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.]
- The Colonization of Pharmaceutical Science by Marketing
- Pharmaceutical Marketing, Capitalism, and Medicine: A Primer (Part I/III)
- Pharmaceutical Marketing, Capitalism, and Medicine: A Primer (Part II/III)
- Pharmaceutical Marketing, Capitalism, and Medicine: A Primer (Part III/III)
- Cases for Overhauling Pharmaceutical Governance