PWC report

1. Pharmaceuticals and Life Sciences
Pharma 2020: Marketing the future
Which path will you take?

2. Table of contents
Previous publications in this series include:
Pharmaceuticals Pharmaceuticals and Life Sciences
Pharma 2020: The vision Pharma 2020: Virtual R&D
Which path will you take?* Which path will you take?
*connectedthinking 
Pharma 2020: The vision # Pharma 2020: Virtual R&D 1
Published in June 2007 this paper highlights a number of This report published in June 2008 explores opportunities
issues that will have a major bearing on the industry over to improve the R&D process. It proposed that new
the next 11 years. The publication outlines the changes we technologies will enable the adoption of virtual R&D; and
believe will best help pharmaceutical companies realise the by operating in a more connected world the industry, in
potential the future holds to enhance the value they provide collaboration with researchers, governments, healthcare
to shareholders and society alike. payers and providers, can address the changing needs of
society more effectively.
“Pharma 2020: Marketing the future” is the third in this series of papers on the future of the pharmaceutical industry published by
PricewaterhouseCoopers. It discusses the key forces reshaping the pharmaceutical marketplace, including the growing power of healthcare payers,
providers and patients, and the changes required to create a marketing and sales model that is fit for the 21st century. These changes will enable
the industry to market and sell its products more cost-effectively, to create new opportunities and to generate greater customer loyalty across the
healthcare spectrum.

3. Table of contents
Introduction 2
What will the healthcare landscape look like in 2020? 4
Recognising the interdependence of the pharmaceutical and
healthcare value chains 8
Investing in the development of medicines the market wants to buy 10
Forming a web of alliances to offer supporting services 12
Developing a plan for marketing and selling specialist therapies 13
Creating a culture that is suitable for marketing specialist healthcare packages 15
Managing multi-country launches and live licensing 18
Adopting a much more flexible approach to pricing 18
Creating a marketing and sales function that is fit for the future 19
Conclusion 22
Pharma 2020: Marketing the future

4. Introduction trends reshaping the pharmaceutical that, between 1996 and 2005, total
marketplace).1 All these challenges real spending on pharmaceutical
The social, demographic and economic have major ramifications for the way in promotions rose from US$11.4 billion
which Pharma markets and sells the to US$29.9 billion in the US (the only
context in which the pharmaceutical
medicines it develops – the subject on country for which expenditure on all
industry (Pharma) operates is changing
which we shall focus here. major marketing and sales activities
dramatically, as we noted in “Pharma is available).2 Another study suggests
2020: The vision”, the White Paper The industry has traditionally relied on that the true figure (including meetings
PricewaterhouseCoopers* published in aggressive marketing to promote its and e-promotions) is closer to US$57.5
June 2007 (see sidebar, Seven major products. One recent study estimates billion in real terms.3
Seven major trends reshaping the pharmaceutical marketplace
The pharmaceutical marketplace is changing dramatically, with huge implications for the industry as a whole. We have identified
seven major socio-economic trends.
The burden of chronic disease is performance of different medicines. where demand for medicines is likely
soaring. The prevalence of chronic Widespread adoption of electronic to grow most rapidly over the next 13
diseases like diabetes is growing medical records will give them the years, are highly varied. Developing
everywhere. As greater longevity forces outcomes data they need to determine countries have very different clinical and
many countries to lift the retirement age, best medical practice, discontinue economic characteristics, healthcare
more people will still be working at the products that are more expensive or less systems and attitudes towards the
point at which these diseases start. The effective than comparable therapies and protection of intellectual property. Any
social and economic value of treatments pay for treatments based on the outcomes company that wants to serve these
for chronic diseases will rise accordingly, they deliver. So Pharma will have to prove markets successfully will therefore have
but Pharma will have to reduce its that its medicines really work, provide to devise strategies that are tailored to
prices and rely on volume sales of such value for money and are better than their individual needs.
products because many countries will alternative forms of intervention.
Many governments are beginning
otherwise be unable to afford them.
The boundaries between different to focus on prevention rather than
Healthcare policy-makers and forms of healthcare are blurring. The treatment, although they are not yet
payers are increasingly mandating primary-care sector is expanding as investing very much in pre-emptive
or influencing what doctors can clinical advances render previously fatal measures. This change of emphasis
prescribe. As treatment protocols diseases chronic. The self-medication will enable Pharma to enter the realm
replace individual prescribing decisions, sector is also increasing as more of health management. But if it is to do
Pharma’s target audience is also prescription products are switched to so, it will have to rebuild its image, since
becoming more consolidated and more over-the-counter status. The needs healthcare professionals and patients
powerful, with profound implications of patients are changing accordingly. will not trust the industry to provide
for its sales and marketing model. Where treatment is migrating from the such services unless they are sure it has
The industry will have to work much doctor to ancillary care or self-care, their best interests at heart.
harder for its dollars, collaborate with patients will require more comprehensive
The regulators are becoming more
healthcare payers and providers, and information. Where treatment is
risk-averse. The leading national and
improve patient compliance. migrating from the hospital to the
multinational agencies have become
primary-care sector, patients will require
Pay-for-performance is on the rise. much more cautious about approving
new services such as home delivery.
A growing number of healthcare payers truly innovative medicines, in the wake
are measuring the pharmacoeconomic The markets of the developing world, of problems with medicines like Vioxx.
*‘PricewaterhouseCoopers’ refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and
independent legal entity.
2 PricewaterhouseCoopers

5. Much of this increase in spending has
Too many cooks spoil the broth
gone on the expansion of the sales
force. However, many of the industry’s Between 1996 and 2005, the number of US sales representatives nearly doubled
biggest markets are now saturated with to 100,000, although the number of practising physicians rose by just 26%. The
sales representatives, and its selling market is getting very crowded in other countries, too. In a recent poll of British
techniques are becoming increasingly general practitioners, respondents reported receiving an average of four visits
ineffective (see sidebar, Too many a month and five promotional mailings a week. Similarly, one Malaysian doctor
cooks spoil the broth).4 participating in a study of promotional practices in emerging countries was
approached by 16 multinationals and nine local generics companies within a five-
Hence the fact that returns on detailing
week time span.
(sales visits to doctors) have begun
to decline in the developed world. The battle for market share has triggered considerable alarm. Some 20% of US
Between 2004 and 2005, there was a and British doctors now refuse to see any sales representatives. The regulations
23% drop in dollar growth per detail in governing the behaviour of sales representatives are also getting tougher. Various
the US, although detailing still accounts US states have passed laws requiring pharmaceutical companies to report all
for more than half the market share gifts or payments to healthcare professionals exceeding $25, while Australia has
new brands win during their first year of banned pharmaceutical companies from providing doctors with personal gifts,
life. The picture is rather more varied in entertainment or lavish hospitality.
Western Europe, but detailing plays a Several industry trade groups have likewise introduced new codes of practice
much smaller role in stimulating sales in – and they are actively enforcing the rules. The Prescription Medicines Code of
these countries.5 Practice Authority (PMCPA), which administers the code of practice laid down by
Conversely, detailing is still very the Association of the British Pharmaceutical Industry, is one such instance. The
important in many developing PMCPA “names and shames” the most serious offenders, by reprimanding them
nations. In China, for example, nearly publicly and publicising the violations they have committed in advertisements in
three-quarters of the information the medical and pharmaceutical press.
doctors receive about new medicines
comes from meetings with sales promotional” information.9 And to US advertising and French-speaking
representatives and conferences.6 But Pharma’s spending on DTC advertising Canadians, who primarily watch French-
here, too, resistance to “irresponsible” only accounts for about US$5 billion, language media – over a five-year
marketing practices is growing,7 and, in which is just 14% of its total marketing period. They found that DTC advertising
May 2007, the member governments of budget.10 However, the jury is still out on had no effect on sales of two of the
the World Health Organisation passed a just what this expenditure provides. three products and that, although sales
resolution to enact or enforce legislation of the third spiked by more than 40%
banning the “inaccurate, misleading or In the early days, the returns appeared
when the campaign began, the spike
unethical promotion of medicines”.8 to be substantial. Between 1999 and
was quite brief.12
2000, sales of the 50 products that
Direct-to-consumer (DTC) advertising
were most heavily advertised in the Much of the industry’s expenditure
– the other big weapon in Pharma’s
US soared by 32%, compared with on DTC advertising may have been
marketing artillery – has also failed to
deliver all that the industry expected. an average increase of 13.6%.11 But pointless, but the damage to its
Only two countries – the US and New more recent research suggests that reputation is arguably a more serious
Zealand – currently allow companies DTC advertising has little, if any, long- problem. In January 2008, the US House
to market their medicines directly to term impact on demand. In one study of Representatives Committee on Energy
consumers, although the European published in the British Medical Journal, and Commerce initiated an investigation
Commission is considering a proposal the researchers compared the uptake into the misleading and deceptive
to lift the ban on direct communications of three medicines in two populations – advertising of medicines, after several
that provide “objective...non- English-speaking Canadians exposed particularly flagrant abuses of the rules.13
Pharma 2020: Marketing the future 3

6. Table of contents
Table 1: Big Pharma has been slashing In short, aggressive marketing – • The buying and selling of medicines
its workforce whether it be to doctors or patients – is is based solely on technical data like
Announced becoming increasingly ineffective as a safety and efficacy, as distinct from
Company Job Cuts means of stimulating demand for new subjective criteria like quality of life.
therapies and overcoming reluctance to
Pfizer 10,000 We shall discuss the changes that have
pay premium prices for products that
invalidated these assumptions in more
AstraZeneca 7,600 are deemed to offer only minor clinical
detail in the next chapter.
Merck & Co. 7,200 improvements. Industry critics are also
becoming increasingly vociferous in
Bayer 6,000
their complaints that it is wasteful or
Schering-Plough 5,500 even unethical.
What will the healthcare
Johnson & Johnson 5,000
Big Pharma has responded with various
landscape look like in
GlaxoSmithKline 5,000 cost-cutting measures. Pfizer set the 2020?
Amgen 2,600 pace in late 2006, when it said that it
Novartis 2,500 would cut 20% of its US sales force.14 For many years, pharmaceutical
Other companies rapidly followed suit companies decided what their products
Wyeth 1,200
and, by October 2008, the industry were worth, and priced them accordingly.
sanofi-aventis 700 leaders had announced plans to shed But healthcare policy-makers, payers
Total 53,300 another 53,300 jobs, many of them in and patient groups are now playing
marketing and sales (see Table 1).15 an increasingly important role in the
Source: PricewaterhouseCoopers
They are now turning their attention valuation process – and this trend will
to developing countries like India, accelerate, as healthcare expenditure
where 10 multinationals are reported everywhere continues to soar.
to be trimming the number of sales
The aging of the population, together
representatives they employ.16
with dietary changes and more
However, both industry executives and sedentary lifestyles, is driving up the
commentators recognise that the failings disease burden in both developed
of the current marketing and sales and developing countries.17 People’s
model cannot be addressed simply by expectations are also rising as new
reducing the size of the sales force; therapies for treating serious illnesses
the problems go very much deeper. like cancer reach the market. The
We believe that they stem from three global healthcare bill has risen
incorrect assumptions, namely that: commensurately; between 2000 and
2006, expenditure on healthcare as
• Pharma alone determines the value
a percentage of gross domestic product
of its products
(GDP) climbed in every country in
• Products alone create value; and the OECD.18
4 PricewaterhouseCoopers

7. Many policy-makers and payers have doctor was electronically notified that
The push for e-prescribing
therefore started trying to measure the product concerned was off plan.21
exactly what they are getting for their More than 70% of all doctors in
E-prescribing has enormous commercial
money. A number of countries, including Denmark, the Netherlands and
implications for Pharma. Most of the
Australia, Canada, Finland, New Sweden write prescriptions
activities it performs to market its
Zealand and the UK, have established electronically, and the European Union
medicines to doctors take place before
agencies specifically to conduct formal is promoting the practice in other
the prescribing decision is made –
clinical and economic evaluations member states. Doctors in Darwin,
and e-prescribing could mitigate that
of medicines. The US Senate is also Australia, are also testing a new
influence, unless the industry can system that, if successful, could be
considering a bill to create a Health
collaborate with healthcare payers to rolled out nationwide, and the US has
Care Comparative Effectiveness
Research Institute, which would perform shape the information doctors receive. just passed a new law to increase
a similar function.19 However, healthcare payers will want e-prescribing among doctors
hard proof that a product really is safer, participating in the Medicare
Similarly, some governments are more effective or more economical than programme. Eligible physicians will
actively encouraging the use of its rivals, and they will have many more receive a 2% bonus for writing
e-prescribing (see sidebar, The push resources to investigate such claims electronic scripts in 2009 and 2010,
for e-prescribing).20 The main aim of than any individual doctor or practice. dropping to 1% in 2011 and 2012, and
these efforts is to reduce prescribing 0.5% in 2013. But penalties will be
errors. But e-prescribing will also enable With greater use of pharmaco-
economics, strict formularies and imposed on those who do not use
healthcare payers to influence the e-prescribing by 2012.
prescribing decision much more easily, e-prescribing, healthcare policy-makers
by providing doctors with clinical and and payers are increasingly assessing Interest in e-prescribing is not confined
financial information at the very point at the relative value of different medicines. to the developed world. India’s largest
which they are choosing which products Patients are playing a bigger part in retail pharmacy chain, Apollo
to prescribe. the process, too. Indeed, they are Pharmacies, has recently started
even helping to decide which products offering doctors and patients an
This will have a major impact on the should reach, or remain on, the market. e-prescription service. Similarly, the
decisions doctors make. In one recent Turkish government has launched
Patient power was a critical factor in the
survey, for example, two-thirds of several e-prescribing pilot programmes
decision to approve Herceptin for use
the physicians participating in a US as part of a bigger initiative to establish
on the British National Health Service
e-prescribing initiative reported that a national health network, and the
(NHS) in the treatment of early-stage
they were more likely to prescribe a Russian Ministry of Health and Social
breast cancer, for example.22
generic or plan-preferred medicine Development introduced new
when using an e-prescribing system. Patients will become even more prescribing rules, including computer-
Analysis of some 3.3m e-prescriptions influential, as access to reliable readable prescription forms for the
bore out their claims; 39% of those healthcare information increases, the beneficiaries of federal and regional
that failed to comply with the formulary use of co-payments proliferates and insurance schemes, in 2007.
requirements were changed when the the trend towards self-medication
Pharma 2020: Marketing the future 5

8. Table of contents
grows (see sidebar, Health 2.0 hits
Health 2.0 hits the headlines
the headlines).23 Public expenditure
still accounts for the bulk of healthcare The number of people using the Internet to find healthcare information has
spending in every G7 country except increased dramatically over the last decade. Some 66% of US adults go online to
the US, but patients in the E7 countries research their conditions, as do more than half of all Europeans. Numerous blogs
typically foot more than half the bill and online forums have also sprung up to cater for increasingly information-hungry
themselves (see Figure 1). patients. They include sites such as patientslikeme.com, which enables patients to
compare symptoms and side effects; medhelp.org, where doctors and patients
The split between public and private
work together to create “wikis”; and various disease-specific forums for patients
healthcare spending is also changing
with conditions like cancer and epilepsy.
in some G7 countries, as they try
to reduce the burden on the public The next stage in the so-called Health 2.0 revolution is the proliferation of
exchequer. In Britain, for example, the electronic personal health records. Microsoft and Google have both launched
government recently gave permission services to help people create and store their own personal health records on the
for cancer patients to buy “top-up” World Wide Web. But there are many other, smaller companies offering similar
drugs privately, without losing their right services, including myPHR.com, medicalrecords247.org and ihealthrecord.org.
to free care under the NHS.24
Conversely, in the US, President Barack
Obama plans to put a bigger share
of healthcare costs on the public tab,
by expanding coverage to uninsured
Americans. He has also promised to
lower the cost of medicines by allowing Figure 1: Private expenditure on health as a percentage of total healthcare
the importation of safe products spending in the G7 and E7 countries
from other developed countries,
increasing the use of generics in public 90% G7 Countries E7 Countries
programmes, taking on pharmaceutical
companies that block cheaper generics
80%
from the market and eliminating the ban 70%
on the federal government negotiating
60%
drug prices.25 But, whether it is patients,
governments or health insurers who 50%
are picking up the costs, one thing is
40%
clear: the days when pharmaceutical
companies could dictate how much 30%
their medicines should fetch, without
20%
regard for the other stakeholders in the
healthcare arena, are over. 10%
The opportunities for generating value 0%
from pure product offerings are also
da
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ly
n
k
S
il
na
In ndia
M ia
o
ia
ey
y
az
U
pa
ic
U
Ita
s
ss
an
rk
an
hi
a
ne
rapidly diminishing. In the past 15
ex
Br
an
Ja
Ru
m
C
Tu
I
Fr
do
er
C
months, at least three companies
G
have started offering personal genome Source: World Health Organisation, “World Health Statistics 2008”
6 PricewaterhouseCoopers

9. services for the masses. 23andMe which medicines are particularly safe,
On the right track
(which is backed by Google) charges efficacious and cost-effective in different
just US$399 to analyse people’s DNA patient populations, and include such Numerous new sources of clinical data
and tell them how likely they are to suffer information in their treatment protocols are emerging. The US National
from more than 90 health conditions and (see sidebar, On the right track).27 They Comprehensive Cancer Network has,
inherited traits. deCodEme (a branch will also be able to revise the prices they for example, established an oncology
of the Icelandic genetics company pay upwards or downwards, depending database to collect socio-
deCODE Genetics) and Navigenics on how specific medicines perform over demographic, clinical and non-clinical
offer more comprehensive versions of time (see Figure 2). information on patients suffering from
this service for US$985 and US$2,500, various forms of cancer. The American
The industry has already been forced
respectively.26 Cheap gene sequencing Medical Group Association has set up
to take the first steps down the path a system to let doctors share
and disease disposition analysis will fuel
to pay-for-performance. In the UK, for comparative outcomes data, so that
popular demand for targeted medicines
example, reimbursement of Velcade, they can treat their patients more
and personalised healthcare.
Johnson & Johnson’s new cancer effectively. And the International
By 2020, electronic medical records, treatment, is contingent on proof of a Serious Adverse Events Consortium
e-prescribing and remote monitoring measurable reduction in the size of a aims to develop genetic markers for
will also give healthcare payers and patient’s tumour.28 Similarly, payment for identifying which individuals are at risk
providers in many countries access Lucentis, Novartis’s therapy for age- of experiencing serious drug-related
to extensive outcomes data, as we related macular degeneration, is subject adverse events.
indicated in “Pharma 2020: The vision”. to a dose-capping scheme under which
They will then be able to determine the company bears the costs of treating
Figure 2: By 2020, pay-for-performance will be the norm in many countries
Today
Patient Prescription Payment
2020
Patient Prescription Outcome
Medicine works/does not work
Medicine is safe/unsafe
Specified populations in which
medicine works and is safe
Payment based on performance
Source: PricewaterhouseCoopers
Pharma 2020: Marketing the future 7

10. Table of contents
any patient who requires more than 14 definition of what constitutes a “good” Recognising the
injections.29 The British government now medicine will expand. In addition
plans to extend this approach, with a to clinical considerations like safety interdependence of the
flexible pricing system under which the and efficacy, it will include qualitative pharmaceutical and
prices of new medicines can be raised, criteria – such as the extent to which
if they prove more effective than initially a treatment makes patients feel better,
healthcare value chains
expected.30 enables them to keep working or
The relationship between pharmaceutical
US health insurer UnitedHealthcare reduces the cost of caring for them.
companies, healthcare payers and
is also piloting a performance-based providers is at best wary – and
By 2020, we believe that
pricing experiment with Genomic sometimes downright antagonistic. Yet
pharmaceutical companies will therefore
Health, which makes a genetic test analysis of their value chains suggests
have to collaborate much more closely
to identify which women with early- that they have far more in common than
stage breast cancer would benefit from with everyone in the healthcare arena
to provide a range of products and might first seem the case.
chemotherapy.31 And, by 2020, we think
that all new medicines will be paid for on services from which patients can pick In its simplest form, a value chain is
the basis of the outcomes they deliver. and choose all but the core prescription, the series of activities an entity (either
both to differentiate their offerings more singular or collective) performs to create
However, most treatments perform value for its customers and thus for the
effectively and to preserve the value
much better in clinical trials than they entity itself. The pharmaceutical value
of the medicines they make. More
do in everyday life, partly because the chain starts with the raising of capital
specifically, they will have to:
level of compliance is much higher.
to fund R&D and concludes with the
Numerous clinical studies show, for • Recognise the interdependence of marketing and sale of the resulting
instance, that most patients who the pharmaceutical and healthcare products. In essence, it is about making
are taking statins can reduce their value chains innovative medicines that can command
cholesterol to normal levels. But in one
• Ensure that they invest in developing a premium price (see Figure 3).
study of long-term compliance patterns,
only 33% of patients were still using medicines the market really wants The payer value chain starts with the
a statin at the end of 12 months, and raising of revenues through premiums,
• Form a web of alliances to offer
only 13% were still doing so at the taxes or out-of-pocket payments.
supporting services
end of five years.32 Thus, if Pharma is The payer then creates value for its
to command premium prices for its • Develop comprehensive plans for customers (patients, policyholders and
products in future, it will need to help marketing and selling specialist payers) by managing the administrative
patients manage their health. Otherwise, therapies process and giving them access to
it risks having to reduce its charges or medical care. The payer’s goal is thus
• Create organisational cultures that to make a financial or political profit by
even incurring financial penalties for
failing to deliver all that it has promised. are suitable for marketing specialist maximising its revenues or reputation
healthcare packages (with its customers or voters, depending
To put it another way, good medicines
• Manage multi-country launches and on whether it is a commercial enterprise
will still be the cornerstone of any
live licensing or government) and the quality of the
pharmaceutical company’s marketing
service it secures, while minimising its
and sales strategy, but they will not • Adopt a more flexible approach to costs (see Figure 4).
be sufficient in isolation. By, 2020, pricing; and
prescription therapies will be only one The provider’s goal is to deliver a high
of the components in a collection of • Build marketing and sales functions quality of care efficiently. This usually
products and services from which that are fit for the future. means treating patients as economically
patients can select. Furthermore, as the as possible, for as long as required. The
balance of power shifts from Pharma provider value chain therefore begins
to healthcare payers and patients, the with an analysis of the factors affecting
8 PricewaterhouseCoopers

11. Figure 3: The pharmaceutical value chain
Raising of Finance Research Development Manufacturing Marketing & Sales
& Distribution
(Via the capital (Target identification, (Clinical trials, (Process development, (Development of
markets) synthesis & screening of submission of new scale-up, commercial promotional materials,
molecule, in vitro and drug application to production, shipping to detailing, account &
in vivo testing, initial regulators) brand management)
warehouse)
testing in man)
Prevention
Source: PricewaterhouseCoopers
Figure 4: The healthcare payer value chain
Raising of Finance Provision of Cover Medical Services Management Bill Payment
(Through premiums, taxes or (Analysis of population (Practice guidelines, clinical (Referral management,
out-of-pocket payments) at risk, administrative guidance, pharmacoeconomic monitoring & payment of
services etc.) evaluations, formularies etc.) healthcare providers’ bills)
Source: PricewaterhouseCoopers
Note: Our diagram represents the key activities in the payer value chain, not the entity that performs a specific activity, since this clearly varies from one
healthcare system to another.
Figure 5: The healthcare provider value chain
Analysis of Prevention Primary Care Secondary & Long-Term Care
Population at Risk Tertiary Care
(Epidemiological (Vaccinations, healthcare (Diagnosis, treatment, (Diagnosis & treatment of (Disease management,
studies) advice etc.) minor surgery) serious illnesses, nursing care at home, in
major surgery, emergency nursing homes & hospices)
services, hospital care)
Source: PricewaterhouseCoopers
Note: Our diagram represents the key activities in the provider value chain. Again, different entities perform different activities in different healthcare systems.
the health of a given population and policies and practices of the providers and, while they continue to clash, they
the preventative measures that can be used. The value providers generate are struggling to attain their respective
taken to forestall illness. Thereafter, it depends on the revenues payers raise goals. The quality of the care they
progresses through the various stages and the medicines Pharma makes. And collectively deliver is lower, and the
of treatment from primary care to long- the value Pharma generates depends cost higher, than it would otherwise
term care (see Figure 5). on getting access to the patients whom be – and society can no longer afford
providers serve and income from the such inefficiencies. So, if mankind is
However, although these three value
payers who fund those providers. to ensure that it gets the healthcare it
chains are different, they are also heavily
interdependent. The value healthcare In short, none of the three parties can needs, the three parties must be much
payers generate depends on the do its job properly without the others more closely aligned.
Pharma 2020: Marketing the future 9

12. Table of contents
We believe that creating feedback loops Investing in the play a key role in deciding whether a
to capture outcomes data will help to medicine is innovative, using different
close the gap. It will enable Pharma development of definitions of innovation at different
both to establish a more dynamic medicines the market points in the product lifecycle (see
relationship with payers and providers, sidebar, What is innovation?).33
and to play a bigger role in giving
wants to buy
The process starts with the researcher,
patients the support they require. This
One of the many areas in which Pharma who identifies the scientific potential of
will ultimately result in the convergence
needs to work much more closely with a particular molecule. It continues with
of the separate, linear value chains that
healthcare payers and providers is in the investor, who backs that belief with
exist today into a single, circular value
determining the sort of medicines the capital; the regulator, who approves the
chain (see Figure 6).
market actually wants to buy. We have labelling claim; and the pharmaceutical
identified seven stakeholders who each company, which commits resources to
Figure 6: By 2020, the pharmaceutical, payer and provider value chains will be much more closely intertwined
Changes in epidemiology will
Med influence the need for healthcare
ica funding & Pharma’s research
er lS
C ov Primary care er
vic
priorities. Payers, providers &
Se
of tio
n
Te co
n e Pharma will collaborate on
en rtia da epidemiological studies.
on
ev
s
ry r y
Pr
M
i
ca
vis
an
Payers will shift to outcomes-based
&
Pro
ag
re
pricing. Pharma will collaborate with
em
Lo
payers and providers to determine
popul is of
ng-
ent
at ris n
which of the medicines in its pipeline
atio
term
k
s
really add value and can thus
Analy
command the premium prices it
care
needs to maximise its return on
Patient investment.
Mark les
Payers, in consultation with the
ce
of f ising
& Sa
medical profession, will issue clinical
inan
etin
Ra
guidelines. They will also give
g
providers incentives to prevent &
manage disease, as distinct from
Ra
M
n treating it. Pharma’s focus will shift to
Di ufac
a
isi
&
ch
t
st the development of cures and
en
rib turin ar
ng
se
ym
fF uti g healthcare packages for helping
Re a
o
on
inan lP
l patients comply with their medical
Payer ce Development Bi regimens and manage the diseases
Provider
Pharma from which they suffer more
effectively.
Source: PricewaterhouseCoopers
10 PricewaterhouseCoopers

13. the production and promotion of the
What is innovation?
treatment. Once a medicine has reached
the market, it is the healthcare payer, Innovative products are typically defined as those which cure a disease or
provider and patient, respectively, who condition; prevent a disease or condition; reduce mortality or morbidity; reduce the
adjudicate on its innovativeness: the cost of care; improve the quality of life; are safer or easier to use; or improve
healthcare payer by paying a premium patient compliance and persistence. Most industry experts also distinguish
price for it; the provider by choosing it between “radical” and “incremental” innovation, although the distinction is not
over other therapies; and the patient by always very helpful. Pharmaceutical companies often engage in a race to develop
taking it as instructed or even pressing new products which all have the same mode of action, and the third or fourth
for a prescription (see Figure 7). market entrant may be superior to the first or second.
However, not all of these “referees”
are equally important. If the
sponsoring company is to recover its
development costs and earn a return Figure 7: Seven stakeholders are involved in deciding whether a new product
on its investment, any new products it is innovative
launches must command a premium
price while they are still under patent
protection. The healthcare payer – be it
Patient
a government, health insurer, employer
or patient – is therefore the ultimate Provider Regulator
arbiter of whether or not a product is
considered innovative, and the shift in Payer
the balance of power from prescribers Researcher Investor Regulator Pharmaceutical company
to payers will only increase that control. $
Yet, for many years, most
pharmaceutical firms invested relatively
little effort in understanding the payer’s
perspective during the R&D process,
and those that did so generally waited R&D 12 Years Marketing & Sales 8 Years
until the end. This is why many of the
medicines they have recently launched
have failed to qualify as innovative. In Source: PricewaterhouseCoopers
2006, only five Big Pharma companies
earned more than 10% of their revenues
Table 2: Only eight truly innovative medicines were launched in 2007
from major products launched within
the previous five years.34 Moreover, Country of
there are no signs of any immediate Company Brand name Primary indication first launch
improvement. In 2007, only eight Novartis Tekturna Hypertension US
of the 27 new therapies launched GlaxoSmithKline Tykerb Breast cancer US
worldwide were the first of their kind
(see Table 2). More than half were PharmaMar Yondelis Soft tissue sarcoma UK, Germany
“me-too” treatments with at least three Alexion Soliris Paroxysmal nocturnal US
predecessors.35 haemoglobinuria
A number of companies now look Pfizer Selzentri HIV US
at whether the medicines they are GlaxoSmithKline Altabax Bacterial skin infections US
developing are as effective as, or more LEO Pharma ATryn Thrombosis UK
effective than, other existing therapies
(and certain countries now require Bristol-Myers Squibb Ixempra Breast cancer US
that they do so). Some firms also Sources: IMS Intelligence.360 (2008) and PricewaterhouseCoopers analysis
Pharma 2020: Marketing the future 11

14. Table of contents
conduct extensive safety profiling in the commercial sphere. Indeed, they known examples being Genentech’s
Phase II to reduce the risk of finding should review every compound in their partnership with DAKO to devise a test
safety problems in Phase III, which pipelines, since no molecule that enters for identifying which patients with breast
accounts for more than 25% of all R&D clinical development today will be cancer can benefit from Herceptin.39
costs.36 However, very few focus on launched before 2015, when the market
However, Pharma will also have to enter
demonstrating the superior economic for medicines will be even tougher
the health management space, with
value of their candidate molecules – and than it is now. Performing a rigorous
compliance programmes, nutritional
even fewer consider pricing before the assessment of what payers, providers
advice, exercise facilities, health
end of Phase III. and patients regard as innovation in
screening and other such services. One
Phase II will enable the industry to
Two recent exceptions to this pattern firm that has already gone some way
terminate any candidates that look
point to a more constructive way down this road is Baxter Healthcare,
unlikely to generate much demand
forward. In late 2007, Novartis struck which offers a range of services for
and concentrate its resources on more
a groundbreaking deal with the patients suffering from renal failure.
commercially promising products (see
English National Institute for Health These services vary from country to
Figure 8).
and Clinical Excellence (NICE) under country, but they include a global
which it agreed to pay the agency a educational website with customisable
consultancy fee for advising it on the tools and information tailored to the
design of a Phase III trial to measure
Forming a web of needs of paediatric patients; a network
the efficacy and cost-effectiveness of alliances to offer of nurses who provide dialysis training
an experimental new drug.37 And, in at home or in hospital; a home delivery
June 2008, GlaxoSmithKline took the
supporting services service; and a travel service to support
equally unprecedented step of giving peritoneal dialysis patients travelling
The development of medicines the locally or globally.40
government healthcare officials in the
market actually wants to buy will
UK, France, Italy and Spain a say in Novo Nordisk has gone even further in
not be enough, though. By 2020,
deciding which compounds to progress its quest to “defeat diabetes”.41 In 2001,
pharmaceutical companies will need
through its pipeline.38 the company launched a global initiative
to offer a suite of supporting services
We believe that all pharmaceutical for the treatments they launch. A few called DAWN, in conjunction with the
companies should adopt a similar companies have already paired up International Diabetes Federation, to
approach and extend the concept to develop complementary therapies provide “psychosocial support” for
of “de-risking” from the clinical to and diagnostics, one of the best patients with diabetes.42 It also operates
a “National Changing Diabetes”
programme in 66 countries, via which it
Figure 8: Pharma needs to adopt a price de-risking strategy in early development provides training for medical staff, free
blood sugar screening services, support
Percentage of spending in each phase of R&D. 11.3% of spending uncategorized for diabetes patient organisations and
equipment for diabetes clinics, as
Preclinical Phase I Phase II Phase III Regulatory Phase IV
well as working with governments to
25.7 5.8 11.7 25.5 6.9 13.3 improve the diagnosis and treatment of
the disease.43
Point at which Point at which
pharmaceutical pharmaceutical Meanwhile, Medtronic recently launched
companies companies a wireless monitoring service for
should be typically start
thinking about thinking about
patients with cardiac disease, which
pricing to de-risk pricing enables them to send data from their
their portfolios implanted devices directly to their
Source: PricewaterhouseCoopers
12 PricewaterhouseCoopers

15. doctors. The latest devices can even Developing a plan for Generics for free
be programmed to update and send
patient data automatically.44 And other marketing and selling San Diego based MedVantx has
precedents for moving into health specialist therapies developed an automated system for
management exist outside Pharma dispensing generics free at the point
itself. In the UK, for example, insurance The industry’s changing product mix of care. When a doctor wants to
giant Prudential has joined forces will act as yet another incentive to move give a patient a sample, the machine
with Virgin Active Health Club to offer into health management. In the 1990s, dispenses a 30-day supply and logs the
a critical illness policy that provides most of the medicines Pharma made transaction. The health insurer then pays
subsidised gym membership and were primary-care therapies for diseases for the product.
rewards people who exercise regularly afflicting large patient populations, The idea is to give doctors an
by reducing their premiums.45
such as hypertension, diabetes, alternative to the free samples issued
By 2020, this model will apply to the high cholesterol and depression. by pharmaceutical companies. Such
industry as a whole. Some companies But genomics, proteomics and samples are popular with patients
may choose to provide such services metabolomics are providing new tools because they provide an opportunity
themselves, but most will function with which to develop larger molecules to try a medication before paying for it.
as nodes for a network of providers, that more closely mimic naturally One pilot programme conducted by Blue
including device manufacturers, occurring molecules in the human body. Cross & Blue Shield of Rhode Island is
dieticians, health and fitness clubs, estimated to have reduced the insurer’s
Biotech companies like Amgen,
mobile telecoms operators and expenditure on medicines by nearly $2m.
Biogen and Genentech were among
compliance call centres. They will
the first firms to capitalise on these
be responsible for managing the
scientific advances. However, many Generics for free).48 The opportunities
mechanics of contracting and delivering
pharmaceutical companies have now for developing primary-care treatments
these services, and thus collectively redirected much of their investment
providing healthcare packages that with the potential to command premium
from chemical entities to proteins prices are thus shrinking rapidly.
individual patients can tailor to their for specific cancers, immunological
own needs. conditions and blood factor deficiencies Conversely, demand for specialist
Moving into health management will not too. At least 400 of the 2,000-odd medicines is soaring. In 2007, 55 of the
be easy, not least because the provision treatments currently in development 106 blockbusters on the market were
are biologicals or protein-based specialist treatments, up from just 12
of services is very different from the
compounds.46 in 2001.49 And IMS Health predicted
provision of products. Nevertheless, this
that sales of all specialist therapies
route has several significant advantages. Increasing generic competition has could reach US$295-300 billion by the
It will enable pharmaceutical companies reinforced this shift in the industry’s end of 2008, accounting for 44% of
to generate new sources of revenue, research focus; as many of the products worldwide spending on prescription
build stronger brands and forge closer developed in the 1990s come off patent, pharmaceuticals.50
relationships with the patients who generics manufacturers are filling an
use their products and services. It will ever larger part of the primary-care Yet, although specialist medicines hold
also help them to protect the value of space. Generics already account for huge clinical and commercial promise,
the medicines they launch, both by 65% of all prescriptions dispensed they come with one major drawback:
increasing compliance and by reducing in the US and for as many as 70% of their charging profile. Tufts Center
the threat of getting locked out through all prescriptions dispensed in Central for the Study of Drug Development
e-prescribing, since it is very much and Eastern Europe,47 a trend that will estimates that the cost of developing a
easier to substitute a standalone product accelerate, as automated dispensing new biological is about US$1.2 billion,
than it is a product which comes with systems neutralise the effect of nearly US$400m more than the average
personalised satellite services. distributing free samples (see sidebar, for a small molecule.51 But specialist
Pharma 2020: Marketing the future 13

16. Table of contents
Figure 9: Many specialist therapies cost thousands, or even hundreds of thousands, benefits and risks associated with using
of dollars a year them and to communicate with an
audience that is very well informed.
Cancer
Second, since specialist therapies
cost such a lot, they attract far more
Alpha-1 Proteinase Inhibitor Deficiency
scrutiny before being approved for
reimbursement – and reimbursement
Pulmonary Arterial Hypertension is crucial, because few patients can
afford to pay for them out of their own
Haemophilia pockets. This trend will increase with
the proliferation of more sophisticated
Fabry’s Disease pharmacoeconomic models, reducing
the opportunities for “hype”. It also
Gaucher’s Disease means that anyone who promotes
such medicines will need to have a
“Bubble Boy” Syndrome clear grasp of the health economics
underlying them.
0 100,000 200,000 300,000 400,000 Third, many specialist therapies are
Average Price in US dollars used to treat patients with specific
disease subtypes, so they must be
Source: D. Stevens, “Specialty Pharmacy to Therapy Management: The Next Generation”, accompanied by a diagnostic. And
presented at PCMA Specialty Pharmacy Annual Meeting, October 2005 since they are more difficult to get to
the target site, they must generally
therapies are currently used to treat value in the eyes of payers, providers be delivered by injection or infusion.
conditions that affect only 3% of the and patients, not just those of the Many such therapies must thus be
general population.52 A company that executives that have backed them. It administered by a doctor or nurse but,
develops a specialist medicine must is also increasing the importance of even when patients can administer
therefore amortise its investment the marketing and selling process. But their own medicines, they usually
(including the money it spends on though most pharmaceutical firms have require intensive patient education
marketing and sales) over a much recognised the potential of specialist and monitoring, especially in the early
smaller number of patients. medicines, they continue to use a stages of treatment.
marketing and sales model that was
So it is not surprising that specialist This not only adds to the overall cost
designed to promote primary-care
therapies often sell for many thousands of using specialist therapies, it also
products for mass-market consumption.
of dollars (see Figure 9). Nor is it means that different payment centres
surprising that healthcare payers In fact, specialist therapies have (and reimbursement procedures)
everywhere are taking steps to slow a number of unique features that may be involved. In the US, for
down their utilisation. If demand for differentiate them from conventional example, specialist treatments are
such products were to grow at current medicines and mean that they must often reimbursed under a healthcare
rates, the global market for specialist be marketed quite differently. First, payer’s medical benefit rather than
they typically have a broader range its pharmaceutical budget. Similarly,
therapies alone would be worth about
of activity and greater potential to in the UK, the cost of monitoring and
US$1.4 trillion by 2020, double the 1
generate an immune response. They maintaining patients on specialist
US$712 billion the entire prescription
are also prescribed by specialists rather medicines frequently falls on the primary
products market was worth in 2007.53
than general practitioners. So anyone care trusts covering the areas in which
The shift towards specialist therapies who is marketing such medicines those patients live, rather than the
is thus accentuating the need to must possess considerable scientific hospitals that treated them in the
develop healthcare packages that have knowledge – both to understand the first place.
14 PricewaterhouseCoopers

17. Lastly, many specialist treatments must will therefore have to develop a at risk of experiencing health problems.
be ordered as necessary, rather than comprehensive marketing and sales It can also, as we have already noted,
kept in stock – partly because they strategy that is tailored to the distinctive generate additional revenues from the
are so expensive and partly because characteristics of such products support services it provides.
they have relatively short shelf lives. (see Table 3). It will have, among
They must also be transported and other things, to offer complementary
stored with much greater care than diagnostics and support services; to Creating a culture that
small molecules, because they are appoint a smaller, smarter sales force
much more fragile. Both these factors capable of engaging with powerful is suitable for marketing
have considerable implications for healthcare payers and medical specialist healthcare
the supply chain. The ability to “make specialists; to build a responsive direct
to order” requires the integration of distribution network; and to invest much packages
a company’s demand management more effort in educating patients.
with its manufacturing, packaging and Selling specialist therapies and support
But if it succeeds in doing these things, services as distinct from standalone
distribution processes – changes that
it can expect to enjoy a longer period small molecules has numerous other
will necessitate a substantial capital
of exclusivity and greater customer implications, and any pharmaceutical
investment in new skills and supply
loyalty, since biologicals are very company that wants to make the
chain systems.
difficult to manufacture and most transition will need to undergo even
Any pharmaceutical company that patients are reluctant to switch from more sweeping changes. It will, for
wants to sell specialist therapies one to another because they are more
Table 3: Specialist therapies require different marketing and sales models from those used for mass-market medicines
Mass-market medicines Specialist therapies Marketing implications
Treat common illnesses Treat rare diseases and specific disease A much smaller target market
subtypes
Must generally be used with a
diagnostic, which adds to the overall
cost but improves compliance
Relatively simple products Very complex products Require more scientifically educated
sales representatives
Typically prescribed by general Prescribed by specialists Require a much smaller sales force
practitioners
Low price per dose Very high price per treatment Require much more extensive proof of
clinical efficacy
Outcomes-based pricing
Usually oral formulations Usually delivered by infusion or injection Require intensive patient education &
monitoring
Costs may be spread across different
payment centres & budgets with
different reimbursement procedures
Relatively easy to manufacture Difficult to manufacture Less vulnerable to generic competition
Easy to transport Require special distribution & storage facilities More expensive to ship & store
Generally kept in stock Often delivered to order Must be supported by a much more
flexible supply chain
Source: PricewaterhouseCoopers
Pharma 2020: Marketing the future 15

18. Table of contents
Many companies will likewise have to a more integrated environment. Various
Playing by the rules
recruit and train people with new skills, elements may have to be altered,
The majority of pharmaceutical including: ranging from new cycle time targets
companies have established for different steps in the R&D process
• Researchers who are as capable of
compliance programmes that are to new measures of effectiveness in
considering commercial imperatives
based on the guidelines the Office marketing and sales.
like pricing and sales as they are
of Inspector General of the US
of considering scientific issues like
Department of Health and Human Most companies will also have to
safety and efficacy
Services issued in April 2003. But they alter their corporate compliance
have typically taken quite a reactive • Manufacturing experts who can programmes. At present,
approach. They have concentrated manage the complex processes pharmaceutical compliance functions
on mitigating legal risks, such as required to produce large molecules typically spend the bulk of their time
violations of the US Anti-Kickback and drug-device combinations and resources monitoring the way in
Statute, US False Claims Act, US that amalgamate different scientific which marketing and sales staff interact
Foreign Corrupt Practices Act and disciplines
with healthcare professionals, and
various US state-level marketing
• Supply chain managers who can ensuring that everyone complies with
disclosure reporting laws. They
have also added yet another layer handle chilled-chain distribution the existing legislation (see sidebar,
of controls to those they use in their through multiple channels and Playing by the rules).54 But, as the
existing business operations, rather supervise a large network of service industry shifts to specialist medicines,
than creating integrated, value-adding providers payers and patients play a bigger part in
compliance functions. • Health economists who can advise the purchasing process and a growing
on the pricing and reimbursement number of companies offer healthcare
example, have to decide whether to of new medicines, and provide input packages that include products and
continue developing primary-care into the design of clinical trials for services supplied by other firms, so the
medications or focus exclusively on candidate molecules compliance function’s responsibilities
specialist therapies (as Genentech • Key account managers who will increase. It will have to monitor
does). Similarly, it will have to decide can negotiate with increasingly communications with payers and
what sort of business model it should powerful healthcare payers and patients; collect, analyse and report
use – be it diversified, federated or one pharmacoeconomic assessment on information from third parties; and
of various other permutations. agencies; and assume responsibility for managing
Clearly, “hard” financial, operational • Disease management specialists a broader range of risks across the
and legal criteria will play a big role in with a profound understanding of extended enterprise – all activities that
shaping these choices but, whatever how to help patients through the will necessitate the acquisition of much
path they take, most companies will disease lifecycle. better operational and information
also have to make major cultural management skills.
adaptations. They will have to build Finding people with the requisite skills
much closer links between their R&D will not be easy, given the breadth of In short, focusing on the development of
and marketing and sales functions to knowledge the industry requires and specialist medicines and services rather
foster cross-disciplinary collaboration the battle for brains now being waged than primary-care blockbusters entails
and ensure that the views of healthcare in almost every part of the world. Many making significant organisational and
payers are fed into the development companies will therefore have to adopt cultural changes – some of which may
process. One way of doing this is to new talent management strategies, as not be immediately obvious (see Table 4).
create dual reporting relationships, well as ensuring that the performance
And implementing these changes will
with employees in R&D reporting to measures and incentive systems they
take enormous effort.
management in marketing and sales, use are aligned with the behaviour that
and vice versa. will be needed to operate effectively in
16 PricewaterhouseCoopers

19. Table 4: Specialist medicines require totally new organisational and cultural characteristics
Blockbuster model Specialist model
Strategy Development of mass-market Development of specialist medicines for treating specific
blockbusters disease subtypes
Generation of new prescriptions Cooperation with healthcare payers & providers to
optimise the healthcare resource mix
Responsibility for compliance & persistence
Organisation Vertically integrated Networked
Culture Fragmented, with separation of disciplines Integrated, with collaboration across disciplines & brands
& brands
R&D Restricted research agenda Comprehensive research agenda
R&D silos Internal & external connectivity, partnering & adaptive trials
Cumbersome decision-making processes Nimble decision-making processes
Reward systems based on number rather Reward systems based on collaboration & commercial
than quality of candidate molecules awareness
Manufacturing Narrow product range Wide product range (including diagnostics, biomarkers &
novel delivery technologies)
Batch-based, “made to forecast” Flexible, “assembled to order” manufacturing
manufacturing
Six Sigma processes Unique manufacturing processes
Distribution Traditional channels, primarily wholesalers Multiple channels, including direct distribution to patients
or their healthcare providers
Conventional distribution Chilled-chain distribution and storage
Pricing What the market will bear, rebates & Pay-for-performance
discounting
Marketing & Sales Intensive detailing Individual negotiations with large healthcare payers;
specialist advice for secondary & tertiary healthcare
providers; & educational programmes for patients
Based on differentiation of competing Based on treatment of specific disease states and
medicines measurement of outcomes
Source: PricewaterhouseCoopers
Pharma 2020: Marketing the future 17