The latest pharmaceutical disease: what it is and how to cure it

Having written my MSc dissertation on the future of the pharmaceutical business model, I could type for days on end and have you scrolling forever. However, I don’t think that would ever be published as a blog article. To realise that childhood dream of mine for at least the length of this post…

Come into my office, take a seat and let Dr. Lok tell you something:

The traditional business model of the pharmaceutical sector is failing.

It is a disease that if left untreated, will cause the company that has contracted it to perish. Symptoms include diminishing market share, increasing overheads and a thinning profit margin. The only cure is an innovative business model - no longer a one size fits all approach but one that each pharmaceutical company can mould around themselves. Think of a memory foam mattress; sold the same to all but embracing the individual and supporting their sleeping positions.

Outside of this GP surgery in the real world, we see traditions diminish as technology and other breakthroughs move the next generation forward into another era. This idea can be projected onto the pharmaceutical industry:

The main reason why the traditional business model is failing is due to the increasing difficulty to establish blockbuster drugs, and the growing number of patent cliffs that are drawing ever closer and giving way to a new generation of generics.

By looking at the fundamental management model of patterns of strategic change (Johnson and Scholes, 1993) (above), we can see that the industry has seemingly enjoyed continual growth for a prolonged period of time. Firms now face a period of flux unless they are able to successfully employ a transformative breakout strategy. With such a strategy, firms do not only have a chance to be a formidable competitor in the market, but can transform the business model of the sector as a whole.

The usual go-to for a breakout strategy in many industries is mergers and acquisitions (M&A), but it is no secret that these have not been successful for many in the pharmaceutical industry unless they have been planned strategically. Pfizer for example, was described by the New York Times as “Frankenstein’s monster” in 2012. They had carried out five large M&A deals in the decade preceding 2011, and ended up making substantial losses across the company.

To those suffering from traditional business model disease, I write a prescription for market research.

Market research is key in enabling pharma to understand how they might leverage their brand’s brands’ USPs to protect and even continue to grow their market share in the face of ever increasing generic competition. These USPs can no longer be molecular and data focussed but need to be humanistic. We doctors see patients - people - who are experiencing a dis-ease. By fully understanding these experiences, companies can recognise the value in easing the distress of a patient rather than just focusing on the molecular microbiology or clinical data story.

At Branding Science, we are able to gain a real insight into the rational, but moreover the emotional drivers which spur the prescription of different drugs. From pre-launch to post-launch, we use a variety of innovative psychology-based methods that allow us to dive deep into the thoughts of health care professionals when making prescription decisions. By helping our clients understand the reasoning behind the decisions being made, we are able to work with clients to effectively identify which themes they should leverage their brand upon in order to connect emotionally with both physicians and patients. Therefore, branded drugs can still be at an advantage in terms of maximising market share as long as they remember that their brand is an intangible asset that only they can exploit.

Traditional Business Model Disease does not have to be terminal - the cure however may be unique for each and will be found through the understanding of customers and end users. I look forward to seeing which pharmaceutical company will be first to unlock that cure and transform the industry.

The Author: Chloe Lok is research executive at Branding Science. She holds a Masters in Management from the Imperial college in London and a Bsc in biochemistry from the University of Reading.