Signs Of Hope For The Pharma Industry: Life Beyond The Patent Cliff

Despite the well-known pressures impacting the pharmaceutical industry—shifting global markets, R&D productivity challenges and pricing and reimbursement changes —some high-performing companies are successfully navigating the patent cliff and are closing the gap between blockbuster sales loss with sales coming in from new-product launches.

According to recent research by Accenture, a few select companies are successfully adjusting to this new way of doing business and are back on the path to sustainable growth. So how are companies navigating this new landscape?

Life in the “New Normal”
While no single model or specific operating structure has emerged as the clear winner, several successful tactics and trends have emerged as ways to be successful while operating in the post-blockbuster, “New Normal.” However, one trend is clear. These companies have all been successful by making a firm commitment to change.

Change in this sense entails a strategy and focus on the areas a company can dominate, while taking decisive action to build the following capabilities:

1. Fast, efficient entry into emerging markets
2. Expedient product launches
3. Collaborative R&D models
4. Savvy Mastering multichannel marketing

Challenge #1: Entering into Emerging Markets
As mature markets such as the United States, Japan and EU countries become saturated, companies are basing their growth strategies on expansion into new markets. According to IMS Health research, this trend is especially true in the life sciences industry where “BRIC” nations (Brazil, Russia, India and China) are expected to be among the world’s top 10 pharmaceuticals markets by 2016. ⁱ

Despite this opportunity, many pharmaceutical firms have been unable to get a foothold in emerging markets. Among the top nine major pharmaceutical companies, no more than 10 to
30 percent of their revenues currently come from these areas. ⁱⁱ

Solutions
According to Accenture, life sciences companies may be able to gain a competitive edge with the following four-point integrated strategy:

• Think in terms of “customer clusters.” Companies should think of customers and clusters of customers rather than focusing only on countries and continents. This approach enables more targeted customer-centric strategies.
• Find cross-border similarities. Since several elements of the value chain appear to be similar across emerging and developed markets, firms should exploit these similarities and position them to easily cross geographic borders.
• Establish global reach with local relevance. While it is important for companies to standardize globally, it is also important to customize where appropriate to achieve local relevance. Implementation design must be customized to address nuances at the local or regional levels.
• Create effective and rapid execution capabilities. Companies that understand their customers and can execute solutions across markets that are aligned with customer needs in a timely and cost-efficient manner will be successful in differentiating themselves from their competitors.

Challenge #2: Expedient Product Launches
The changes in the biopharmaceutical industry have reverberated throughout every phase of the product lifecycle, including product launches. According to Accenture research, there are many factors behind this erosion. First, the days of long lead times to peak sales are gone. Second, peak sales are no longer what they used to be, and third, launch brands will need to make dramatic alterations to their launch strategies in the post-blockbuster era.

Solutions
According the analysis of more than 25 new product launches across 15 major pharmaceutical companies, the following trends emerged as ways to enable a successful launch in the post-blockbuster environment:

• Create brand positioning that stretches over future indications. Brand leadership must create a master brand at onset where future indications are mapped out and clearly support the overall brand positioning.
• Rethink your competitive differentiation. The concept of differentiation has to extend beyond catchy slogans to more broad-based programs that demonstrate commitment and success in improving patient outcomes. Launch brands must invest less in traditional channels and instead develop more holistic patient treatment programs.
• Embrace advanced analytics to increase launch uptake and ROI. Biopharmaceutical companies have volumes of data, and they now need to use it in a different way.  Launch brands must make resource allocation decisions based on a more complete understanding of potential within their launch markets instead of through traditional methods such as population size or past experiences.
• Develop a complete understanding of market influence. Effective launch strategies focus not just on tracking, understanding and targeting physicians; they focus on the broader group of people who influence a script, including patient advocates and key opinion leaders. Building an integrated influence map across geographies is a complex undertaking but worth the effort.
• Be honest and objective in confronting launch plan gaps. Brand teams must take the time to scrutinize the plan and identify gaps at the start.
• View project management as a source of competitive advantage. Dedicated launch management is essential to delivering a complete go-to-market strategy and meeting tight deadlines.
• Recognize the launch doesn’t end at the launch party. Savvy, guarded physicians and aggressive competitors can quickly stall launch momentum if a brand does not remain vigilant, so it is important to not lose focus after launch.

Challenge #3: Collaborative R&D Models
The most significant challenge for pharmaceutical R&D is productivity decline. The industry is developing fewer new molecular entities (NMEs), and the cost for each is increasing.

Solutions:
No one solution can bridge the R&D productivity gap. The future of pharmaceutical innovation demands a holistic approach that addresses every R&D dimension—strategy, process, organization, and funding.

• Rethink and refocus strategy and intellectual property. The future of pharmaceutical innovation requires more focused strategies, less emphasis on overly competitive areas and flexible business models that drive outcomes in new ways.
• Build a smaller, less integrated and less complex R&D organization. A successful company will manage the strategic direction and relies on skilled third parties such as CROs for execution. Explore an R&D model that focuses on the core parts of the value chain for a strategic advantage over the competition. Simplify overly-complex matrix organizations by creating smaller, independent business units with decision and budget authority. And finally, reward innovation among leaders for informed risk-taking and creative de-risking approaches.
• Aggressively pursue partnerships and external funding. Explore and identify partnerships with funding sources backed by content and execution expertise. This way, individual projects can be rapidly and expertly assessed and implemented.

Challenge #4: Mastering Multichannel Marketing

Life in the New Normal requires companies to rethink how they can reach patients, payers, providers and governments in both mature and emerging markets, including speed, price and the right information for each target audience.

Solutions:
Accenture recently surveyed 200 senior executives that work for large pharmaceutical firms who revealed the following solutions in this new environment: ⁱⁱⁱ

• Reshape today’s sales and marketing models to be successful in the New Normal. Nearly half of survey respondents cited they have room for significant improvement, while 11 percent indicated they will undertake a wholesale redesign of their sales and marketing organization in response to constrained budgets and the revolution in stakeholder engagement.
• Reduce costs, master multichannel marketing and improve digital effectiveness.  Of survey respondents, 83 percent said cost reduction was the highest strategic priority for them in 2013, while 70 percent identified mastering multichannel marketing and 60 percent indicated improving digital effectiveness.
• Master analytics, digital, multichannel marketing and third-party service providers. Of respondents, 87 percent intend to increase their use of analytics; 83 percent intend to increase digital and multichannel interactions; and 72 percent intend to utilize third-party service providers.
• Use digital to interact with a wider range of customers. Nearly one in four direct sales force interactions have been replaced with digital interactions for targeting doctors, providers, payers and patients. Over the next two years, executives plan to increase their use of such digital interactions by 26 percent.
• Utilize third-party service providers. To manage the increased use of digital interactions, 66 percent intend to use third-party providers, 16 percent intend to build in-house capabilities, while 12 percent intend to do both.

Getting Back on the Path to Profitable Growth
The current market environment remains tough, but there is light at the end of the tunnel for companies, and perhaps the industry as a whole, that can take advantage of these four characteristics deftly and swiftly.

  ⁱ IMS Health report, May 2012. Spending in US$ with variable exchange rates.
  ⁱⁱ Accenture report, 2013. Winning in Emerging Markets to Drive Growth in the Life Sciences Industry, http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Life-Sciences-Winning-in-Emerging-Markets-to-Drive-Growth.pdf
  ⁱⁱⁱ Accenture report, 2013. Life in the New Normal: The Customer Engagement Revolution, http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Life-in-the-Normal-The-Customer-Engagement-Revolution.pdf

Jeffrey Russell has over 20 years of consulting and industry experience in North America, Europe and Asia Pacific, working with a wide range of leading pharmaceutical, manufacturing, distribution and retail organizations. Jeffrey has held a variety of different leadership roles since joining Accenture in 1998.  Based in New York, he currently serves as North American managing director for Accenture’s Life Sciences’ practice.