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Pharmaceutical Branding is Just Getting Started (Part I/The Sky’s the Limit)

This article is part of the series:

Because our pharmaceutical landscape is filled with familiar product names such as Prozac, Lipitor, Prilosec, and Viagra, we might think that brands occupy as prominent a role in pharmaceutical marketing as in other consumer goods industries. In fact, the perception among pharmaceutical marketing experts is that branding is a relatively new and weak focus in the industry. Many propose improved branding as a solution to the threat of flagging fortunes resulting from blockbuster drug patent expiries, for which few new innovative replacements are on the horizon. If we listen in on their conversation, we can get a sense of why they think branding is underdeveloped and what they plan to do to remedy it.

“Successful brands, unlike patents, do not have expiry dates.” Thus states an article in the Market Leader, summarizing their reason for why pharmaceutical companies have to transition “from managing pills to managing brands,” in the title words of a Harvard Business Review article endorsing the same strategic vision. What are the differences between patents and brands, and why are these important now?

The value of patents to drug companies does not ostensibly require explanation. Patents are miniature monopolies. If a company has patented a cure for disease X, then for as long as the company holds the patent for that drug, it owns exclusive right to sell it, and this is the source of their profits. When the patent expires, the drug may be copied and sold by anyone capable of synthesizing it. (We can complicate the discussion by taking account of what gets patented [molecule, compound, or process, for instance], and we can distinguish patents from FDA approval. For present purposes it’s pills and patents versus brands.)

But patents are not immovable entities, and business is never a static arena. To get the most value out of patents, marketers ‘manage’ them. On one hand are strategies for expanding the commercial perimeter of patents so that more exclusive profits can be incorporated and protected under the patent. Hence companies conduct post-marketing trials in the attempt to expand the indications for use of a drug. If a drug previously approved for preventing seizures is shown by means of a clinical trial to have efficacy in treating migraine headaches too, for instance, the patent’s value is extended in space and time. Promoting off-label prescription is another source of broadening the value of existing drug approvals.

Protecting patents from value erosion is also important. Patents confer only a limited grace period of exclusivity or near-exclusivity. Companies earmark budgets for delaying the entrance of generics by legal means, and trouble is taken to make certain that FDA warning labels aren’t worded so as to inhibit the prescription of the drug. Pre-commercial planning and marketing, which refers to efforts taken to market drugs before they are approved, similarly works to extend the profitability period of patents.

But the times, they are a-changin’, and the perception is that patents are losing their leverage as sources of profit. In 2008, in an article entitled “Beyond the Patent: Extending the Life of Brands,” Medical Marketing and Media exhorted its readers:

“In today’s world, it is critical for pharmaceutical marketers to realize the importance of investing over the life of the drug to continue building brand power and value. If we limit our vision of opportunities to the patent period, enormous amounts of potential revenue will simply be left on the table.”

“The life of the drug” refers to product lifecycle thinking, which has become central to all consumer product marketing. Increasingly in marketing plans for pharmaceuticals also one sees charts laying out the entire projected biography of the product. The subpoenaed marketing documents for Parke-Davis’ Neurontin, for instance, contain a product life cycle chart in which the horizontal axis is time and the vertical axis is labeled US $MM. The phases of the cycle include:

• Launch Phase (e.g., studies, promo mix, etc.).
• Growth Phase (e.g. new indications/formulations/filings, strategies, studies).
• Harvest/Generic Phase (patent status and key competitors).

The chart itself depicts a rapid drop in revenues once the patent date is expired and the generic phase begins. Most marketers inspecting that chart would point a laser at the drop-off point in the revenue line and ask, “What are we going to do to soften that drop?” One of several possible answers is “do more to promote the brand.”

I’ll return to strategies for branding in a future post (as well as to other perceived reasons for its necessity). What we can observe by pointing out that drug companies are adopting the product life cycle approach is, first, that pharmaceutical companies are thinking more like other fast moving consumer goods companies (FMCG) than like entities in business to discover and convey ethical medicines. The influx of MBAs from other consumer products companies into the pharmaceutical industry is causal and representative of this shift.

Second, by objectifying and envisioning profits in terms of product life cycle in this way, there is a subtle shift to a framework in which value is being measured and determined not relative to medical goals, such as lives saved or patients healed, but against a standard used to extract value in any consumer product category: number of widgets sold. It is a businessman who looks at the curve and says: How can we increase this? How can we beat the competition?

On one level, this conclusion is obvious—of course businesspeople are focused on profit! However, we have to account for the fact that most pharmaceutical company executives (and much of the public) do not see themselves as profiteers, but as public servants. What we can see from the adoption of conceptual tools such as the product life cycle is one in a process by which marketing think takes over one small step at a time, in a move so subtle as to conceal the moral implications of so doing.

Marketing tools are not value-neutral, as most management theorists believe. They shape the consciousness of their adopters. It is an important reason why I tend to object to public-private partnerships for healthcare delivery; they almost always are managed like businesses, not public sector entities, and this makes a difference.

[No post next weekend.]


4 Responses to Pharmaceutical Branding is Just Getting Started (Part I/The Sky’s the Limit)

  1. Great post.But should all pharmaceutical companies be only public or governement institutions without possibility for profit?Is marketing department something what shold be banned in pharmaceutical companies?Or it has to be mix of both?Ethic and marketing?What is your solution?

  2. Garp, Thank you for your comment. This is the big question. In my view, the solution will entail three stages.

    First, enough people must recognize that there is a problem and what sort of problem it is. In my view, what has gone wrong is only partly explained by models of corruption (conflicts of interest, e.g.) or procedural issues (PDUFA, e.g.). Rather, we are looking at the clash of two whole systems bearing alternative goals and concepts of pharmaceutical value. These different outlooks are also mismatched for available budgets and organization devoted to enacting respective visions of how things ought to be. On one side is public health and medicine, on the other the pharmaceutical industry.

    Because of the widespread adoption of business models for solving social sector (i.e., public and nonprofit) problems during these past couple of decades, not just healthcare, and the embedded private/public partnerships these have given rise to, it is difficult for people to discern the actual disparity of cultures and motivations that lie at the root of action for each ‘side’. The key, I think, is to recognize that while various actors in public health view their relationship with industry as a partnership, industry actors are acting rather according to a competitive logic in which ‘partnerships’ are a means to winning over one’s potential opponents in the competition for control over sources of knowledge and budgets.

    The second stage will be to explain not just that this is happening, but how. The pharmaceutical industry is an empire, and hardly monolithic. If our goal is to reform its practices and to impose new governance regimes, then we must be thorough and responsible in identifying each aspect and stage of how companies work—both in regards their negative as well as their positive aspects.

    Pharmaceutical companies have many capabilities; we want to be able to leverage these for enacting good in the world, but in accordance with OUR definition of good, not theirs. I believe that marketing has stolen the soul of the industry, to all our detriment, and this should be the specific target of reform.

    Still, reform will be difficult to conceive and implement. This is the third stage, and the one I have as yet thought about the least. My first inclination (and I invite as much discussion at this site as informed people have time to devote to it) is to propose a separation of R&D from drug synthesis, commercialization, and dissemination. A kind of Glass-Steagall act for pharmaceuticals. R&D can be protected as a combination of strategic industry (as aerospace, telecommunications and semiconductors were at one time, because of their vital importance to defense) and humanitarian concern. The motive to find cures will drive true innovation, and needs will be defined by medical experts not marketing ones. Pharmaceutical companies would concentrate on the development/synthesis phase and on devising strategies for effective distribution.

    The greatest leap over business and competitive market ideology towards the accomplishment of any reform will be accepting that the next phase of pharmaceutical progress has to be global. Where disease and its consequences for all our good is concerned, we live in one world. Even if one believes that the only path to Social Good passes through the market, it is not difficult to show how the financial costs of global healthcare inequality are much greater even than the profits accrued by ten Pfizers, Mercks or GSKs.

  3. “most pharmaceutical company executives (and much of the public) do not see themselves as profiteers, but as public servants”

    What kind of claim is this, exactly? Does it mean that the goal of being effective public servants is a part of the real strategic calculus that these executives carry out in the line of their work? Or that appearing to take this role seriously is a key part of how they find it necessary to present themselves — to themselves or others? Is it a consideration about what issues these executives are likely to be sensitive to if they are raised in the course of some kind of give-and-take about company policies, lobbying, court actions, etc? Or simply an observation intended to highlight some apparent hypocritical discrepancy between their proclaimed principles and their actual methods and strategic goals?

  4. Paul, Thank you for the stimulating questions. I’ve just posted a reply as a regular entry called ‘four good questions’. I don’t mean to be equivocal by answering yes to all four. I hope I’ve understood you. KA

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