Wednesday, November 3, 2010

Marketing Drug Products--Direct Strategy?

In class, there has been a lot of recent discussions about brand image, corporate branding strategy and approaches to global marketing. As we saw in the Kraft-Cadbury case, there was a distinct difference in the perception of the Nestle and Kraft corporate brands versus their product brand counterparts. This is mainly due to the corporate structure and the visibility of the product labels as opposed to the corporate logo. This "umbrella" strategy is also inherent within the pharmaceutical industry, where corporations release drug products that mainly speak for themselves in terms of their marketing power.

One thing that you have to understand about the pharmaceutical industry, is that pure consumer marketing does not truly exist. Yes, you'll see Lipitor TV advertisements time-to-time or the little clouds representing depressed beings not taking Zoloft. These blockbuster drugs are so well entrenched in the consumer's minds because...well, most people know someone who takes them. Most consumers who are in need of such drugs will opt to purchase the medication because it has a positive reputation and good credentials (meaning it works!). Consumers do not prefer one drug over the other because Pfizer has a stronger brand image than Novartis. Just as Nestle's Nestcafe brand stands strong on its own, Pfizer's Lipitor can transcend borders and fill consumer's cholesterol needs.

Regulations on direct to consumer advertising have made it more difficult for pharma companies to boost product awareness, and it turn, their corporate brand image. In 2006, the US General Accountability Office reported that pharma spent $4.6 billion on consumer advertisements and $7.2 billion promoting to physicians. In the EU, this type of marketing is banned, and therefore pharma companies have to employ different strategies to get their products in the minds of consumers. Currently, only the US and New Zealand are legally allowed to broadcast such commercials.

Zoloft Commercial in US

Most drug companies do not market via what's called direct to consumer advertisement. Rather, they have much different marketing strategies, especially when transferring manufacturing operations into foreign countries. For the most part, pharma and biotech companies pitch marketing to other businesses and do so by attending large conferences and traveling to various company sites. Another methodology is to push drugs into the hands of the physicians that control prescriptions. This can be quite a sticky issue and it is currently being tightly controlled by the legal system in the US. In other semi-regulated countries, preferential prescriptions may not be such a problem.

Then the only thing to really ask is how can a US pharma company market with a solid product make its way to Europe, Asia Pacific, or the BRIC countries? This is extremely complicated...but the basic answer is through partnerships and distribution agreements with well-established players in those local markets. Let's take Medtronic's bone morphogenic protein-2, called InFuse. This product helps in bone healing after surgeries. Medtronic manufactures and markets this product in the US, but has established an agreement with Pfizer for exclusive marketing in Europe. Medtronic still receives royalty kickbacks and benefits by extending its name on the label (manufacturer) in European countries. For Japan, which is a tremendous pharmaceutical market on its own, Medtronic reached out to Astellas (ranked 21 in global sales) for local marketing of its product.

The idea that drugs are driven by different market forces compared to typical consumer goods is reflected in Interbrand's ranking system. Do you see any pharmaceutical companies making the list? No you don't. These companies are immense, some with nearly $63 billion in revenues (J&J). So how do you quantify the brand power of these products? The answer is that you can't because its a whole different ballgame with completely different economic and political pressures. This does not mean there is no marketing only means that the strategy is completely focused on the product and its competitive advantages.

1 comment:

  1. I think after a brand name drug becomes generic, people prefer to go with the generic name as it is more affordable to purchase. Individuals know that generic drugs have the same effects as brand name ones. Only when it comes to taking an antibiotic for a serious disease or infection, then one should think whether or not it is worth to safe on generic medicines. But still, according to pharmacists and experts generic drugs has the same ingredient as the brand names. The only time pharmaceutical companies make a profit is, when brand name remain as brand names for 10-15 years before becoming generic drugs. Therefore, during that time frame drug companies improve their sales and do not compete to be ranked high to attract customers.