Shift Happens!Print this Page

The last twenty years have witnessed dramatic growth in the pharmaceutical industry. But as is the case with all business cycles, market and environmental conditions change, and the pharmaceutical industry has had a longer ride than most. The surest sign that we are at the end of the cycle is the change in the balance of customer power.

Employers, desirous of reducing their spiraling health care costs, are placing more of the financial burden on the consumer. In addition, an ever smaller group of payers now wield enormous power over manufacturers of products, with many readily available alternatives and a pragmatic shift to “acceptable treatment outcomes”. This installment will explore the new approach to marketing required by this shift, and the consequences of failing to adjust to the new reality.

Consumer-driven Health Care (CDHC) has been touted for several years as the coming watershed that will change the pharmaceutical business. There are several signs that CDHC is finally upon us: Wal-Mart, the world’s biggest retailer, recently announced that it was testing (then rolling out to 14 more states) a program whereby generic prescriptions would be filled for the discount rate of $4. Target followed with a similar program, and Medco (the giant pharmaceutical benefits manager) has announced its own low-cost generic drug plan.

These are but the most visible outward signs. The Kaiser Family Foundation has been studying employer-sponsored health benefits for years, and recently reported its finding that the difference between first- and third-tier drugs is growing dramatically. In 2006, the co-pay difference between a generic and a third-tier drug (non-preferred on the formulary) is $27. This takes the decision out of the realm of a mere inconvenience and places the consumer’s decision squarely into the realm of “do I buy this (branded) drug and forgo X (mortgage payment, credit card bill, etc.), or go with a generic alternative that is almost as good…”

Another vivid example of CDHC is presented by a small company called BidRX, who have created a Priceline-like competitive auction to reduce drug and medical device costs to the consumer. Transparency across not only drug alternatives but also pharmacy delivery options makes a powerful demonstration of where this trend is going — and it doesn’t look good if one takes the historical position occupied by big pharma.

Since the goal of CDHC is to halt, or at least slow, the rising cost of healthcare, it is crucial that drug companies learn to work with this movement instead of being squarely in its sights as the target. This involves taking a patient-centric view of the perceived value of branded drugs versus the lower-cost alternatives, working with payers to provide the appropriate education and incentives to motivate appropriate use of the drugs to achieve superior outcomes (and funding necessary studies to prove those outcomes with payers), and equipping prescribers with the tools they need to be able to articulate the case for branded drugs to their patients. These are non-trivial changes to the traditional business model, and in fact highlight the need for a “whole new playbook” if pharmaceutical marketers are to continue to thrive in the industry’s next 20 years. pharmacy in canada

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