By Ross Bjella
“Don’t ever forget the storm will fly out at some point. Are you building your company for the future? Are you investing in innovations so that after the storm you will be better than you were before, having something to offer that will keep you ahead? Protect your talent, make sure it is engaged, and an engaged mind will bring new ideas.”
— Ram Charan
Due to a number of devastating setbacks coming together at once, the current recession is what renowned business mentor and author Ram Charan calls a “100-year” economic event. However, as Charan also points out, things will get better. In the case of the pharmaceutical industry, things are already looking up. As an example, DDN is currently in the midst of its most successful period on record — posting a revenue increase in excess of 30% in 2008 and seeing new opportunities to service customers that prompted DDN to create a Medical Affairs Division in late 2008. All this in the midst of bad news coming from just about every sector of the economy.
I mention this to highlight the importance of planning ahead, being proactive, and moving now to seize opportunities that differentiate you from others in the marketplace. Bullish moves in a bear market ensure that once this downturn is over, you will enjoy a distinct advantage over competitors who merely laid low and tried to ride out the economic storm.
That said, consider these other indications that things are looking up in pharma — and some ideas to look at to strengthen your business.
THE INCREASED VALUE OF SALES REPS
Tough times force tough decisions. Smart companies are already looking to focus on the products that truly matter and differentiate. Now, when pharmaceutical reps detail products that offer the greatest therapeutic benefit, the detail has more weight. Fewer people, fewer products, better details, more value. That is the mantra going forward in this economy.
Speaking of pharma reps, this economy isn’t very good news for them — the “care and feeding” of reps is extremely expensive. However, the industry may see benefits through reductions in the rep workforce. At the same time, efforts are underway across the nation to restrict physician/rep interactions. Physicians will appreciate fewer reps making office calls, and those calls will be more focused and ultimately, more important and effective than ever.
Furthermore, more stringent PDMA (Prescription Drug Marketing Act) rules will result in a greater emphasis on education, increasing the importance of medical science liaisons and salespeople who can explain both the therapeutic and economic benefits of their products. Those representatives who can demonstrate skills in these areas will be in especially high demand in the future.
In response to no longer being able to rely on feet on the ground, product managers will utilize more coupon programs and e-detailing — that is, pharmaceutical- or medical device company-sponsored programs using the Internet to inform prescribers about products or diseases — in conjunction with rep details. There is tremendous opportunity in the market for truly creative advertising that incorporates social networking, viral marketing, or other media to create effective compliance and adherence programs.
A NEW DAY AT THE FDA
This early in the Obama administration, we have just started to see the direction which the new president will take the FDA. But challenging times tend to put the focus on where the problems are — and a key opportunity is reforming an agency that has been slow to review and ultimately approve too many products. Whether through political pressure or the realization that investment in the FDA will encourage a streamlined process and increase availability of products that can help drive an economic renaissance, the agency is primed for renewed focus and sense of purpose with a new administration. The FDA has been understaffed for a long time; that is a known fact. The hope is that this administration will acknowledge that fact and boost funding, potentially resulting in faster drug approvals.
The government pushing to have drugs go over the counter faster is good news for the pharma industry. Patients will have easier access to medications, and physicians and nurses will spend more time with truly sick patients. Less time will be spent tending to commonly diagnosed illnesses, which could be more rapidly and (potentially) effectively managed at the pharmacy. The potential result is a way to achieve real-world healthcare cost savings without focusing on only pharmaceutical prices.
SPECIALTY PHARMA IS ON THE RISE
The specialty market and acquisition model strategies are back. Big Pharma simply can’t afford to focus on smaller products; eventually they either sell that product or partner with smaller companies that can give these products the attention they need. Big pharma will increase almost exclusively on big products — thereby opening the door for smaller companies with smart business plans to flourish in niche areas. Lundbeck, through the purchase of Ovation, and Ipsen through the purchase of Vernalis, are two that come to mind as companies that saw a unique opportunity, seized it, and own it.
DDN has specialized in supporting new and emerging life science companies who develop or acquire products for niche markets. After a dearth of new company launches in the first couple of years following 9/11, activity in this segment has never been stronger. Since January 2006, DDN has supported the launch of two new life science companies each month, and we expect growth in this segment to continue through acquisitions and as big and mid-tier pharma continues to shed smaller or non-core products to those companies who can cost-effectively maximize their value.
MAXIMIZING SUPPLY CHAIN SAVINGS
While freight and logistics costs will undoubtedly rise again at some point in the future, companies are already enjoying the short-term benefits of substantially lower gas prices. As compared to this time last year, fuel surcharges are down 10% to15%. Even with DHL leaving the U. S. market, the poor economy has freight carriers chasing after fewer and fewer packages, resulting in increased competition and lower costs to manufacturers. Whereas 2008 was a perfect storm of high costs and decreased demand, 2009 should bring some cost relief, even if product demand remains flat.
THE BIG PICTURE: GLOBAL OPPORTUNITIES
Innovative efficiencies and new levels of security in the supply chain are available not just in the United States, but also in areas of the world that offer high-end manufacturing in low-cost settings. For example, China and India offer world-class clinical trial support and manufacturing services for both generic and branded products, expanding opportunity for U.S. companies looking to survive and thrive in this challenging time.
The current economic crisis also has spurred a productive discussion on using information technology to better serve patients, including setting standards for the use of electronic medical records. While the recent solutions proposed by Congress are filled with potential pitfalls, the dialogue is at least aimed in the right direction — at seeking ways to bring healthcare into the 21st century in ways that improve patient safety, streamline processes, and address soaring costs.
About The Author
Ross Bjella is president of DDN (www.ddnnet.com), a provider of outsourced business services to the life sciences industry. He has 20 years of industry experience at companies including LifeCore Biomedical, E.R. Squibb, Allergan, and Schwarz Pharma.