Marketing Techniques Used by the Pharmaceutical Industry

1. Marketing Techniques Used By The Pharmaceutical Industryby Allan Karr, FPharmS, DipM, MBA Pharmacy Business Services Manager, UCL Hospitals Trust

2. The Association’s Mission The ABPI’s mission is to represent the pharmaceutical industry operating in the United Kingdom in a way that: • Assures patients access to the best available medicine • Creates a favourable political and economic environment • Encourages innovative research and development • Affords fair commercial returns

3. Messages : In short . . . • Better medicines for patients • Better value for money for the NHS and taxpayer • Better economic success for the industry and the country

4. Value of Medicines • Reduce or eliminate the need for other more costly treatments • Speed up health treatment, thereby freeing up state resources • Improve the quality of life for patients • Reduce the cost of ill health to other areas of public expenditure • Improve the health of the nation

5. Phase II 100–300 Patient Volunteers Efficacy and Side Effects Preclinical Testing Laboratory and Animal Testing FDA Review Approval 0 2 4 6 8 10 12 14 16 Years Discovery (2-10 Years) Phase I 20–80 Healthy Volunteers Safety and Dosage Phase III 1,000–5,000 Patient Volunteers Monitor Adverse Reactions toLong-term Use Additional Post-marketing Testing The Drug Development Process IIa IIb Exploratory DevelopmentClose collaboration with academia; Novel approaches; new endpoints; biomarkers Full developmentConfirmatory studies; Access to large pt numbers;

6. Attrition in the R&D Process ~100 Discovery Approaches 7,000,000 Compounds Screened 1,000 Screening Hits 30 Candidates 1 Medicine 12 Candidates Discovery Exploratory Development Full Development Phase I Phase II Phase III 0 15 10 5 Idea Medicine 12 -24 Years

7. Innovation: the lifeblood of an economy In 2005 the pharmaceutical industry spent nearly £9million every dayof the year in the UK on R&D (£6000/minute!)

8. Trends in R&D expenditure, sales and number of NMEs Source: CMR International Ltd.

9. Global Growth to 2006 Driven by the US 2006 2001 ROW USA ROW 14% 59% 17% Japan 10% USA Japan 49% 15% Top 5 Europe Top 5 17% Europe 19% US$ 628 billion US$ 390 billion IMS Audited Markets + Estimates for Other Regions Source: IMS Global Consulting

10. Financial Pressure on Industry Results in….. Mergers and Acquisitions

14. World market share for leading companies 2006 * primary and hospital Source IMS World Review

15. Japan 5% France 7% USA 60% Switzerland 8% UK 19% Origin of IMS world top 75 products in 2006, share by value Germany 1%

16. Share of world market for pharmaceuticals – UK 2006 World ex- UK $581bn, 96.8% UK $19bn, 3.2% Sources: IMS World Review

17. Annual NHS expenditure £m Total NHS expenditure Total NHS pharma expenditure Source OHE

18. Average daily expenditure per person 2005/2006

19. Prescribed medication is the most common form of medical treatment in the UK and affects the majority of the population • At any one time 70% of the UK population is taking medicines to treat or prevent ill-health or to enhance well-being • 36% of older people take 4 or more different medications on a regular basis • Many long term illnesses are tackled by means of prescribed medicines

20. Economic Positive trade balance of £4.3 billion pa

21. UK Pharmaceutical Trade Balance Exports £m per annum Imports Balance Source HM Customs & Excise

22. Employment • 68,000 jobs • 250,000 related jobs

23. Affordability? Govts can afford ALL medicines for ALL people : they choose NOT to

24. The UK is very slow at introducing the fruits of advances in medical research • Britain’s doctors are ‘probably the most conservative in the Western world’ and the slowest to use new drugs. Prof Sir Michael Rawlins Evidence to Health Select Committee on NICE

26. Access to Medicines Reduced access to new drugs in Europe may be reflected in higher morbidity and mortality from diseases that are responsive to innovative drugs World Economic Forum Wall St Journal (19 April 2004)

27. Pharmaceutical Industry Donations for Tsunami Relief Effort • Abbott - Donating $2 million in cash and supplied $2 million worth of prescription drugs and nutritional aids. • Akzo Nobel - Akzo Nobel has pledged $400,000. • Amgen - Providing a $1 million contribution to the International Federation of Red Cross and Red Crescent Societies.

28. Astra Zeneca -Providing more than $600,000 primarily directed through the Red Cross organisations. Also donating a range of anaesthetics and an important antibiotics through its own local marketing companies. • Baxter - Nearly 200,000 units of Baxter products delivered to the affected areas • Bayer - Contributing approximately $1.4 million worth of medicines, products and money to disaster organisations

33. Top US Rx Products in 1999 • Rank Product US Sales millions $ • PRILOSEC (Astra Pharm L.P.) 4,186 • LIPITOR (Parke-Davis) 3,002 • PROZAC (Lilly) 2,570 • PREVACID (TAP Pharm) 2,356 • ZOCOR (Merck & Co) 2,304 • EPOGEN (Amgen Inc) 1,841 • ZOLOFT (Pfizer) 1,737 • CLARITIN (Schering) 1,533 • PAXIL (SB Pharm) 1,516 • ZYPREXA (Lilly) 1,494 • NORVASC (Pfizer) 1,482 • CELEBREX (Searle) 1,409 • GLUCOPHAGE (BMS US Ph) 1,310 • PROCRIT (Ortho Biotech Div) 1,203 • PRAVACHOL (BMS US Ph) 1,178 • AUGMENTIN (SB Pharm) 1,164

36. Medicines Contracting Strategies Generic Drugs Oligopoly Monopoly Potential for Purchase/Contracting Supplier Strategy

37. Impact of size of Purchasing Organisation Regional Consortium Single Hospital National Purchasing Power Size of Organisation Ease of Co-ordination

38. Marketing

39. 1.“The object of selling is to make the customer want what the company has. The object of marketing is to make sure the company has what the customer wants” Theodore Levitt 2 “Marketing is looking at the business through the customer’s eyes” Peter Drucker 3 “Marketing is the identification and satisfaction of customer needs at a profit” Institute of Marketing Definitions of Marketing

40. PharmaMarketing Objectives 1 1 Enlarge the Market by innovation or product development 2. Increase market share by emphasising: • product development for competitive advantage. • persuasion effort for competitive advantage. • customer service activities for competitive advantage 3. Increase profitability by; • Increasing sales volume for profit leverage • eliminating unprofitable activitiesprice improvements • cost reduction

41. Key Players in the Pharmaceutical Chess Game Pharmaceutical Manufacturers Finance/CEO PPRS PCT’s Patient Support Groups Government GPs/Community Pharmacy Procurement Consortia Commissioning Agencies Wholesalers NPSA Clinical Pharmacy DOH EMEA Doctors

42. Industrial marketing versus Consumer marketing Internal marketing or External Marketing

43. Principles of Customer/Market Segmentation • Benefits sought e.g. economy,convenience, prestige. • Conditions of purchase e.g stringent, light • Geographic e.g urban rural • Usage e.g. light, heavy • Organisations personality e.g. risk taking, loyal, power seeking. • Organisations demographics e.g. size, specialities

44. Segmentation • Measurable • Accessible • Substantial • Unique in it response

45. Buyers e.g. Government Deciders e.g. Trust Boards, PCTs The Buying Centre Influencers e.g. Practice Managers Pharmaceutical Advisers Gatekeepers e.g. Receptionists Users e.g. Patients GPs Model of a Buying Centre

46. A. PRODUCT • Does the company have the right products now? - What are the right products going to be in the future? • B. PRICE • Is the selling price right? - How do prices compare with those of competitors or PI’s? • C. PROMOTION • What methods will you use to ensure all potential customers are aware of your product and want to purchase it? • D. PLACE • What markets are you going to spotlight? - How will you ensure product get to where they are wanted? The Marketing Mix (4P’s)

47. Product Differentiation • This term is used to indicate which buyers perceive differences between goods and services offered by different suppliers and includes the extent to which their buying decisions are influenced by such differences. • Sales Technique called “Benefit Analysis”.

48. The Product Life Cycle

49. Products • Patient Acceptability e.g. Sandostatin LAR, Zoladex LA, EPO • Bioequivalence e.g. anti-epileptics, morphine, nifedipine, mesalazine. • Product Licences e.g. Captopril, Taxol • Patient Loyalty e.g. pen devices, home delivery • Isomers - (Chiroscience) e.g.Esomeprazole, Fluoxetine, Ca Folinate, Bupivicaine • Formulation e.g.Triazolam, Losec MUPS

50. Market Share & Market Growth (a) Market Share Where a company tries to increase its proportion of sales (b) Market Growth Where a company tries to increase the total quantity of product used