The principal purposes of pharma's business staff functions have remained intact for generations. Marketing research, for example, assesses the attitudes and needs of customers to inform tactical planning for products. Competitive intelligence seeks to learn the thinking and planning at other companies that market competing products. The respective assignments in departments devoted to forecasting, pricing, payor insights, sales analysis, pharmacoeconomics and several other areas all make useful contributions to business operations.
Those historic assignments may have to change into the pursuit of a common goal because pharma's basic mission as an industry appears in doubt.
The defining purpose of the prescription pharmaceutical industry has always consisted of discovering new molecular entities to advance the various standards of medical care. If the new therapeutic brands launched by pharma cannot substantially advance the capabilities of curative medicine, then the industry has little reason to exist - payors and customers will invariably choose cheaper generics that create the same outcomes.
Generics already account for 78 percent of all prescriptions filled in the U.S. Yet pharma's ability to fulfill their basic mission has declined steadily over the past several years. In 1991, the Food and Drug Administration approved 30 new compounds for sale in the U.S. By 1996, the number had grown to more than 50. Yet over the next 14 years the number of approvals declined steadily, so that last year the FDA approved only 20 new drugs. In short, the connection between Big Pharma and drug development has become increasingly tenuous.
The emerging task for all of pharma's business research functions then becomes one of empirically determining what the industry should do to turn a dollar until such time as biomedical science advances sufficiently to permit a return to its historic purpose.
Consider as an example the changing prospects of marketing research. The customers traditionally probed and assessed by this discipline consist of defined segments within the 660,000 American physicians and their 9.3 million colleagues worldwide. In the U.S., at least, that task will continue to lose importance for the simple reason that individual prescribing physicians will decline as a percentage of pharma customers. Instead of individual physicians selecting the appropriate drugs on the basis of their diverse practice experiences, large organizations such as Integrated Delivery Networks (IDNs) and practice chains will make those decisions on the basis of comprehensive data about what works, for whom and in what circumstances. As there are only a few hundred IDNs in the country, and perhaps a comparable number of large, independent practice chains (such as Access Community Health Network in the Chicago area, with 60 community health center locations), the task of doing marketing research for a large pharma company will no longer require an entire department.
So, will pharma marketing researchers go the way of farriers and stagecoach repairmen? As an alternative to extinction, consider the role that marketing research played in the broadcast industry.
Starting in 1927 ,William Paley transformed several nondescript radio stations based in the Philadelphia area into the Columbia Broadcasting System. Sally Bedell Smith's astute biography of Paley, In All His Glory, devotes considerable attention to Frank Stanton, who was Paley's second in command as president of CBS from 1946 to 1971.
Stanton originally joined CBS as a marketing researcher in 1935. At first he was assigned to accompany CBS salesmen on their presentations to prospective advertisers. As a researcher, he was expected to play the auxiliary role of a technical expert to answer customer questions. The way things turned out, Stanton became the most important representative of CBS in those meetings because his work defined the product.
For potential advertisers, the radio airtime that CBS wanted to sell consisted of the numbers and kinds of listeners divined by Stanton's market research. The audience for Jack Benny's program regularly contained X million women with preferences for speedy, convenient meal preparation and Y, Z and W amounts of money to spend on their desserts. As artfully distilled by Stanton, that audience represented a multitude of potential customers for Jell-O.
Using such acumen, Stanton assumed leadership of CBS sales, and from there he eventually became company president.
The lesson for pharma is that the bigger the role someone exercises in defining the company's product, the more important he or she becomes. Traditionally, the laboratory and clinical researchers, together with the sales reps, played that role. The scientists' role has faded, however, because their productivity at turning out profit-making drugs has declined. And the credibility and access granted to sales reps has similarly eroded, even as the physicians on whom they call continue to lose control over the drug selection process.
In all likelihood, the redefinition of pharma's mission will come from investment bankers and hedge fund managers - the sorts of people that pharma CEOs listen to and aspire to be. Fiduciary officers barely know that marketing researchers, forecasters and pricing analysts even exist. But who is more suited to the task, assiduous researchers and dispassionate analysts or the people who gave us the meltdown of 2008 and Bernie Madoff?
Senior pharma executives and sales managers had their shot, and they forged an industry that Dr. Sidney Wolfe of Public Citizen refers to as America's largest organized crime entity. Marketing researchers and other staffers could surely suggest better alternatives.
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