Last week I published a piece on the future of pharma marketing that included a segment copied from another list-serv by Brian Towell from Doghouseonline that was critical of pharma’s reticence. Regular THCB contributor The Industry Veteran was critical of both the industry and Brian for going too far. With a bit of time to consider, here is Brian’s response (Unlike me, Brian’s an unreconstructed Brit–hence the dodgy spelling):
My points of view, although presented with a level of ‘passion’ that many in the big Pharma arena will be unfamiliar with (although I am surprised that one respondent appears ‘rudely offended’), requires some context to be fully understood. Much of the work that Doghouse does with its clients is aimed at unwrapping the conventions and strategy traps that are ‘heritage-based’ behaviours, and using our branding processes to realise a portfolio of marketing/business strategies that provide new opportunities and reveal new value and meaning for the brand. My ‘rant’ was directed specifically at the procurement practices of Big Pharma, but the frame for our work is far more profoundly connected to an industry that is clearly entering a period of crisis, where the big themes like ‘leadership’ and ‘direction’ are being challenged more than ever. And old-school thinking (like the Industry Veteran’s) will get the industry nowhere. So here is some context that should help old codgers reconsider their unpleasantness before they pass judgement.
A classic cue for being locked within a strategic box is the situation that Andy Grove of Intel characterises as a "strategic inflection-point", a "time in the life of a business when its fundamentals are about to change. That can mean an opportunity to rise to new heights". With the current paradox of increasing R&D budgets and inexorable decline in the number of launched New Chemical Entities, is it the case that the pharmaceutical industry is at such an inflection-point? An inflection-point where its greatest danger might be to become efficient at driving a strategy with noticeably decreasing returns at a time when we should respond to the productivity signals that require a move into more effective, alternative strategies? What kind of paradigm-trap may we be in, and how could we escape?
Let’s review some of our assumptions. Many of these assumptions are implicit within our strategic choices and need to be revisited regularly to prevent them becoming hidden strategy-traps that consume investment to little return. We need to actively consider our hidden, and often tacit agenda of assumptions and constraints. We need to articulate these assumptions and explore their current validity. How valid are some of these assumptions?
Assumption 1: It makes sense to organize our research by Therapeutic Areas.
Reality-Check 1: Knowledge networks within any Pharma company are more like a map of the London Underground than the straight, linear tramlines of TA portfolios. Alternative strategies can be found in the mechanism-based Discovery paradigm; elements of this mechanism-based approach can be found in Novartis’ new discovery strategy and Pharmacia’s approach to its COX2 franchise. Whilst an analysis of Paul Janssen’s strategy (the single most successful drug discover of all time) could lead one to adapt a chemo-centric evolutionary model of Discovery.
Assumption 2: Blockbuster drugs come from targeting big patient populations
Reality-Check 2: A significant number of New Medical Entities are aimed at orphan diseases. Many of these, ultimately turn out to be unanticipated blockbusters, (e.g. Glivec) whilst many drugs aimed at large GP markets fail to make ROI due to lack of differentiation in an already crowded marketplace. Interestingly it has not gone unnoticed that many innovative first-in-class drugs target orphan diseases, whilst it is not uncommon for the rate of innovation in many mature major disease markets to be as low as one new blockbuster class a decade. Could these orphan opportunities be reassessed relative to efficacy? A drug bringing a significant health benefit to a small patient population maybe have blockbuster potential as much as a drug delivering a differentiating, but small health difference, to big patient population.
Assumption 3: Marketing ability to know the value of drugs should guide our research.
Reality-Check 3.1: What objective research has compared historic, anticipated market assessment figures with actual returns gained? How much learning has been integrated into the models deployed, as a result of such research?Reality-Check 3.2: Is it fair to load Marketing with unrealistic expectations as to its ability to determine potential market value? Do we not need to at least understand the limitations of this gate-keeper role to market access by bearing in mind the famous examples of 3M’s Post-Its being deemed as having no definable customer, and Honda’s mistaken attempt to go head-to-head with Harley Davidson in the 70’s leading to the introduction of the moped as an unancticipated market leader? Reality-Check 3.3: Have we learnt all the lessons from Viagra? Innovation can lead to the creation of new, market value that redefines the existing market by a new standard or creates an entire new market. Shouldn’t we be both market creators as well as market followers?
Assumption 4: We can serve our TA strategy with oral drugs derived from combinatorial chemistry.
Reality-Check 4: Looking at the chemical structures of FDA approved drugs over the past few years, leads a chemist to realise how few of these drugs (some years as low as 25%), would fit within the industry’s current discovery paradigm of deriving drugs from diverse synthetic combinatorial chemistry. Many launched drugs appear to have been discovered from unfashionable approaches of modifying endogenous ligands or natural products, or derived from recombinant biologicals and antibodies. If delivering on a TA aligned strategy is our mission, this maybe hindered by a limited range of core technology competencies.Assumption 5: One gene to one pill for one disease.
Reality-Check 5: The complexities of biology counters the dogma that every disease may be attributed to a single gene defect. Advances in many fields of medicine, such as oncology and cardiology are as reliant on discovering new combinations of existing agents as well as new agents. Large scale, gene "knock-out" studies in mice reveal the scale of redundancy in biological pathways and the robust nature of phenotype. Polypharmacology has been a key feature of many successful drugs. Psychiatric drugs often work precisely because they target multiple receptors. In addition, new indications for existing drugs account for a significant fraction of the revenue of blockbuster drugs and provide as many new treatments per a year as the number of first-in-class New Chemical Entities.
Assumption 6: The wealth of drug targets from the Genome demands only large-scale research organisations will succeed.Reality-Check 6: The 25,000 genes in the human genome, is a significantly smaller number than was expected only a few years ago. Our increasing understanding of the psycho-chemical limits of drugs and drug targets and the redundancy in biological systems points towards there many only be a several hundred high quality targets tractable by means of traditional oral drugs — roughly equivalent to the number of projects in our Discovery portfolio. In addition the industry has launched on average one new blockbuster class per year yet 80% of our research portfolio is predicted to have a potential success rate as low as 1 in 51.
We are challenging ourselves to be more efficient in delivering on our strategy. However all strategies have a sell-by date. Effectiveness requires a portfolio of strategic choices. The trick is to recognise and anticipate the cues for strategic entry and exit: the moment that diminishing returns appear. It’s all about timing and choices. The traditional Knowledge Management approach is to manage knowledge around what we currently do, to make us more efficient, whereas we need to manage knowledge around what we are going to have to do in the future; to make us more effective. We need a new portfolio model that exploits our tendency to populate empty boxes and draws us into creating new capabilities and exploring real and imagined constraints, preparing us for radical shifts.
Branding (which we define as ‘managing for meaning’) helps to unlock new strategic options, within the holistic context of the capacity and capabilities of the business. It reverses the legacy-based, unsustainable paradigm by releasing new and valued ways of becoming more effective (returns/profits to the business) with radically rationalised efficiencies (less wasted effort and duplication, and greater connectivity). Our starting point is always solution neutral, as only when the brand has been formed into a ‘vehicle for meaning’ do the new, more valuable strategies reveal themselves. Part of that process involves changing the way the marketing culture thinks, and then encouraging overcommitment to the inevitable change and managed decision-framing and risk that new activities bring.
Unfortunately the industry is largely managed by individuals who do not have the capacity (or strength of will) to accept change, and are largely risk-averse. This is almost certainly why the general public’s view of Big Pharma tends to be suspicious and unresolved. Our experience tells us that Leadership and Direction are both ‘side effects’ of well managed branding activities.
Without meaning, you cannot have leadership or direction. As the Cheshire Cat famously advised Alice, "When you don’t know where you’re going, every path takes you there".