Pharmaceutical Practice: Marketing Strategy and Tactics.
Pharmaceutical Marketing Capabilities
The marketing of pharmaceuticals to physicians serves an
essential function in the health care delivery system. Many physicians
learn about new drugs and ongoing research in their areas of
specialization largely through information provided by the companies
that market new products. The medical system benefits significantly from
this form of education, including drug company-sponsored Continuing
Medical Education (CME) and other educational programs that help
physicians keep up with medical information.
The vast majority of the amount spent by pharmaceutical companies on
medical marketing is on substantive information provided to physicians.
All of it – every word – is regulated by the FDA to assure accuracy,
balance and full disclosure
Pharmaceutical marketing serves the following positive purposes for
it enables physicians to learn quickly and
accurately about new therapies and diagnostic tools
it provides FDA-regulated information that must be
balanced and disclose all risks
it enables physicians to keep up with medical
it provides a mechanism for physicians to get prompt
answers to their questions about medical research and the proper use
it helps physicians gain exposure to some leading
authorities in their fields through CME and other programs.
Pharmaceutical marketing is essential for physicians,
allowing physicians to have sufficient information about new drugs so
they can prescribe them appropriately. The amount spent on promotion
(about $15.7 billion in 2000, according to IMS Health, over half of
which is free samples of prescription medicines that physicians provide
to their patients) is much less than what is spent on R&D ($25.7 billion
in 2000). Marketing represents only a small fraction of the actual costs
of developing and manufacturing a drug.
Moreover, to the extent that marketing promotes sales, it increases
research since over 20 percent of sales revenues are reinvested by the
industry into more R&D. It’s also critical that the public understands
that the free drug samples, which are counted as an estimated marketing
expenditure, play a highly important role in the health care system.
They allow doctors to learn about the benefits of new drugs recently
introduced to the market and they allow patients to evaluate a drug’s
benefit before spending the money on a full prescription.
Pharmaceutical marketing is regarded as an essential part of the R&D
process that brings new products into medical practice. More
importantly, it serves a critical educational role in our health care
Marketing Strategies and Tactics in the Pharmaceutical and Biotech
o Marketing strategies are carried out in the marketplace
through promotional and communications efforts. These efforts are
based on a number of factors, such as product features and benefits,
defined product goals, market characteristics, the regulatory
environment, and company strengths and potential weaknesses.
o After appropriate research and due consideration, marketing
personnel set their plans in action using various approaches.
o Sales presentations involve the practice of making personal calls
for sales purposes and are often used following the introduction of
o Sales calls are an effective way of familiarizing physicians,
other healthcare providers and pharmacists with a new product's
features and benefits in relation to competitors.
o Historically, sales presentations involved one-on-one interaction
with physicians. However, as the responsibility for patient care
shifts from individual practitioners to teams of healthcare
providers, group sales presentations are becoming an attractive
o Another marketing approach is the creation and placement of
advertisements in journals such as The Lancet and The Journal of the
American Medical Association.
o When deciding where to place an ad, the type of drug and the
audience to be targeted are deciding factors. For example, it would
make sense to advertise a product for acid reflux in specialty
publications for gastroenterologists, as well as in publications for
o Advertising copy should be short and lively and discuss only one
or two claims, as potential customers tend to forget the information
presented in longer copy that discusses many features and benefits.
o There are regulations that govern the inclusion and placement of
claims, indications and safety information in drug advertising.
These guidelines may require the inclusion of long or technical
text. Therefore, creativity must be exercised to balance the need to
include appropriate information against the need to maintain
Direct to Consumer Advertising
o For most of the history of pharmaceutical advertising, drug
companies were not permitted to advertise directly to consumers.
When restrictions on direct-to-consumer advertising were lifted in
the United States, the technique was soon adopted by a number of
o An example of direct-to-consumer advertising is the placement of
ads in newspapers and magazines. These media are a particularly good
forum for advertising because they provide sufficient space to
include the disclosure information federal regulations require.
o Print-based advertising also has the advantage that potential
customers may hold onto it for future reference or pass it along to
other potential customers.
o Traditionally, the high cost of advertising time on television
meant that an advertisement long enough to convey disclosure
information would be too expensive. In 1997, FDA policy changed such
that prescription drug advertising on television no longer had to
include disclosure information. This change paved the way for
increased direct-to-consumer advertising on television.
o Direct mail can be quite effective for promoting pharmaceutical
products and may take the familiar form of an envelope containing a
letter and brochures or other communication materials such as a
o Typically, direct mail pieces carry more elaborate information
(such as charts and graphs) than other written forms of advertising.
Other Marketing Approaches
o Sampling: Pharmaceutical marketers value sampling because it
allows physicians to develop firsthand experience with a drug in
their own patient population. Sampling leads to new prescriptions
and also helps build brands. A free sample can introduce patients
and physicians to the product or reinforce an impression of a brand
they have already heard about. Once patients have started therapy on
a particular drug and are having a good experience (no side effects,
etc.), they are unlikely to switch to another branded product or a
generic version. For this reason, sampling is particularly important
for drugs used to treat chronic conditions, because they may be
taken for long periods of time.
o Continuing Education: Continuing education programs, are used to
reinforce brand and product recognition among physicians and
pharmacists. To avoid any appearance of inappropriate influence,
many companies present programs that place more emphasis on the
therapeutic category of a drug and less emphasis on the specific
product they want to promote.
o The Division of Drug Marketing, Advertising, and Communications, a
division of the FDA that regulates drug marketing, has established
clear guidelines for how prescription drugs can be advertised in the
United States. These guidelines are stringent and state that
advertisements cannot be false or misleading or omit material facts.
o The FDA also mandates that there must be a fair balance between
information about the drug's effectiveness and risk. Fair balance
rules require that advertisements and other promotional pieces
convey any significant limits to the use of a product. To ensure
fair balance in television advertisements, the most important
information about risk must be included in the audio and visual
portions of the ad, and there must be a brief summary of the
product's risk information.
Key Functions and Responsibilities
o A classic marketing model, the "four P's" of marketing, is one way
to describe the responsibilities of the marketing department. The
four P's of marketing are product, place, price, and promotion.
• The first P of marketing, product, is the item being sold in the
marketplace.. The potential for product success is greatly enhanced
when a company defines the target market and assesses its needs
before introducing a new product. To this end, the marketing
department is getting involved earlier in the drug development
• The second P of marketing is place, which refers to the means of
contact between the buyer and the seller. Place may also be referred
to as distribution, which is important because a product must be
available where and when the customer wants it. Marketers of
pharmaceutical products are in an unusual position because, in many
cases, their customers are the physicians and pharmacists rather
than the actual end-users of their products.
• The third P of marketing, price requires the marketing department
to analyze several factors. First, the pharmaceutical company must
cover the costs associated with bringing a drug to market, including
its research and development costs. Price sensitivity is another
factor that must be considered to determine what price physicians
and patients will be willing to pay. Competitive influences over the
life cycle of a product also need to be considered, particularly
following patent expiration for a brand-name drug.
• The fourth P of marketing, promotion (also called communication),
any activity intended to increase the chance of a sale.
Communication strategies are dictated by the overall marketing
strategy for the product.
Marketing over the product life-cycle
o Introduction: Marketing must coordinate and launch a
comprehensive marketing campaign.
o Growth: Physicians and pharmacists begin to show confidence
in the product's value; prescriptions increase, and competition
o Maturity: Competition reaches its peak; all of the
companies that hope to gain market share have entered the market.
o Saturation: Physicians have used a product for all feasible
indications, and many consider it a valued therapeutic resource.
o Decline: Due to the development of new, more effective
therapeutic agents, communication efforts may be aimed at a core of
physician users or abandoned altogether.
Today, many of the marketing efforts are geared to ensuring a
company’s drug receives formulary approval. You MUST understand the
formulary concept and its relevance to pharmaceutical marketing
efforts. If a drug is NOT on a Formulary of an organization,
(hospital, HMO, insurance company) it cannot be prescribed unless
the prescriber goes through major hassles. The first step in any
marketing effort should be understanding the formulary processes,
and working toward formulary approval (see types of formularies
o A formulary is a list of drugs that have been approved for use by
the medical staff working in a particular healthcare facility, such
as a hospital or health maintenance organization. A formulary may
also be a list of drugs approved for reimbursement by an insurance
company or HMO. In addition, formularies are used for no drug
products such as medical equipment and supplies.
o The goal of the formulary is to encourage more effective use of
drug therapies by physicians. Formulary management does not focus
solely on decreasing the pharmacy budget, but rather on improving
the efficient delivery of healthcare services and optimizing patient
o Typically, a pharmacy and therapeutics committee P&T (made up of
physicians, pharmacists, nurses, administrators and other health
professionals, as appropriate) evaluates available drugs for
inclusion in the formulary. The P&T committee also may remove drugs
from the formulary, or limit their use to certain medical
o Many managed healthcare organizations rely on the formulary to
help manage pharmacy costs
Hospital and other Formularies
o The hospital formulary is a continually revised list of drugs that
have been approved and are available for use within the hospital.
This formulary reflects the current clinical judgment of the medical
staff, as well as the judgment of administrators and nursing staff.
o The formulary system is the method the hospital medical staff
uses, working through the P&T committee to evaluate, appraise and
select drug products that are considered most appropriate and useful
in-patient care for inclusion in the formulary. Only those selected
drugs are routinely available from the hospital pharmacy.
o The first step in developing a formulary for any hospital,
regardless of size, specialty or ownership, is the selection of a
o The medical staff bylaws usually charge the P&T committee with the
responsibilities of developing and maintaining the formulary and of
developing a policy that ensures the safe and appropriate use of
drugs within the hospital. Once the P&T committee makes these
decisions, it becomes the responsibility of the director of pharmacy
to produce the document.
o Formularies are also an important cost-containment measure used by
managed healthcare organizations. A key objective of these drug
formularies is to change physician-prescribing behavior to favor the
most cost-effective agents.
o Like hospitals, managed care organizations such as HMOs work
through a P&T committee to develop and maintain a formulary and a
o As with hospital formularies, the formulary systems for managed
healthcare organizations include guidelines and procedures for
adding, deleting, restricting and reviewing drugs on the list.
o Types of Formularies: Although there is a considerable amount of
variation in formularies and formulary systems from one healthcare
institution or organization to the next, there are two basic types
• Open Formularies- Allow physicians to prescribe non-formulary
drugs without financial
penalty or other consequences, allowing virtually any drug
to be stocked in the
• Closed Formularies (This has become the most prevalent type)
– which consist of a
limited list of approved drugs and impose strict rules on
the use of non-formulary drugs.
o Formulary Approval Criteria:
• Safety and efficacy of the drug
• Cost (as compared to similar compounds)
• Practice guidelines and outcomes research
• Other factors such as pt compliance, easy of administration,
number of physicians
requesting its addition to the formulary
The Impact of Managed Care on Pharmaceutical
o Prior to the advent of managed care, products were marketed in
terms of their specific features and medical benefits, with little
attention paid to their costs. A managed care approach to healthcare
that attempted to use preventive care and incentives to limit costs
became established in an effort to control spiraling medical
o Marketing departments are increasingly looking at disease
management approaches and pharmacoeconomic data when targeting
managed care organizations. Additionally, marketing departments have
learned a number of lessons about how to operate best in a managed
o Most pharmaceutical companies now have Web sites where patients
and physicians can learn more about their products and research
Marketing with Pharmacoeconomic Data
o Marketing departments are finding that valid pharmacoeconomic data
can often demonstrate to those paying for healthcare that the right
pharmaceutical treatment represents excellent value for them and
their patients. The ability of pharmacoeconomic studies to
demonstrate indirect costs and the costs and benefits of specific
treatments can often provide an important perspective when making
decisions within restrictive budgets.
o A co-promotion agreement typically occurs when a smaller company
develops a new drug with the potential to become a blockbuster, but
does not have the resources to launch and market the drug nationally
or internationally. Often, these small companies will turn to large,
established pharmaceutical companies that have the ability to test
these new agents in large clinical trials, devise large-scale
production processes and market them worldwide.