Topline: News & Views on Pharmaceutical Marketing Research

Over the next five to six years, the global pharmaceutical industry will face several immense and unprecedented challenges that will necessitate important shifts in the marketing research demands placed upon supplier agencies. As a tool for reducing business decision-making risk, marketing research will continue to play a vital role within the global pharmaceutical industry. However, with massive challenges looming in the drug business, there are key sectors where marketing researchers need to evolve to meet drug companies’ needs.

This article, written by Noah M. Pines, Executive Vice President of GfK V2, illustrates these challenges, the big picture strategic actions that drug companies are taking, and how the industry-MR supplier relationships may change as a result.

The Challenges

Over the next five to six years, many top-tier global pharmaceutical companies will lose patent protection on either their largest or second largest brands, or both, and these are brands that will account for 14 percent to 86 percent of total projected revenue in 2012, according to a recent analyst report from Prudential Equity Group, LLC. Notable examples include the patent expirations of Bristol-Myers Squibb’s Plavix, Avapro and Ability, which combined account for 30 percent of 2012 projected BMS revenue. Merck will lose Cozaar/Hyzaar and Singulair, accounting for 22 percent of its projected 2012 revenue. Forest Laboratories will lose Namenda and Lexapro, which together are expected to account for 86 percent of the company’s projected 2012 revenue.

A second challenge to the industry is that, with the recent shift of power in the U.S. Congress, drug companies potentially may face increased pricing pressure from the government. Indeed, among Congress’ planned initiatives is improving access to prescription medication by using its negotiating clout to attain deeper discounts (especially given the costs of maintaining the Medicare Part D benefit over time). Other perennial challenges include increasing drug development costs, stemming from the safety demands of a more safety conscious FDA, and a more cutthroat marketing environment, featuring more aggressive counterdetailing. The recent halting of development of Pfizer’s Torcetrapib (a drug designed to raise patients high-density lipoprotein (HDL) or “good cholesterol” levels) punctuates the challenges and risks facing pharmaceutical companies as they seek to replace the massive void in future revenue that these coming patent expirations will burrow.

The Pharmaceutical Industry Response

In response to these challenges, pharmaceutical companies are making changes. First of all, rather than relying on a small huddle of major blockbuster brands, with “blockbuster” being defined as medications with sales in excess of $1 billion, companies are developing and licensing more brands with expected sales in the hundreds of millions range. Novartis, for example, has been a leader in implementing this strategy. A few years ago, the company started branching out into oncology, hepatology and metabolic disorders. Roche Laboratories (and Genentech) have also built a formidable specialty drug portfolio in oncology, virology and transplant medicine. Schering-Plough is currently following this route and is among a few companies that appear immune to the upcoming patent expiration upheaval. The main strategic purpose that this serves is to more strongly diversify the portfolio so that no one brand accounts for such a large percentage of sales that loss of patent protection poses a massive risk for the company’s future earnings. In short, a table is less likely to topple with more legs holding it up.

Secondly, with greater diversification, companies are focusing more on specialty diseases such as CNS/neuroscience, oncology, virology, hepatology, cardiology and other metabolic disorders. The dual benefits of this approach include (1) given the smaller physician specialty populations treating these illnesses, companies can deploy a smaller sales force, and (2) it is easier to protect one’s margins when one has a unique product (i.e., there are fewer competitors), and where a drug is used to treat a very serious medical condition such as Chronic Myelogenous Leukemia (CML), Hepatitis C or HIV/AIDS. Gilead Sciences is an example of a company that has successfully focused in and dominated one therapeutic franchise, virology (although the company is currently diversifying with its recent acquisition of Myogen).

Third, drug companies are clearly preparing for the world of individualized medicine. While in the past, the pharmaceutical industry sought to maximize its gain by targeting mass populations of patients, such as patients with joint pain, hypertension, hyperlipidemia and osteoporosis, in the future companies will court more limited segments of patients according to such criteria as their having a specific genotypic composition or being of a particular ethnicity. Herceptin was among the first of these targeted therapeutics. Another example is HIV, where the treatment regimen often is individualized according the patient’s specific genotype, phenotype and now (with CCR5 receptor antagonists becoming available soon) his or her HIV co-receptor tropism. In short, the industry is embracing fragmentation and developing (and, in some cases now commercializing) medications targeted at a more narrow, defined target patient audience.

From a financial standpoint, these industry trends are also likely to drive a further round of mergers and acquisitions activity, the most recent evidence of which is Schering-Plough’s acquisition of Organon. These mergers and acquisitions will help companies reduce costs but have not been shown to drive more fruitful drug development pipelines.

The Marketing Research Industry Response

In response to these challenges, marketing research agencies will have to change the way they serve the pharmaceutical industry.

First and foremost, as the industry moves briskly into narrower, more specialized, and often highly complex disease areas, marketing research suppliers will have to cultivate in-house disease specialists who have specific knowledge and expertise within these therapeutic areas. GfK V2, for example, has in-house specialists in cardiology, oncology, virology and ophthalmology (to name a few) who are highly familiar with the state-of-the-art treatment of these conditions.

Secondly, as speed to market is key, more rapid and efficient marketing research project turnaround time will become paramount. As pharmaceutical companies are challenged to rapidly bring new medicines to market, researchers will be called upon to bring a host of integrated, efficient and time-tested techniques and methodologies to bear. As time to market is of the essence, marketing researchers will increasingly be asked to work with companies throughout the launch of a product (so as not to slow down for purposes of a learning curve), and thus will need to provide not just one-off project support, but an integrated curriculum of research techniques surrounding the launch of a new brand.

In this respect, there is likely to be a transition toward more in-depth relationships between pharmaceutical companies and their marketing research vendors, relationships that span the entire launch of a product, and/or that focus in a particular therapeutic class (the so-called “Agency of Record” or “AOR” model). These relationships will be necessitated by the learning curve required to participate in the launch of a new medication for a complex and specialized condition and because of the rapid pace that will be required in launching new products (to make up for the future loss in revenue as noted above). The benefits of the AOR model include seamless integration of knowledge, not having to trek the learning curve with each new project and a heightened focus on the client’s changing business needs.

A third area is methodological innovation. Because one of the industry challenges is a more cutthroat environment, pharmaceutical companies that want to be competitive will select vendors on the cutting edge of methodological innovation. Thus, marketing research vendors that offer a unique toolbox of approaches will be more readily selected.

The challenge of individualized or personalized medication will bring about a greater need for market segmentation research among drug companies. Segmentation research involves studies designed to ascertain the existence, size and characteristics of subgroups within a specific population. In particular, patient segmentation will become more common as companies seek to prioritize and pinpoint their marketing activities.

Additionally, as sales forces shrink, companies will need to rely more on marketing research to measure and improve sales force effectiveness (SFE). Indeed, companies have increasingly been approaching GfK V2 to conduct studies to help their medical science liaisons provide effective support to key opinion leaders within several therapeutic areas. There also has been a growing demand for GfK Market Measures’ SFE audits in tracking, measuring and ultimately improving the delivery of targeted promotional messages.

Congress’ increased focus on access to affordable medication will mean that companies will require more pricing studies, especially studies that incorporate government-based pharmaceutical decision makers as well as the traditional managed care pharmacy directors. Also, with pharmacy costs being shifted to the patient, pricing studies will increasingly need to take consumers into consideration as far as their willingness to pay for a medication based on its co-payment tier.

Marketing research agencies' field departments also will be challenged by having to recruit more specialist physicians, who are often hard to attract. Here again, using a researcher within an agency who has pre-existing relationships with physicians and/or key opinion leaders within a particular therapeutic area can be pivotal in recruiting the right respondents.

Additionally, as pharmaceutical companies develop more personalized medicines, field departments will be challenged to recruit even more specific and precise sub segments of consumers. Consumers participating in marketing research studies in the future may need to be screened for such traditional demographic dimensions as age, gender, ethnicity, education and income level, as well as past treatment, resistance patterns, co-morbid conditions, and/or genotype composition. This may present new challenges from the standpoint of respondent confidentiality, since the evidence of, for example, an individual patient’s resistance profile would reside only in the patient’s medical chart.