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Successful positioning

A compelling payer value proposition must integrate with other marketing principles and align with the agendas of proposed target segments

Three directional compassesLike most specialist areas, marketing – and especially pharma marketing – has its fair share of jargon. While at times this is a useful shorthand, too often such phrases are used with little understanding of their true meaning and implications.

One such phrase is 'value proposition'. Exactly what a marketer means when he/she uses the phrase is open to debate, and there are probably as many definitions as there are marketing professionals using it.

Yet, understanding a brand's 'value proposition' has never been more important for pharma. It's true to say that having a compelling payer value proposition (PVP) is no longer optional, it is a prerequisite for survival. If you do not have a proposition that justifies your price, health technology assessors such as NICE will challenge you. What's more, if you do not have a compelling proposition to assess willingness to pay for your product, your pricing and reimbursement strategy will be leaving money on the table.

So how do you turn evidence into value? How do you create a compelling value proposition that enables you to secure a higher price and full reimbursement? How do you respond to HTA challenges and, last but not least, how do you refine the core PVP to reflect local needs and accelerate take-up?

What is the value proposition?
In 2007, the Office of Fair Trading (OFT) made the following recommendation: "We advocate a value-based approach to pricing, where drug prices reflect the clinical and therapeutic value to patients and the broader NHS." Some pharma marketers interpreted this to mean that the value proposition is about medical effects, rather than being about communicating real value.

Because of this, a value proposition is seen by many marketers as a series of brand-specific messages instead of the actual value that it represents to the customer. We should, however, be referring to the 'total value' that a brand represents, including potential cost savings and/or benefits. It's about leveraging all the dimensions of value, not just a proposition that focuses on the functional clinical attributes.

In the current healthcare environment, the three traditional basics of safety, efficacy and tolerability are seen as the minimum requirement to obtain regulatory approval and a product licence, so they are likely to be seen as a given by key stakeholders rather than a compelling reason to use a particular product. It is the additional value within a particular brand that provides the compelling reason and which should constitute the core of the PVP.

What purpose does it serve?
The OFT quote above demonstrates what the value proposition needs to do and that is to appreciate what the clinical and therapeutic value is to patients and to the broader NHS. In the UK, just as in almost all major markets, the rising cost of healthcare is an important political and social issue and there is not a healthcare system in the world that is not looking to manage its budgets better.

For payers, there is a clear circle to be squared here. They must, on the one hand, meet the need to contain costs and stay within ever-tighter budgets while, on the other hand, managing the availability of new treatments and technologies. Hence, the change in emphasis from a 'profit and price control' approach to one based on value to patients and to the healthcare system itself.

How payers perceive value, therefore, becomes of paramount importance. If, as a pharma marketer, you fail to understand this, then your value proposition will be badly thought through. A robust PVP is a must-have for pricing and reimbursement and for securing local formulary listings.

Developing a value proposition
The starting point of any value proposition needs to be establishing who the relevant stakeholders are for the outcome you are trying to achieve. You need to be aware that this will vary over the lifecycle of the brand. At launch, you will be concentrating on stakeholders who are key to gaining market access, reimbursement and funding, and you need to weight these stakeholders by their relative importance to the desired outcome.

So, if the UK is being used as the first point of entry into Europe for a new brand, and as a subsequent reference point for prices in other regions, you would put a relatively high weighting on NICE, Scottish Medicines Consortium, etc. Alternatively, if the product is already on formulary and reimbursed in the market, but is coming under pressure because of pending local budget restrictions, you would focus more on hospital budget-holders or PCT advisers.


A robust payer value proposition serves to:

• Secure appropriate pricing and reimbursement and local formulary listings
• Support continued funding by payers post-launch
• Ensure that payers, prescribers and key decision makers understand the situation or setting in which the brand offers value
• Accelerate the time to peak year sales as a consequence of faster and broader product uptake post-launch
• Maximise the overall commercial value of the medicines (increasing the area under the sales curve)


A core value proposition builds around:

• Burden of disease for the target patient segments
• The current treatment challenge and unmet need
• Supporting evidence built around the unique value(s) the product has and the overall package
• The value of solving the problem to the stakeholder, in terms of his/her foundation needs and values
• How your brand provides a valuable solution to the problem (using the 'value dimensions')


The next step is to ensure the value proposition is aligned to the marketing segmentation model and proposed target segments, which should also include key stakeholder segments. Think of the value proposition as a key component of the overarching brand umbrella and not as a separate proposition with a different set of messages. This approach helps to ensure the different target customer audiences receive consistent messages, with customer-tailored emphasis on value.

You will then need to understand what drives perceptions of value in the minds of the key stakeholders you have identified. I call these the 'value dimensions' and they should certainly include:
• Medical and therapeutic benefits
• Patient reported outcomes, which focus around patient/caregiver benefits and the difference these make to their lives. For example, reduction of pain may enable patients to regain more independence, requiring less carer time; loss of sleep may impact on work and relationships with links to depression and psychological problems, etc
• Economic benefits, especially in the context of the shift of budget management from secondary to primary care in the UK

How can you understand these perception drivers? Market research has a big role to play in gaining insight and in validating the relative importance of value drivers. You should be aiming to build a target value profile (TVP) for each proposed segment to tell you what its stakeholders require in order for you to achieve your strategic and financial objectives. This TVP will enable you to identify your most valuable benefits in the eyes of the stakeholder, as well as tell you whether you meet the minimum performance level required. In addition, it will help you identify any potentially unique advantages that key decision makers will value.

Integrated effort
The development of a payer value proposition is not a stand-alone process; rather, it is part of an integrated and collaborative effort with other marketing principles and must be an integral part of the brand umbrella. Therefore, the brand positioning and value proposition should not be developed in isolation, but rather they should support and shape each other. 

Given that the value proposition plays a role throughout the lifecycle of the product, it follows that it should be considered as early as possible in the clinical development phase (eg phase IIb) so that the new brand is developed to deliver against a target value proposition. It also needs to be updated regularly and integrated into the global pricing and reimbursement strategy, with each country having a clear understanding of the status and price that the value proposition supports.

Payers in healthcare systems are, at last, waking up to the fact that pharmaceutical products are far more than the sum of the functional benefits, which can be proven in clinical trials. The right prescribing decision can add value to both the healthcare system and, crucially, the patient by ensuring efficient and effective treatment. This reduces the need for more expensive therapies down the line. It can also enable the patient to resume an economically and socially useful life, unencumbered by the effects of his/her condition.

Pharmaceutical marketers who can demonstrate that their brand delivers all of the above will gain a huge competitive advantage because, once again, the ability of the industry to align its agenda with that of health policymakers is crucial to survival and prosperity. That's a jargon-free statement that anyone can understand.

The Author
Alex Blyth is managing consultant at The MSI Consultancy where he leads the marketing sciences division.
To comment on this article, email


4th January 2010


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