The Unique Case of Pharmaceuticals
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Last fall, pharma suffered one of its blackest days ever, but few in the industry seemed to notice. On September 21, Wal-Mart,
the world's largest retailer, announced a generic-drug program offering nearly 300 generic drugs for $4 per prescription.
"Each day in our pharmacies, we see customers struggle with the cost of prescription drugs," said Wal-Mart CEO H. Lee Scott
Jr. "By cutting the cost of generics to $4, we are helping to ensure that our customers and associates get the medicines they
need at a price they can afford. That's a real solution for our nation's working families."
The price cut made headlines for days, drawing waves of praise. However, some industry veterans heard in this news a more
ominous message. Like many other pharmaceutical stakeholders, Wal-Mart was engaging in the phenomenon called the consumerization
of pharmaceuticals: using drug-industry products to promote stakeholders' interests in the name of consumers' interests. Despite
its stated pro-consumer intentions, the retailer was actually pushing its own agenda: to drive store traffic and to deflect
criticism of its subpar employee-health benefits.
"[The $4 generics promo] is a loss-leader type program solely aimed at getting people in the door at Wal-Mart," said Charlie
Sewell of the National Community Pharmacists Association. Richard Evans, a Sanford Bernstein drug analyst, stated that it
"makes more sense as a political air cover [than] as a retail strategy." In other words, Wal-Mart was playing the consumerization
game—and doing it, as is increasingly the case, at the pharmaceutical industry's expense.
Ironically, it was pharma that initiated consumerization in the nineties with direct-to-consumer advertising. In the decade
since, one stakeholder after another has lined up to seize every opportunity to "consumerize" pharmaceuticals for its own
benefit—whether or not it was good for consumers. This Pandora's box of unintended consequences has badly damaged pharma,
eroding its image and devaluing its products. The $4 Wal-Mart price tag, in fact, marked the ultimate devaluation of pharmaceuticals,
insinuating that they are mere commodities to be purchased "on sale" like soap or toilet paper. Industry leaders need to recognize
and respond to this phenomenon because of its profound impact on their products and their businesses.
What Consumerization Is and Is Not
Consumerization is not an easy concept. By way of definition, it helps to clarify what it is not. Consumerization is not consumerism,
a grassroots movement that advocates for the needs and rights of consumers. Consumerization is driven not by consumers but
by other stakeholders, who use a product to promote their own interests in the name of consumers'.
Only a few select product categories, such as oil and gasoline, tobacco, and alcohol, have been consumerized. Yet no product
has been consumerized to the extent of the molecules that pharma discovers, develops, and markets as medicines. These products
are in a category of their own, with exceptional clinical, commercial, social, and political value (see "The Unique Case of
Pharmaceuticals,"). That's why they are so susceptible to consumerization—and why the process escaped pharma's control almost
as soon as it was set in motion.
A classic case of pharmaceutical consumerization occurred in 1998 when WellPoint Health Networks became the first managed-care
company to initiate an Rx-to-OTC switch by petitioning the FDA to transfer Claritin, Schering-Plough's blockbuster antihistamine,
to OTC status. "The OTC status of loratadine, whether Claritin or a generic, is in the best interest of allergy sufferers,"
said Robert Seidman, Wellpoint's chief pharmacy officer. "It lowers the cost and eases access."
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