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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 physicians:

  • 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 advances

  • it provides a mechanism for physicians to get prompt answers to their questions about medical research and the proper use of drugs

  • 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 delivery system.

Marketing Strategies and Tactics in the Pharmaceutical and Biotech Industry

  • Communications Strategies

    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.

  • Sales Presentations

    o Sales presentations involve the practice of making personal calls for sales purposes and are often used following the introduction of a drug.

    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 option.

  • Journal Advertising

    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 general practitioners.

    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 readability.

  • 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 pharmaceutical companies.

    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.

  • Direct Marketing

    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 company-sponsored journal.

    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.

  • Marketing Regulations

    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 process.

    • 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 increases.

    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 below).

    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 outcomes.

    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 specialties.

    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 P&T committee.

    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 formulary system

    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 of formularies:

         • Open Formularies- Allow physicians to prescribe non-formulary drugs without financial
            penalty or other consequences, allowing virtually any drug to be stocked in the
            institution’s pharmacy.

         • 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 Marketing

    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 spending.

    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 care climate.

  • Internet Marketing

    o Most pharmaceutical companies now have Web sites where patients and physicians can learn more about their products and research efforts

  • 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.

  • Co-Promotion Agreements

    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.