Having written my MSc dissertation on the future of the
pharmaceutical business model, I could type for days on end and have you
scrolling forever. However, I don’t think that would ever be published as a
blog article. To realise that childhood dream of mine for at least the length of this post…
Come into my office, take a seat and let Dr. Lok tell you something:
The traditional business model of the pharmaceutical sector is failing.
It is a disease that if left untreated, will cause the
company that has contracted it to perish. Symptoms include diminishing market
share, increasing overheads and a thinning profit margin. The only cure is an
innovative business model - no longer a one size fits all approach but one that
each pharmaceutical company can mould around themselves. Think of a memory foam
mattress; sold the same to all but embracing the individual and supporting
their sleeping positions.
Outside of this GP surgery in the real world, we see
traditions diminish as technology and other breakthroughs move the next
generation forward into another era. This idea can be projected onto the
pharmaceutical industry:
The main reason why the traditional business model is failing is due to
the increasing difficulty to establish blockbuster drugs, and the growing
number of patent cliffs that are drawing ever closer and giving way to a new
generation of generics.
By looking at the fundamental management model of patterns
of strategic change (Johnson and Scholes, 1993) (above), we can see that the
industry has seemingly enjoyed continual growth for a prolonged period of time.
Firms now face a period of flux unless they are able to successfully employ a
transformative breakout strategy. With such a strategy, firms do not only have
a chance to be a formidable competitor in the market, but can transform the
business model of the sector as a whole.
The usual go-to for a breakout strategy in many industries
is mergers and acquisitions (M&A), but it is no secret that these have not
been successful for many in the pharmaceutical industry unless they have been
planned strategically. Pfizer for example, was described by the New York Times
as “Frankenstein’s monster” in 2012. They had carried out five large M&A
deals in the decade preceding 2011, and ended up making substantial losses
across the company.
To those suffering from traditional business model disease,
I write a prescription for market research.
Market research is key in enabling pharma to understand how
they might leverage their brand’s brands’ USPs to protect and even continue to
grow their market share in the face of ever increasing generic competition.
These USPs can no longer be molecular and data focussed but need to be
humanistic. We doctors see patients - people
- who are experiencing a dis-ease. By
fully understanding these experiences, companies can recognise the value in
easing the distress of a patient rather than just focusing on the molecular
microbiology or clinical data story.
At Branding Science, we are able to gain a real insight into
the rational, but moreover the emotional drivers which spur the prescription of
different drugs. From pre-launch to post-launch, we use a variety of innovative
psychology-based methods that allow us to dive deep into the thoughts of health
care professionals when making prescription decisions. By helping our clients
understand the reasoning behind the decisions being made, we are able to work
with clients to effectively identify which themes they should leverage their
brand upon in order to connect emotionally with both physicians and patients.
Therefore, branded drugs can still be at an advantage in terms of maximising
market share as long as they remember
that their brand is an intangible asset that only they can exploit.
Traditional Business
Model Disease does not have to be terminal - the cure however may be unique
for each and will be found through the understanding of customers and end
users. I look forward to seeing which pharmaceutical company will be first to
unlock that cure and transform the industry.
The Author: Chloe Lok is research executive at Branding Science. She holds a Masters in Management from the Imperial college in London and a Bsc in biochemistry from the University of Reading.