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Eric Bolesh is a senior analyst for, Cutting Edge Information, based in Durham, North Carolina.
Companies are tightening their purse strings just when brand strategies need to target new audiences
The global economic struggle is adding injury to injury in a traditionally recession-proof branded drug sector already saddled with its own serious issues.
Internal industry challenges—such as overbuilt sales forces, looming patent expirations, regulatory holdups, and pricing scraps—are coming head to head with external problems like payers, doctors, and consumers trying to contain costs.
One undertaking in particular, the release of new brands, will sorely test drug companies in the months and years ahead.
New product launches remain intensely important to the industry. Hopes for growth—or even just the ability to tread water in treacherous economic seas—lie squarely with new brands coming to market.In the current environment, however, budgets tighten even as brand plans expand to address a broadening audience of physicians, payers, and patients.
Time is critical. Patents and approvals wait for no one. Companies (large and small) must marshal resources if they want to rocket their drugs into prominence.
Finding a way to balance priorities now becomes even more of a challenge for brand teams as they shepherd their drugs to market.
The question then is: How do you find a way to balance priorities? And are differences (or similarities) in approach between brands supported by large and small companies?
How Other Companies Do It
Knowing and understanding the pressures that assail other brand teams can go a long way in helping a product manager prioritize his or her own resources as a launch approaches.
Data collected over the last several years by Cutting Edge Information show that ideal brand support starts as early as pre-clinical testing and ramps up rapidly throughout human trials, regulatory submission, and launch.
For big drugs at big companies, that can mean hundreds of millions of market-oriented dollars before field forces even enter the picture. Skimp a little, and teams run the risk of undermining their own best hopes for future success.
But not all drug companies can afford such top-flight support. Many brands reach the market with different levels of resource support. Most brand teams give high-priority tasks the most attention, while other concerns succumb to a grab-bag approach to budgeting. Small companies, especially, face a difficult series of decisions when it comes to budgeting for a brand launch.
All Budgets Great and Small
Some things hold true no matter how deep the pockets. Research shows that all teams gradually shift their focus to advertising and promotion (A&P) as they progress toward launch. This trend generally holds true regardless of company size.
Among large-company drugs in Phase IIIa testing, resources are split fairly evenly between A&P and medical affairs. Market research and market access receive slightly lower budgets. During Phase IIIb and the launch year, however, focus turns firmly to advertising and promotion.
In the first year on the market, nearly two-thirds of all spending is earmarked for advertising and promotion, while medical affairs claims 24 percent of total expenditures.
Smaller companies’ brands show a similar trend, but the percentages are slightly skewed given the inability—pending a clear picture of a drug’s potential—to free up commercial funds.
For teams scraping up dollars wherever they can find them, early allocations favor market research in order to establish a basic market understanding. With each passing development stage, however, funds for advertising and promotion increase. By the launch year, A&P claims 72 percent of total spending. At that point, other budget categories can become afterthoughts as teams put all of their resources into promotion.
Targeting New Audiences
Within the general trend of shifting resources, however, each brand now faces its own challenges.
One large-company brand, an eighth-to-market cardiology product, contributed considerable funds to patient marketing amid a total expenditure that was close to $100 million.
This drug (Brand A) targets consumers in an effort to differentiate itself from competitors. At launch, the team plans to allocate $2 million to DTC ads and $3 million to patient education. Brochures, ads, and Web content will highlight the differences between Brand A and its competitors. The goal: bring patients to doctors’ offices seeking more information and samples, if not actual prescriptions.
When that happens, Brand A plans to be ready. Fifty-four percent of launch-year spending is earmarked for samples. The ultimate objective is to get the product into consumers’ hands. Ideally, those consumers will convert to patients.
Brand A also has clinical aces up its sleeve: increased tolerability, improved efficacy, fewer doses, and fewer safety concerns than existing treatments. In fact, the brand’s biggest commercial gamble throughout Phase III is its dependency on the progress of an associated delivery device. That device ideally will help brand the drug as convenient, safe, and effective. With all of this in place, Brand A’s company feels confident that sales will top the $2 billion mark.
The Little Drug That Could
Another drug (Brand B) faces a different path to market. Without Brand A’s resources, the product team pulled together all possible resources to position Brand B for success.
Brand B is a gastroenterology drug that is expected to be a first-line therapy, with sales projected at $750 million annually. Despite this formidable forecast, the company struggled to support the product. The sole preclinical allocation was $40,000 for market research. This stayed true through early human testing, as Brand B’s company tried to predict how competitive the drug would be. The team also sought to identify clinical endpoints that would best position the brand if it reached the market.
The company’s early-stage investments in market research, though minimal, paid off. Phase II trial results were exactly in line with what key stakeholders wanted to see. As the drug entered Phase III trials, resources jumped eight-fold. The amount, however, was still just $1.7 million, with a good deal going into market access activities such as pricing studies and pharmacoeconomics work.
This sort of painstaking approach to careful development should lead to an influx of commercialization dollars that will fund expanded activity throughout Phase III and launch. Talks are under way with a potential large pharma partner. All told, the team expects big things for Brand B.
Striking a Balance
These two examples show that brands can take different paths to positive outcomes. Again and again in interviews, brand team members express the need to devote generous resources to brands with high sales potential, and to do it as early as possible. It’s a no-brainer: with substantial ROI waiting downstream, it only makes sense. If companies can afford the investments, they’ll be in prime position at launch. For a drug like Brand A, which offers unique benefits, a team’s main challenge is hatching an effective commercial strategy.
Other approaches can work, too, however. In interviews at small companies, teams often spoke of careful allocations and prudent development on both the clinical and commercial sides.
The point is: Every brand team at companies big and small faces tough decisions. But with strategic, long-term planning, and making the most of limited resources, as in Brand B’s case, drugs can get to market without torpedoing their considerable potential.
Eric Bolesh is Research Manager at Cutting Edge Information. He can be reached at email@example.com