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GfK Healthcare | August 2010 | |
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In Memoriam  It was July, and I was taking it easy for a few weeks. Golf, trips to the beach, dinner out and walking the dogs in the humid heat of Hilton Head Island (they don’t call that area of South Carolina the Lowcountry for nothing!) were my daily activities when a colleague forwarded me a few paragraphs that had come across his computer. As you can imagine, like everybody else, I get a ton of e-mails every day, so it takes a lot for one to stop me in my tracks. This one did. The few paragraphs summarized a press release from PDI, announcing the company’s plans to “exit the marketing research business currently conducted by its business unit, TVG Marketing Research & Consulting, effective August 31, 2010.” Several things grabbed me about this announcement. First, as many of you know, the TVG name was actually an acronym for The Vanderveer Group, a company I founded in 1979 and that underwent its name change when I departed about a decade later to join Medco in pursuit of using Individual Physician Level Prescribing Data (IPLRx) as a tool for introducing the pharmaceutical industry to the micromarketing paradigm. More telling was the shock of realization that the company was one of the leaders in the pharmaceutical micromarketing field, although only a fraction of the size of the industry leaders in 2010, including GfK, Kantar, Adelphi, etc. And now it had fallen. A business going out of business is far from an unusual event. But what really struck me was the statement of Nancy Lurker, chief executive officer of PDI, about the reasons the business was closing. Ms. Lurker observed that: “Changes in the health care industry, including various mergers and acquisitions as well as sweeping health care reform, have resulted in a significant decrease in demand for market research.” Thus, the decision to close the doors on TVG was “necessary to help ensure the long-term health of our business and is consistent with our stated strategy to focus chiefly on the growth of our core, outsourced promotional services business.” Some will definitely accuse me of overgeneralization here, but this event, in concert with our own experiences in the marketplace and myriad conversations with our colleagues at pharmaceutical marketing research conferences, could readily lead one to conclude that it is increasingly difficult to maintain a viable business as an agency focusing on the conduct of high quality pharmaceutical marketing research. Underlying this state of affairs, in addition to factors Ms. Lurker identified, are several other drivers. First is the dearth of new drugs being marketed coupled with the patent expiry of existing blockbuster agents. Since much market research has historically been conducted to support new product launches and been funded by the sales of existing products, this one-two punch in and of itself has substantially reduced the pharmaceutical industry’s marketing research spend. In addition, we have the more significant role of pharmaceutical companies’ purchasing and procurement departments in the buying of marketing research. With the major focus of these departments being price reductions, even the marketing research projects still being conducted are producing substantially lower margins for agencies providing these services. In recent years, TVG has been of relatively modest size. I have written before, however, about CEO panels in which I participated at this year’s PBIRG and PMRG annual meetings where the heads of the world’s largest pharmaceutical marketing research suppliers expressed concerned as to whether the industry could support the several mega-agencies that now exist. Put all this together and one can begin to foresee a world devoid of pharmaceutical marketing research agencies as we know them, as groups of various sizes and shapes are sequentially required to close their doors based on an ever-tightening squeeze on profitability. As health care reform and myriad other changes in the medical landscape present pressing needs for information and insight, where will health care manufacturers turn to gather the information they need to develop the right strategies and execute the right tactics in a world in which all of the pharmaceutical marketing research agencies that have been fixtures in the industry for decades have shuttered their doors? Several possible outcomes occur to me. The first is that marketing research needs will be met by “second bedroom operators” who are able to provide such basic research services as focus groups and depth interviews at low cost because of their minimal overhead. There are several problems with this model. They include the lack of capacity of such organizations to deal with clients’ increasing focus on governance and their resulting requirements for significant paperwork. Also troubling are the questions of how more complicated projects will get handled and how new methodologies will get developed that are responsive to changing information needs when agencies are simply individuals engaged in day-to-day work. Another possibility is for the pharmaceutical industry in the United States to convert to a system, used in many other pharmaceutical markets, in which their marketing research needs are met by researchers operating within the framework of a larger marketing research company that also does work for other industries. While this approach significantly reduces the overhead burden on the health care marketing researchers, permitting them to make a profit even while doing less work and charging lower prices, it also offers the advantages of having larger backup staffs to handle larger projects and being able to employ new research methodologies developed for other verticals. However, in most such cases seen in other countries, and likely in the United States, such an approach also leads to less depth of background knowledge about the health care industry and its issues, individual treatment areas, etc. Coming full circle to the demise of TVG, I would like to close these ramblings by posing three questions.
 Richard B. Vanderveer, Ph.D. CEO, GfK Healthcare   |