LAUNCH OPTIMISATION IN TIMES OF AUSTERITY
The pharmaceutical industry continues to innovate and stride ahead
However, in today’s challenging austere climate, those contemplating new product launches need to navigate many financial and competitive obstacles. Innovation is only as good as the commercialisation strategy behind it. So what does austerity mean for the pharmaceutical industry and how can new product launches survive and achieve success?
The impact of austerity measures
In an era of patent cliffs and shrinking pipelines, capturing full value from every product launch is critical. Despite this, only a third of launches actually meets or exceeds analyst expectations1, meaning successful commercialisation still remains a considerable challenge.
Austerity measures across many major markets have resulted in greater scrutiny of drug budgets and hence ever increasing local and national hurdles to access and tighter pricing controls. In addition, therapy areas that have traditionally been considered‘Blue Oceans’, like oncology and orphan drugs, are becoming increasingly competitive, with speciality
launches now accounting for 75% of pipeline drugs.1
In many cases the success of a launch determines the success of the product throughout its lifecycle. The importance of getting a launch right the first time around is therefore critical. However, the question that remains for many Pharmaceutical and Biotech companies is how they can consistently optimise the launch process and hence the outcome?
Patent cliff challenges and incentives for payers
In 2014 alone, 10 key brands (worth approximately US $19.5 billion) lost their patent exclusivity. As a result of this, and previous patent losses, a multi-billion dollar market opportunity for generic manufacturers across key geographic regions has been created.2
However, it is not just small molecules which are being affected. It is predicted that biologics will now also start to feel the impact with a number of biosimilars expected to enter the market within the next 2–3 years.3
In an already constrained environment, this generic environment has seen the advent of a number of different measures implemented by payers in order to control drug spend; price control, reference pricing, and heavy discounts have significantly decreased prices in both the retail and hospital sectors (20% and 40% respectively). This trend has also intensified with the advent of a more ‘valuebased pricing’ mindset
across many EU markets.4
Market access strategy on launch optimisation
As a result of payer pressure in key markets many companies have realised the importance of having more focussed market access strategies during clinical development. Companies are acutely aware that dramatic delays in revenue generation are often a distinct possibility for launch products with a sub-optimal market access strategy. In many major markets payers have increasingly high negotiating power and unfortunately in most cases pharmaceutical companies are just not appropriately prepared to enter discussions.5
The reality is that whilst big pharmaceutical companies may be able to absorb the loss of revenue that delays to market may entail, this time delay can be fatal to smaller companies with limited portfolios.
Even in the current climate evidence suggests that companies are still tending to focus on market access too late. As a result many have had to increasingly invest in expensive post-marketing studies to produce the evidence required for payers not attained during Clinical Development (pharma companies conducted 10 times the number of Phase four studies between 2000 and 2010).5
In order to shape drug development programmes for optimal gain the launch process (and subsequent market access strategy) for a new product should ideally start as soon as you consider shaping your pivotal trials. Experience indicates that companies which strategically plan from the earliest stages of clinical development, and throughout the commercialisation process, are more likely to achieve a successful launch trajectory in the first 6–12 months.
The concept and reality of ‘Blue Strategy’
Blue Ocean Strategy is based on a study of 150 strategic moves spanning more than 100 years over 30 industries. The benefits of employing these strategies has had a significant impact across a number of industries which implement them, often changing the competitive landscape within which they operate.
Essentially ‘Blue Ocean Strategy’ is based on creating a new demand that does not currently exist, rather than fighting over existing space with other companies. With Blue Ocean Strategies there is often deeper potential within the market that has not yet been explored. Most blue oceans are created from within red oceans (competitive markets) by expanding existing industry boundaries. The key to a successful Blue Ocean Strategy is to find the right market opportunity and make the competition irrelevant.
While the authors of Blue Ocean offer a convincing argument as to its merits, there are a few things to keep in mind. First of all, it is important to remember that value creation and innovation are critical success factors. Most importantly, new introductions to the market, that companies have created, may disrupt the tranquillity of the blue ocean and in turn any market share that has been attained.
How does Blue Ocean Strategy relate to pharma?
With the combined forces of patent loss, generics and the resultant payer pressure, the pharmaceutical industry has looked to ‘Blue Oceans’ of specialist and orphan indications to both meet high unmet need and replace lost revenue.
Although the rare disease market remains relatively small, orphan drug development is growing at an incredible pace. In 2013, there were a record 260 orphan drug designations in the US (which treat fewer than 200,000 patients) and world-wide orphan drug sales are forecast to total $176 billion by 2020.6 These previously unchartered waters have been driven by patient demand and the need for alternative revenue streams as the patent cliff for many pharmaceutical companies looms closer. In addition, regulatory incentives have aided the development of a greater number of orphan drugs.
However, at a time when payers face multiple cost pressures, the orphan drug market is now facing a changing competitor environment. The increased development and licensing of orphan drugs in recent years has now led to greater competition and a change in the market dynamic. The orphan drug market is now starting to more closely resemble the trends and challenges seen within traditional pharmaceutical markets.7 As some rare diseases now introduce second and third entrant orphan drugs the reimbursement challenges and payer demands are increasing. Notably, a greater burden of proof is necessary to show value due to a decreased level of unmet medical need.6
Trouble in settled waters & navigating ‘Red Oceans’
The orphan drug market model clearly illustrates how blue oceans quickly attract competitors and thus become red oceans. As a result while many specialty and orphan drugs were once exempt from utilisation management, payers are beginning to target these classes more frequently.
Due to this shift from blue to red oceans, even in traditionally non-competitive markets, successful launch strategies will increasingly rely on a nuanced understanding of your competitors’ activities.
Despite their best intentions most companies are almost forced to operate a ‘Red Ocean Strategy’.
Red Ocean strategy involves competing in industries that are currently in existence and usually require overcoming an intense level of competition. For this strategy, the key goals are to beat the competition and exploit existing demand. The reality of operating in competitive Red Oceans means that pharmaceutical companies must also focus on competition both during clinical development and post-launch.
The value of competition-driven market access strategies
We have said the success of a product is often determined by the success of its launch. We know that continuous competition causes disruption. Companies have responded by seeking to develop insight into competitor activity to influence both their market access strategy and subsequent launch. Traditional research methodology focuses on internal assets. For example a market access event may occur and is communicated to your team. Research is scoped and commissioned. The research is then is concluded and tactics are implemented. This all occurs in a linear timeframe, offering just a snapshot of one event at one time point. However, during this same period several other market access events may have occurred. As these are not communicated or implemented into the final tactical plan, any conclusion of the research will not be reflective of the changing environment.
Real-time competitive insights are far more valuable than traditional research methodologies. Those companies who continually monitor the landscape and competitor events are able to make proactive market access decisions both during clinical development and post-launch. This enables them to innovate and shape the market as their tactics are evolved on an ongoing basis. A realtime strategy is flexible and continually adapts to a changing market access landscape.
Finding land and coming ashore
Most airplane passengers will tell you that ‘taking off’ and ‘landing’ make them the most nervous. The same can almost be said of the Pharma and Biotech industries. Therefore robust market access and competitive analysis strategies must be considered as a core component of ‘Launch Optimisation’ and hence successful commercialisation. In a rapidly changing and competitive environment, those companies who adopt these strategies early will be more likely to achieve commercial success whilst those reliant on incremental innovation and targeting key customers will lose out.
The key to striving ahead is to consider and be aware of competitors from the earliest phases of clinical readiness right through to post-launch. Those who ignore their competition, do so at their peril.
1. Beyond the storm – Launch Excellence in the new normal, McKinsey & Company, 2013.
2. Generic Market Outlook 2015, Datamonitor.
3. Company Annual Reports 2012, Datamonitor.
4. IMS Market Prognosis Reports 2011–2015, EU5 Markets.
5. Patients W.A.I.T. Indicator 2010 report, EfPIA.
6. Orphan Drug report 2014. Available at: http://info.evaluategroup.com/rs/evaluatepharmaltd/images/2014OD.pdf.
7. Shelley S. The maturing rare-disease market. Available at: http://pharmaceuticalcommerce.com/index.php?pg=brand_communications&articleid=27375&keyword=orphan%20drug%20act-FDA-rare%20disease.