The way that pharma and medical device companies are choosing and marketing their products is changing. And for good reason! An over-saturated market has led to soaring marketing costs and an increasingly small share of the market. In a marketing-costs study covering 1996 to 2005, it was reported that the cost of marketing and promotions increased from $11.4 billion to $29.9 billion in that time period alone. And the cost continues to rise.
In addition to over-saturation, numerous other trends, such as prescription regulation and pay-for-performance, are pressuring companies to pursue strategic marketing models known as the blockbuster business model and the specialist business model. Which one gets the best results? It depends on the variables.
The blockbuster or blast model is a mass-market approach that’s generally reserved for medications and devices that can help a large number of people or the general population. The companies that pursue this approach invest their R&D dollars into a restricted research agenda that will produce a narrow, inexpensive product that helps the most people possible. The created product is distributed through traditional channels and wholesalers in an effort to reach a large swath of patients.
As they are prescribed by general practitioners, blockbuster products are available to a large market. And, since they are generally inexpensive and easy to manufacture, they are kept in stock in most pharmacies/hospitals. This allows the company to deliver the product to as many patients as possible, which maximizes profitability and market share.
However, there are disadvantages to this model. The competition is stiff, and it usually takes a large salesforce to get the word out. What’s more, primary care doctors are very difficult to reach. Approximately 40% have no interaction with pharmaceutical reps due to their workload. Long-term profitability is also an issue. Once generic products hit the market, sales for most name-brand, previously patented products go off a cliff.
The specialist business model focuses on delivering specialized products that treats a specific subset of the population, a specific disease or a disease subtype. In an effort to serve a narrow need, the company performs comprehensive research and may develop several products — diagnostics, biomarkers and delivery technologies — in addition to the treatment product. the products are often only delivered after an order for an individual patient or targeted treatment center.
Specialized products reach a smaller market, but they are generally priced high and have little competition. For this reason, they normally experience sustained sales over a longer period of time. In essence, there is no sales cliff to worry about, as generic competitor products are rarely introduced. It takes a much smaller salesforce and a direct distribution supply chain to reach such a specialized market, which means overhead costs are lower.
However, specialized products are difficult to manufacture, and it takes a more educated salesforce to convince medical professionals to purchase or prescribe them. It may even take a comprehensive education program and several negotiations to get the sale. Moreover, the price received is often closely correlated to the product’s success. A poor-performing product will be a poor earner.
Both can be successful, depending on the product/need involved. Instead of focusing on one approach or another, however, today’s successful companies are those that learn how to create much-needed products that are clinically and economically compelling.They also recognize the need to establish a brand that physicians and patients trust and value.
With that said, most marketing tactics are mimicking the specialized or niche approach. This is due to the changing industry and market. Instead of sending out a hoard of sales reps to carve out as much of the market as possible, companies are starting to employ a small team of specialists that can educate and negotiate with large healthcare providers. These specialists are also working closely with R&D in an effort to streamline the process and meet the needs of the health industry.