The pharma paradox

Chris Rose

Roses Solutions

Much speculation has been made about the “New Commercial Model” and how the pharma business will survive the threat of generic competition, declining pipeline productivity, increased pressure on the bottom line etc.

However amongst all this speculation there is one belief that is being desperately hung onto to try and sustain the old pharma paradigm!

To quote a leading industry player, “patents represent the foundation of pharmaceutical innovation”.

If we examine this statement we immediately see a major flaw in the model!

Patents are not the foundation of innovation, patents are simply one way to protect innovation. (It could very easily be argued that patents in the pharma industry are one of the biggest barriers to innovation!)

The other flaw is that this statement suggests that all innovation is only relevant if it is “patentable”.

 

“…patents represent the foundation of pharmaceutical innovation”

 

In my first article I suggested pharma look outside the narrow focus of its own business model and learn from other industries. If we take the statement above how would other businesses view this?

Bernard Arnault is currently the richest European, did he amass his wealth from a “strong patentable pipeline”? Mr Arnault’s wealth comes from his shares in Louis Vuitton®, Moet &amp, Chandon® and other successful brands.

Amancio Ortega is the next European with a very successful fashion retail business including the Zara® brand.

Karl Albrecht from Germany and owner of the Aldi® supermarket brand is 10th on Forbes Rich list 2010 (www.forbes.com)

Luggage, Champagne, clothes and supermarkets are two a penny (OK, maybe Champagne would cost a little bit more!) so how have these businesses built a huge wealth based on a product anybody else could copy?

It is not rocket science to see that it is the brands that people are buying and not the products and it is the brand that protects the asset from competition.

Why is this such a challenge for pharma?

Ever since I entered the pharma business 20 odd years ago the pundits and the agencies have been busy convincing us all on the importance of branding and brands and yet we all still fear the loss of exclusivity!

 

“Or, is it even simpler than that, and just that pharma marketers still have not grasped the true meaning of a brand?”

 

Is it time to simply admit that branding in pharma is no more than a simple management tool, controlling promotion, activities and the exuberance of the young?

Or, is it even simpler than that, and just that pharma marketers still have not grasped the true meaning of a brand?

 

The life cycle of any product is quite similar, although the time scale may vary from industry to industry. The benefit (or challenge!) pharma has is the long-protected period where the competition is not copies of your product but with alternative products or solutions to the problem.

If we consider this in terms of the brands mentioned above then there are a number of disconnects to pharma.

1. None of these products are protected by patents. We can buy luggage ranging from the very cheap to the very expensive and they can all transport our holiday wardrobe to Tenerife or Marbella! Has the focus on patents within pharma made us lazy towards the brand?

2. The others are primarily corporate or family brands. Louis Vuitton, for example, has a host of products that all sit within the “posh” luggage market. Is there any pharma company where the buying decisions are based on the emotional association with the corporate brand?

3. These companies have more control over the supply of their brands (Zara has its own retail outlets, Louis Vuitton is only supplied via selected outlets or its own shops, Aldi is the retail outlet etc.) The brand can therefore be nurtured within a controlled environment. Imagine if a pharma company only supplied the top teaching hospitals with their brands for “high end” diseases!

4. In each of these cases the buying decision is free from regulations regarding pricing and reimbursement or guidelines. (I only wish there were guidelines to restrict the brands my daughters asked to buy!)

Of course there are other differences, however the question remains is branding in pharma really a viable options for protecting your assets?

If we look at the post-patent market then this is where we can really see the benefits of all the branding work. In Sweden for example Alvedon® is still the leading Paracetamol product (despite being sold by AstraZeneca in 2008 to GSK) In the UK, the Calcichew® brand from Shire is still a leader in the competitive calcium and vitamin market.

Branding does therefore work as a product protection strategy post-patent expiry, however this is far from the minds of many of the industry leaders as they plan how to fill the large gaps in sales anticipated for the future.

So where does this leave us?

I believe that branding in pharma can help to build market share during the patent protected period by nurturing an emotional link to the product.

I would love to see if corporate branding would work in pharma, but it will take a brave CEO to take the leap forward and give it a proper try (i.e. not just a nice logo and strap line but a true commitment to a corporate brand and strategy)

 

“Patents are undoubtedly the most effective protection that innovation can have in the pharma industry”

 

Incidentally, I still wonder how many pharma companies actually use the marketing knowledge they have to develop their corporate brand and not just rely on their Investor Relations and PR experts. So many companies employ a mix of the three main corporate strategies all under the same brand name!

Lastly, the true value of a pharma brand, I believe, comes in the post-patent era. Not immediately when you face “the cliff” but once the shares and sales begin to grow following the initial losses.

Patents are undoubtedly the most effective protection that innovation can have in the pharma industry. However, long-term value can be gained through branding and maybe, just maybe, the best thing that could happen to true innovation (implementation of new ideas) would be a new perspective on patents and how they are implemented as well as a focus on other areas for innovation.

About the author:

Chris Rose has worked in Sales and Marketing roles within the Pharmaceutical Industry for over 20 years leading the launches of primary care and specialty products. After recently leaving the position of Business Unit Director at Nycomed, Chris is currently working for SAM, a specialist recruitment company and is a Partner in Roses, a Marketing Consultancy company based in Sweden.

Contact chris@roses-solutions.com for help in developing your strategy and identifying business solutions or visit the website (www.roses-solutions.com).

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