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Helping small pharma compete

As Big Pharma seeks to reinvent the way it does business, what role will the specialist company fill and how can it stand up to these new entrants to its market?

Helping small pharma competeA commercial model less exposed to the substantial revenue decline of megabrands at patent loss, with more productive R&D and that considers the increasing demands of regulators, payers and end users, appears to be the path forward for Big Pharma.

One strategy has been to invest in brands for specialist orphan and rare disease markets, with research showing that in 2009 Big Pharma accounted for 43 per cent of all orphan drug approvals (Frost and Sullivan, 'Orphan and Rare Diseases', Life Science Leader, October 2010), almost twice the volume of a few years previously. Additional research by Braun et al in 2010 cited that in the US an increasing number of the new molecular entities (NMEs) approved by the Food and Drug Administration each year are in the orphan drug category, representing approximately 30 per cent of NME approvals.

2010 also saw the introduction of new standalone R&D units by GlaxoSmithKline (GSK) and Pfizer, dedicated to the development and commercialisation of medicines for rare diseases. 

And it is not just about R&D; Big Pharma continues to buy its way in. For example, there was the $20.1bn acquisition of Genzyme by Sanofi in April 2011.

Why is there this interest? Despite smaller overall revenues, these markets offer a highly lucrative environment in which Big Pharma can diversify corporate risk. Lower investment in clinical development, infrastructure and marketing expenditure means better profitability. Companies can readily invest in several of these brands simultaneously, spreading corporate risk from one or two blockbusters across different brands and markets.

So, what are the implications of this move for those already working in these smaller, more specialist, markets?

There are two likely scenarios; the first is the potential for partnership. Big Pharma offers an opportunity to bring in expertise, resource and otherwise unavailable capabilities. Consider how Amicus Therapeutics and its lead therapy Amigal, a novel therapy for the ultra-orphan Fabry's disease, has benefited from its alliance with GSK, with the second phase III study announced in September 2011.

However, in the majority of cases, having Big Pharma in the marketplace is more likely to be as a new, highly skilled and well-resourced competitor.

Focusing on this second scenario, what should a European team consider when facing a new, large competitor? 

Undoubtedly, new competitors will have a significant impact on the market. For continued success small companies and their local operating companies (LOCs) need to understand how opportunities across the different markets may change, what new challenges arise and what will need to be done to remain competitive.

It is likely that new players will be well resourced, with cash, advanced organisational skills and geographic scope. Therefore, to be successful in this changed environment, small firms and their local affiliates must work smarter, together. This will involve making the most of assets such as the freedom and flexibility of a less centralised small pharma network and market expertise. All need to be confident that they are both doing the right things and doing those things right.

Here are three points to consider:

  • How to ensure that there are no surprises brought about by any changes resulting from a new competitor entering this market.
  • What can marketers do better to ensure that in this changed world they are still activating those customers that drive business?
  • Given comparatively fewer resources, what can be done to get the most from the spend available?

Regarding the first of these points, it should be understood that the dynamics of the markets will unquestionably change.

Therefore, the reaction to this new competitor in each market must be evaluated and the implications for European strategy understood. How will customers' attitudes change? What strategies and tactics will this new competitor use to win, and use against the smaller firms?

Once a likely scenario has been contemplated across the markets, the new strategy can be tested to see how it will perform. Then competitive priorities can be identified and, where necessary, strategies can be adjusted to ensure they will be future-proof.

Most organisations have good competitive intelligence in the form of facts, figures and historic analysis. However, in this situation, looking at history and current performance does not help. What is needed is to try to predict the most likely future and one way to do that is by War Gaming.

War Gaming
War Gaming is a role playing workshop where participants take on the role of their competition. By stepping into their shoes, the team and its affiliates can develop an informed prediction of the most likely reaction of the market, the competitor's own brand strategy and their most likely counter strategy.

This insight enables pressure testing of current intentions and uncovers what, if any, changes may be needed.

Additionally, everyone gains valuable insight into the workings, thinking and priorities of the most important competitors.

Looking at point two, in many orphan markets, the numbers of prescribing customers, potential or actual, can be quite small. However, the number of stakeholders who impact the use of the medicine can be far more complex and vary by market.

Given the increased importance of optimising a defence against any newcomer, it is imperative to really understand the true drivers among that diverse range of stakeholders and the implications for use of an orphan drug. Namely these are the barriers, positive drivers, true needs and what really activates those customers to drive business.

Effective market research
How to ensure that market research is delivering the insight needed:

  • Clearly define the critical business issue to be addressed, confirm or reject market 'truths' and identify any knowledge gaps against an initial hypothesis.
  • Ensure research objectives are clear, appropriate and focused. Challenge and agree the methodology to maximise results.
  • Involve affiliates throughout the process to ensure support for the findings and to help keep this small, specialist audience engaged.
  • During fieldwork, ensure focus on the key research questions and as often as possible attend qualitative research in person.
  • Make sure the debrief answers ALL the questions.

There is no point in spending money on research if it is not going to help drive business, ensure support and provide practical output.

In response to point three, it is important to know that, given limited resources, the budget is really working and working as hard as possible.

This can be done in two steps:

  • Be entirely clear on the barriers to growth and priority commercial challenges.
  • Develop a transparent and realistic view on return on investment (ROI).

Both are closely linked. Through the planning process, build a detailed picture of the barriers to growth, the levers to drive change and thus the commercial challenges; then focus on ROI there.

Getting ROI right requires a detailed and objective understanding of where revenue can be generated and is currently being lost. This can be done using a tool such as the 'Patient Flow', which enables the identification of where business growth can be driven and the behaviour changes needed to push sales.

Once the required changes in behaviour are known, SMART tactical objectives can be defined and the marketing and the sales activities needed to deliver them can be prioritised.

ROI analysis often fails because it is based on marketing plans where activities have no clear link to outcomes or the opportunities in the market.

In summary, Big Pharma is moving into smaller, more specialist markets so a well prepared plan must be put in place. It is essential for both the EU team and the local affiliates to be confident that everyone is doing the right things, and doing them right. Start by considering these three different areas:

  • Be confident that there will be no surprises in the future, there is a consensus view and that the company and its strategies are well prepared for the most likely eventualities.
  • Gain as much advantage as possible through marketing efforts by ensuring that those customers who drive the business are involved.
  • Ensure that the methods are right. Check that the budget is working as hard as it can by linking any investment directly to major sales drivers and opportunities.

Michael Craig, MSi ConsultancyThe Author
Michael Craig
is associate partner at the MSI Consultancy.
He has over 11 years' experience in the pharmaceutical industry, spanning consultancy, sales, marketing and government liaison. Michael has cross-industry experience in segmentation, brand revitalisation, competitive evaluation, strategic planning and marketing excellence, delivered mostly in partnership with regional or global teams.
His area of expertise and special interest is in orphan and rare disease strategic marketing and since becoming a consultant Michael has supported commercial teams overcoming challenges on over 20 orphan indicated brands.

12th March 2012


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