Towards Value Innovation in Pharma

31 May, 2007Drs. A. R. J. Halkes MHAPR54936/RHA/GZA

Perspectives for an imaginative role in health care

2

The growing problem…

Pharma revenues and margins are under threat

The pharmaceutical industry has an ever more diminishing access to target audiences:• Customers, health care workers, as well as patients, consumers

Influence on prescription gets more and more mediated through networks of several kinds around the doctor

Growing sepsis in public and media about integrity and the sustainability character of the industry

There seem to be less and smaller blockbusters among us than might be necessary for several companies to uphold their current positions in the market?

3

IMS study: changes in pharmaceutical markets are underway globally, with the most emphasis in the

advanced markets of the industry1

USA

UK

GerCanFrance

ItalyIber

L.A.Japan

China

India

Turkey

BenlxNordic

•Developing healthcare systems

•Information sources poor

•Pharma looking for sales deployment models

•Pharma in wait mode, not a burning platform for change

•Relationship selling, access not yet an issue

•Basic methodologies for sales deployment

•Prescriber access challenge

•Major ROI concerns•Industry reputation•Distribution complexity

•Increasing no. of stakeholders

•Shifting portfolio

Advanced Markets (60%)Urgent need for change

Mature Markets (25%)Some pressure for change

Emerging Markets (15%)Changing/Developing models

1. Trends in Sales Force Effectiveness, IMS 2005

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What would be a negative response from the pharmaceutical industries in advanced markets?

To put more and more effort and investment into an ever growing sales force• More effort into a lesser approachable target group floats contacts to

individuals who come to shut the door

Focus on targeting systems• When the base of information about ‘intimacy’, depends on estimation of sales

reps about actual ‘sales’ to doctors – problems of mismatching effort with individual doctors, will result in resentment to the industry

Enhancing volume of marketing towards consumer• What information will come across to what audiences?

Search for molecules in competition• When biddings on promising findings pushes stress on revenues, yet uncertain,

how to manage this ever growing gap with diminishing revenues?

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Market perspectives under such conditions In a worst case scenario, imagine what being in a price fighting

market, would do to your industry

In a context of growing sepsis about the value of (certain) pharmaceutical companies to health care, there’s the risk of intensifying government rules over the industry

When investment power comes instead of intelligence and innovation in research will we then wind up with a war on molecules?

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Other responses are available

CRM and multi channel management, when applied correctly, poses the promise of adequate and positive relating to targeted audiences and of overcoming the commercial trap in relation management

Remodelling R&D logistic management may lead to enhancements through different phases of time to market

But, most of all, rethinking the concept of value innovation may emerge into changed market positions and positive relations with enthusiastic audiences

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‘Adding value’

Originally grounded in efficient market theory

Implies:• Thinking in chains

• Measurable in discrete quantities

• A specific activity (favorably conducted in cooperation)

• A proper – unique – value to specific target groups

• With perspective of optimalisation and discovering opportunities

Originally grounded in efficient market theory

Implies:• Thinking in chains

• Measurable in discrete quantities

• A specific activity (favorably conducted in cooperation)

• A proper – unique – value to specific target groups

• With perspective of optimalisation and discovering opportunities

Clients of the Pharmaceutical industry

1. Prescriber – ‘Customer’

2. Patient – ‘Consumer’

In the chain of care delivery, added value to the one mayresult in added value to the other,and vice versa

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Value innovation

Productbenefits

Brandbenefits

Servicebenefits

Acquisitioncosts

Customer Value-surplus

Costs of- buying

-production- handling- services

- etc

Margin

Creation of Customer Value (W. Reijnders 2005)

Pric

e

E.g.:Information searchTravel expensesWait timeConsult or guidanceAnnoyances of

BuildingPersonnelOthers

et cetera

E.g.:- accessibility - consult / service- attitude problem solving client directed friendly et cetera

Brand characteristicsConfidence FunctionEmotionEt cetera

Customer desired product range: breadth, length, depth of assortment Complementarities Cohesion Services Guarantee Et cetera

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Creating added value by the pharmaceutical industry –

a positioning issue

Sources for added value: Disease management The care delivery value chain Compliance efforts Technology

The creation of added value by Pharma poses the industry for its fundamental question of identity.

Positioning is all about choosing a distinctive customer value propositionPorter, M. (2001), Interview in Fast Company (March 2001)

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Sources for Value innovation in Pharma Information and education

CompliancePatient empowerment

Care Delivery Value Chain from a “transaction” perspective:• Medical Perspective• Customer perspective• Organisational Perspective

Customer Value: De “customer experience cycle”

Organisational Perspective• Logistics• Administration and registration (EPR)• Technology

11 Accessing

Measuring

Informing

Knowledge development

Monitoring/ Managing- Monitoring and managing the Patient’s condition- Monitoring compliance with therapy- Monitoring lifestyle modifications

Recovering/ Rehabilitating-Inpatient recovery- Inpatient and Outpatient rehab

- Therapy fine- tuning- Developing a discharge plan

Intervening

-Ordering and administering drug therapy

-Performing procedures

-Performing counseling therapy

Preparing

-Choosing the team

- Pre- intervention preparations - pretesting - pretreatment

Diagnosing

- Medical history- Specifying and organizing tests- Interpreting data- Consultation with experts- Determining the treatment plan

Monitoring/Preventing- Medical history

- Screening

- Identifying risk facotrs

- Prevention programs

Pro

vide

r Ma

rgin

Patient value

(Health results per unit of cost)

The care delivery value chain. Porter and Teisberg, 2006, 204

Feedback loops

(Results management and tracking, staff/physician training, technology development, process improvement)

(Patient education, patient counseling, pre-intervention educational programs, patient compliance counseling)

(Tests, Imaging, patient records management)

(Office visits, lab visits, hospital sites of care, patient transport, visiting nurses, remote consultation)

Porter en TeisbergPorter en Teisberg

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E.g.

Diabetes COPD Contraception

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Added value to whom: Synergetic Marketing

The ADDED VALUE X RELATIONSHIP matrix relates

Marketing and Brand managementfrom medical PROFILING

to Sales,

toCustomer and consumer relationship management

and toCommunication, multi channel management

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Terms of Terms of relationrelationshipship

Customer Individualizing surplus valueCustomer Individualizing surplus value

I General and selling communicationand tools

II Productsupport services

III Implementationand consumer directed supportServices

IV Therapy enhancing support packages

V General practice and partnership

1 Relation getting- No relation- Selling encounters2 Ad hoc Rx

3 Extended Rx

4 Long term

5 Enhanced Long term and life time

The “Added Value X Relationship” Matrix

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A defined concept of pharmaceutical value in health care is at the bottom of the model

Terms of relationship

Individualizing surplus value

Core product

Product service

Domain package

Cross package

Ad hoc

Repeat

Long term

Life time

Com

mer

cial

pro

cess

es

Content of contacts and service provision

Sel

ling

proc

esse

s

Development of intensified relationshipwith customers

From outbound communication

to

To interactive partnership

The concept definesand formulates different: Relationship patterns x Level of value added,

service provision x Level of preferred relationship and partnership

CR

M

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I. Development and management of Added Value Strategies on company and product level to value propositions for targeted audiences

II. Commercial sourcing of customer value management (segmentation and profiling) to differentiation of added value propositions

III. Defining approaches and communication conditions development and implementation of specific communication mix and multi channel communication to differentiated and targeted audiences

IV. Defining organisation and processCreating and implementing organisation conditions to implementing new sales and marketing proceduresE.g.: Account directed teams, front and back offices, dedicated brand teams etc., defining and creating system conditions

V. Innovation and change development

Dimensions of value innovation

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Some implications to the industry

Differentiation in market and target audience approachaccording to• Product – disease – combination• Country structure of health provision• Product phase of presence on market• Position and positioning of the company• …

“Share of voice”• Entrance condition to the market more than sufficient sales• Optimizing more than maximizing• Creating awareness more than prescription• Exasperation more than “value”

Quality of reps• Reps?

Organisation

Client focus “outside in,” in stead of product focus “inside out”

Differentiation in market and target audience approachaccording to• Product – disease – combination• Country structure of health provision• Product phase of presence on market• Position and positioning of the company• …

“Share of voice”• Entrance condition to the market more than sufficient sales• Optimizing more than maximizing• Creating awareness more than prescription• Exasperation more than “value”

Quality of reps• Reps?

Organisation

Client focus “outside in,” in stead of product focus “inside out”

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References

1. Trends in Sales Force Effectiveness, Driving sales excellence in a complex market, IMS 2005Pharma Futures: Long Term Value Outlook on the Pharmaceutical Industry WHO Priority Meds Meeting, 24th November 2005, Sophia Tickell, Director IBM Business Consulting Services, Pharma 2010:The Threshold of Innovation. IBM corporation 2002

2. Bonini, S.M.J. McKillop, K and Mendonca, L.T., What consumers expect from companies, McKinsey Quaterly, 2007, nr. 2

3. Medicijnenprijzen kunnen veel lager, Elsevier, mei 20074. Minister neemt farmaceuten onder de loep, Trouw maart 20065. Pharmacists' Role in Healthcare Still Evolving. C. A. Kenreigh, PharmD;

Linda Timm Wagner, PharmD, Medscape Pharmacists 2006;8 (2) 6. Taking CRM to the Next Level: Web-assisted relationship- and community-building for the

pharmaceutical industry. Datamonitor Dec. 20067. Porter, Michael, E. and Teisberg, Elizabeth Olmsted , Redefining Health Care. Creating Value-

Based Competition on ResuHarvard Business School Press, Boston Massachusetts lts. 2006

8. 'Druk op farmaceuten stijgt' Financial Times, 23 jan. 2007 9. Factoren gerelateerd aan farmacotherapietrouw van chronisch zieken. Resultaten van studies

uitgevoerd in Nederland sinds 1990. A. van den Brink-Muinen, A.M. van Dulmen, NIVEL 2004 Utrecht

10. Theo B.C. Poiesz en W. Fred van Raaij, Synergetische Marketing, Financial Times Prentice Hall, Amsterdam 2002

11. IBM Business Consulting, Pharma 2010:The Threshold of Innovation. IBM corporation 2002.

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Van Spaendonck Management Consultants

Specialists in Pharma market business development consultancy

20 years of experience in pharma market developments in the Netherlands

Expertise in actual developments and regulations in the Dutch health care market

Experience in working for all kinds of health care institutions and organisations

Track record in marketing and sales development

Track record in consultancy support for merger and alliances

Track record in roadmap development and implementation

Specialists in “strategic change”

Specialists in Pharma market business development consultancy

20 years of experience in pharma market developments in the Netherlands

Expertise in actual developments and regulations in the Dutch health care market

Experience in working for all kinds of health care institutions and organisations

Track record in marketing and sales development

Track record in consultancy support for merger and alliances

Track record in roadmap development and implementation

Specialists in “strategic change”

Accounts

AbbottAstra Zeneca

Boehringer IngelheimGlaxoSmithKline

Janssen CilagLeo Pharma

MSDNovo Nordisk

Nycomed (Altana)Organon

PfizerPharmacia

(Sanofi Aventis) Sanofi Synthelabo

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Rob Halkes

Senior Consultant in Health Care Development and Pharmaceutical Business

Drs. A. R. J. Halkes MHAVan Spaendonck Management Consultants

Hogeweg 85                   T +31 418 578000Postbus 2005                 F +31 418 5780105300 CA Zaltbommel     M +31 653 420722The Netherlands

E r.halkes@vanspaendonck.nlI www.vanspaendonck.nl