sales performance.

Equally, homing in on specific markets - and gaining an in-depth understanding of specific therapy areas - is an intelligent tactic for marketers at smaller pharmas. Marketing and selling to specific therapy areas is a wise approach for small pharmas, as it enables them to build a reputation in a certain disease area and to focus their comparatively limited resources on a single field.

There are significant challenges when it comes to marketing for smaller pharmas but for the marketer, it's a challenging assignment, but one that can pay dividends if it's done right.

How big is big? - a PM obsevation

When people talk about `small pharma' and `big pharma', what are they actually referring to? Aside from the clear measures of physcial size - numbers of employees, products, offices, global reach, budgets, profits etcÖ - some would argue that the real `size' of a company lies more in its thinking. It lies in the way that the employees feel when they come to the office, in the way they execute their work, in the way that managers interact with junior staff, the manner in which telephone enquiries are dealt with, and of course the way that the company handles itself in the
business arena. There are no two distinct camps of big and small, but more of a difference in perception, as it's all relative.

Do you ever think that you can actually `feel' the size of a company, just by walking into the reception area? A 30ft high ceiling, video phone technology, lots of tinted glass and seemingly implausible water features come at a price. Generally speaking, a big price requires a big wallet, which is filled through big sales in a big market. That's a big pharma reception area.

But what does a big, luxuriant building say that a well-used - if much smaller - home sofa, fishtank-kitted out building right in the heart of the city does not?

Quirky observations aside, being `small' means that you may have the ways and means to jump on good ideas and inject more innovative and avantgarde thinking into your business processes.

That's not to say that big pharma is slow and awkward while small pharma scampers about like a whippet. Indeed each group appears to want to reflect the best bits about the other - big pharmas try to emulate the `small feel' so that customers feel valued and employees feel able to be creative and use that `blue sky' to its best, while small pharmas can impersonate the comfortable and well-practised approach to deal-making to try to re-create the sense of stability and `you're in good hands', felt at the big pharmas.

The Author
Duncan Alexander is managing director of Health Direction

2nd September 2008


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