LET’S TALK ABOUT MEDICINE COMMERCIALISATION*
Medically speaking, differences among innovators, generics and biosimilars have been discussed for many years. My purpose, however, is to elaborate on the different go-to-market models that Pharma companies adopt to extract as much value. You will find below some commercial information, not medical information.
Analysing the value chain. Competitive advantages, risks and ROI.
R&D, Production and Marketing & Sales are the three key stages to bring a medicine to patients. In order to succeed in an innovator’s, generic’s or biosimilar’s market, there will be some differences in how critical those stages are.
By definition, an innovator medicine is a newly discovered medicine. As a consequence, R&D is a critical activity. If we had a look at Pharma companies’ financial report, we would find that around 20% of total revenues are put back in R&D.
On the other hand, production doesn’t look like playing a critical role. The amount of medicines produced is not massive, and the cost of goods sold may mean between 10-20% of the price charged.
Finally, marketing & sales. Although it may be less relevant than R&D (no new medicines means marketing & sales activities are redundant), it’s critical to success. As a matter of fact, most of the innovative companies devote the same amount of resource to Marketing & Sales cost and R&D.
Undoubtedly, the production plays a vital role. Generic companies produce and deliver millions of pills, and consequently it’s a must to have a reliable and cost-controlled supply chain to become a leader.
Innovative companies usually make acquisitions to get access to a promising pipeline. Conversely, generic companies try to get access to new markets/countries and gain scale.
R&D could be named as the Cinderella. No clinical trials are needed to launch a new product and, therefore, complexity is dramatically reduced in comparison to innovators.
Commercial-wise, being first-to-market is vital to succeeding in most markets. Additionally, price is an extremely relevant factor because generics’ raison-d’être is to reduce originators’ price. Obviously, dropping price is at odds with profitability. Thus every executive working with generic medicines racks their brain to provide added value beyond decreasing price.
Biosimilars could be called in the near future “generic biologic medicines”, but I reckon we’re not quite there yet. There’re many nuances.
R&D is more complicated in biosimilars than in Generics. However, there’s much less risk of failing with biosimilars than with innovators. Phase I and Phase III trials are needed (not the inexpensive bioequivalence studies required for generics). As a consequence, innovators’ know-how and greater financial strength give them a head start in this competition.
To produce biosimilars is more complex than a regular pill or injectable. It may be a limiting factor at present, but I’m not sure it will be within a short time.
Regarding marketing this kind of products, previous experience in generic field may be relevant. Even so, I guess most companies are at a crossroad and decisions regarding go-to-market strategy will make some products to succeed or to fail badly.
Go-to-market models: past, present and future
Not long time ago Statins, Angiotensin antagonists or Serotonin Inhibitors played a critical role in many big company’s portfolios. Pharma companies promoted these blockbuster medicines to primary and secondary care with an army of medical sales reps.
Many of these medicines improved millions of people’s health and there were no significant restrictions to get reimbursement. There was a fierce competition in raising and keeping the share of voice up. I reckon some people would call it “the good old days”.
At present, many things have changed. Innovation is mainly focused on less prevalent illnesses such as Cancer or Alzheimer and, high prices set off lengthy negotiations with payers. There’s an ongoing debate should new medicines with limited incremental benefit be used versus much more cheaper alternatives.
In any case, everybody would agree that go-to-market strategies have evolved and new actors play crucial roles in this new equation. Market access activities, to any level, have become critical. Additionally, there’re more channels (digital channels, mainly) to communicate with prescribers, influencers and patients, and it looks like a must to master these new ways of communication.
Unless, there’s a significant disruption in the process of discovering, testing and bringing new medicines to the market (i.e. some kind of digital means that makes this full process quicker and cheaper), I’ll bet that there will only be an evolution of the current situation.
Likely, digital channels will become more relevant both to engage with prescriber, stakeholders and patients. Additionally, added value services should play a role along with medicines, and more sophisticated health economic models will be needed to prove value.
There’re three well-known archetypes to market these medicines, and most markets/countries have been evolving for the last two decades:
- Physician-driven. They’re market led by so-called brand generics. Doctors pick a specific brand (generic or innovator) out according to a variety of reasons, and pharmacies dispense that brand. As a result, uptake of generics is slow, and price competition is low.
- Pharmacy-driven. Physicians write INN (International non-proprietary name) prescriptions, and pharmacies can pick out the most convenient supplier. There is fierce competition with limited differentiation in the product (null if speaking about quality). Without any doubt, it’s a B2B go-to-market model. B2B marketing strategies adopted in other industries are totally transferable.
- Tenders. Speaking of Europe, health care is a right, not a privilege; therefore, governments can intervene directly in the pharmaceutical market to reduce prices. Assuming that generic medicines are alike, they can squeeze companies’ margins providing access to market to the cheapest supplier(s).
In any case, margin erosion is a reality in every single product and companies need to launch new products constantly.
New biologic medicines going off-patent are generally accepted as a new category: biosimilars, due to differences with “traditional” generics products.
I see in the future two clear paths for generics companies:
- Competing with “traditional” generics in mature and growth markets. This competition will be mainly in price and with squeezed margins.
- Competing with biologic medicines and additional services. They will have to explore different go-to-market models.
I mentioned earlier that biosimilars could be named “generic biologic medicines”. However, there’re many differences, such as not being interchangeable, that make the go-to-market model more complex.
Biosimilars are born to provide a less expensive alternative to originators, and they don’t offer new options to treat an illness.
On the other hand, lack of awareness about biosimilars, limited competition and, as mentioned before, not being interchangeable makes it crucial to choose the right go-to-market strategy country after country.
Not many generics companies have embraced biosimilars as yet, likely because of their complex development. New players outside Pharma have entered into the equation, such as Samsung, and some companies focus on innovators are expanding their portfolios with biosimilars too.
There’re many conundrums we’ll need to solve in the near future, but I’m sure the right combination of generics and innovators go-to-market models will be critical to succeeding.
* retail market
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