June 2008
	The Size and Shape of Pharmaceutical Marketing Research As this is being written, it is a matter of public record that GfK, our parent company, and longtime mega-competitor TNS are in negotiations to consummate a “merger of equals,” in which no money would change hands but stock would be swapped on a one-for-one basis to yield equal ownership of the joint company, to be named GfK-TNS, by the current shareholders of both companies. Also a matter of public record is a series of cash offers for TNS, being made by competitor WPP, which have been summarily rejected by TNS management as significantly “undervaluing” the company. Although the outcome of this drama is not yet clear, the most recently announced timeline is that the GfK-TNS deal will be consummated by the fourth quarter of this year, yielding the second-largest marketing research company in the world. While this unfolds, it is important to note that health care constitutes a relatively small percentage of each major player’s practices. Although we all see this through the eyes of health care marketing researchers, we must remember that the real financial play here is in areas like TV audience measurement, advertising effectiveness, etc., with health care marketing research largely along for the ride. While the GfK-TNS merger would marry two of the world’s largest marketing research firms, the major progeny of this union, the financial press tells us, would be the enhancement of TV audience monitoring through a combination of technologies and differential geographic regional strengths. All interesting, fascinating and important. But how about health care? As I have written and spoken about previously in numerous forums, health care, and thus the marketing research efforts that support it, is in big trouble worldwide. And it is getting worse. AT Kearney, a global management consultancy, will soon publish a paper titled "Healthcare Out of Balance" that describes a situation in which the health care systems in developed countries were designed to have six or seven active workers contributing to the health care funding of one retired worker, whereas by 2020, a year on which many health care forecasters are focused, the number of active workers supporting the health care of each retiree will be two or three. This fundamental shift, A.T. Kearney argues, will put substantial pressure on drug pricing, and obviously on funds available for funding new drug development research. As a result, attention will shift from developing and implementing expensive and largely inefficacious regimens designed to extend the lives of cancer patients, the hottest area in drug development at the moment, to using existing resources to prevent and manage chronic conditions, e.g., activities that have shown themselves to be efficacious, cost effective and impacting the lives of far greater numbers of people. As this transition occurs, the current intense interest in oncology will wane. Moreover, developing countries, from which much of the growth in health care is expected to come, will inherently follow suit since much of their health care is funded by the dwindling profitability in developed countries. So coming full circle, we can foresee potentially significant shifts in the direction that pharmaceutical marketing research will take in the future. Historically, it is only a mild overstatement to say that pharmaceutical marketing research has been aimed largely at helping pharmaceutical marketers attain more sales and greater market share. Thus, it has focused largely at the product level and on how to use the features and benefits to beat the competition. When the developed countries run out of money to fund the use of existing premium-priced, branded pharmaceuticals and turn increasingly to generics where possible, the ripple effect on the multinational companies, whose profits decrease and thus have less money available to fund research and new product development efforts, is virtually immediate, as is the trickle-down effect on the developing countries where growth in the future is likely to be the most profound. With the cost of health care currently 10 percent of global gross national product, although substantially higher and lower than that when one takes a by-country look, any increases in health care cost required by an aging population and/or the desire to provide adequate health care to a greater percentage of the population will be examined very carefully. In summary and in simple terms, we anticipate a world in the not-too-distant future that cannot afford significant allocations of health care funds to the battle for market share nor the marketing research designed to support it, nor even to expensive oncology drugs designed to extend life a mere few months, if they work at all, at great expense. Rather, we see an era coming soon when the efforts of pharmaceutical companies will focus on generating acceptable, if not historical, margins by providing health care solutions, not just pills, that will most cost effectively prevent and treat chronic conditions in a cadre of people growing rapidly, based not only on the aging of the population in developed countries but also on the inclusion of huge and presently untreated populations in developing countries. The function of marketing research will thus change from assisting in the battle for market share to helping optimize profitability in this new and lower margin health care marketplace. In terms of size and shape, pharmaceutical marketing research agencies can be expected to grow larger so as to extend a truly global reach, to defocus on pharmaceuticals and refocus on health care more generally, and to look more like econometric think tanks than extensions of advertising agencies. As a result, one can expect new bedfellows and associations to emerge, as health care marketing research becomes more and more different from the marketing research used to support the sales of refrigerators, potato chips, etc. Richard B. Vanderveer, Ph.D. Group Chief Executive Officer GfK U.S. Healthcare Companies