Continued Erosion Of The Blockbuster Model
By John Breen
Over the past year, InterbrandHealth has observed the progress of two notable trends in the healthcare sector. Firstly, the continued loss of exclusivity for a number of notable “blockbuster” pharmaceutical drugs, heralding a change to the industry’s traditional brand model; and secondly, the increasing role of brand in the hospital and health delivery industries.
In the past 12 months, blockbuster brands such as Lipitor, Plavix, Singulair, and Lexapro have all lost patent exclusivity. By 2015, a number of important biologic brands that comprise a large proportion of the estimated USD $140 billion global biologics market — including MabThera, Aranesp, and Herceptin, are anticipated to lose patent protection, creating a potentially large market opportunity for biosimilars (imitations of biologic products with expired patents).
Perhaps more importantly, a number of anticipated potential blockbusters have continued to face delays or clinical failure. More stringent regulations and the dearth of new products have shifted the nature of innovation in the healthcare industry towards more niche opportunities. Recent drug approvals tend to be more specialized therapies targeted at smaller sub-groups of patients.
This trend has important implications for the healthcare industry brand model. For example, the marketing of niche products will require a different skill set to connect with very specific and smaller groups of more sophisticated stakeholders.
Leveraging corporate brands and current assets
Historically, pharmaceutical companies have not promoted their corporate brands to customers, choosing to focus on product brands because of the efficiencies of marketing a few products to many customers. With the rise of more “personalized” therapies, there is a need for companies to leverage the corporate brand to increase marketing efficiencies and differentiate their product brands.
To build stronger foundations for growth, pharmaceutical companies must also consider a broader focus than solely selling traditional compounds. Opportunities include entering end-consumer markets, focusing on emerging markets, and beginning to develop biosimilars. There are strong indications that this is already happening, with pharmaceuticals proactively identifying ways to redefine their brand offerings.
The industry must also find new ways to maximize the residual brand value of existing assets, as pipeline relief may not come anytime soon. Companies continue to try to squeeze as many uses as possible out of their current assets. As part of this strategy, they must measure and manage their brands to drive appropriate business decisions.
Proactive brand management will be of particular importance to the innovators of biologics, where physician and patient uncertainty surrounding biosimilars could present an opportunity to capture greater revenue after patent expiry. Unlike many drugs, biologics cannot be precisely replicated, making biosimilar development more costly and less predictable than that of generic drugs. The relatively small price gap between branded biologics and biosimilars, combined with the development of enhanced biologics (“biobetters”), should all drive greater investment in maximizing the residual brand value of biologics.
Conversely, because biosimiliars are closer to branded products than traditional generics, they represent a tremendous brand opportunity in both established markets (some predict the US will become the largest market for biosimilars) and emerging markets (where biosimilar activity is thriving due to less stringent regulations). The market’s current combination of necessity and uncertainty call for a long-term brand strategy. This is an ideal playing fi eld to leverage a strong corporate brand.
The evolving role of brand for hospitals
The role of brand in healthcare is also emerging as an urgent issue in areas never before considered brand-sensitive, like hospitals. In the face of shrinking reimbursements, rising costs, and a changing healthcare culture, we have seen hospitals begin to rethink their delivery of superior and cost effective care to drive future success.
In Europe, public health networks are facing extreme pressures and challenges as economic decline continues alongside growing demand for services. As a result, community-based services are growing in importance, and competition for private hospitals is increasing considerably now that cheaper European travel costs are opening up opportunities for more patients to consider treatment locations beyond their local area.
Now, more than ever, it is critical to cultivate the ability to communicate positive, reassuring messages, make an emotional connection, and create lasting relationships. Hospitals face the same organizational, financial, and consumer issues as any business, but their success depends on a uniquely diverse range of stakeholders; this includes current and potential patients, employees, payers, donors, employers, government, volunteers, and the media. Hospitals also specialize in delicate and emotional concerns and services — matters of life and death. Therefore, while hospital customers are not always “customers” by choice, choice is playing an ever-greater role in where and how they get care.
A brand is a powerful business tool that has the potential to drive business performance. The transition period during a merger or acquisition, for example, is a crucial time for hospitals to use brand to consolidate identity, create efficiencies, rally employees, and reach targets. There is certainly an enormous opportunity for hospitals to leverage their brand to drive choice, bridge institutional gaps, differentiate their organization, and galvanize a diverse set of stakeholders. In turn, this will help them attract and establish meaningful relationships with consumers and, ultimately, strengthen their bottom line.