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Successful Product Manager's Handbook
Volume 0, Issue 0
Brand teams can no longer count on an embarrassment of riches to ensure a successful product launch.
No company wants to underfund new brands. But it's important to be realistic. The industry is in a period of sluggish pipelines and major patent expirations, and that means slower growth for branded drug makers. Increasingly, companies are looking hard at what they spend to commercialize and launch new drugs. What's the right number? It depends: The optimal launch spend is not just a matter of company and sales forecasts, but of the unique advantages and challenges of that particular product. Teams can no longer count on an embarrassment of riches to ensure a successful launch.
A Cutting Edge Information (CEI) study of 18 recent launches in the United States found that the biggest spender ponied up $267 million for marketing a blockbuster. The smallest budget? A mere $1.7 million for a niche brand. Unsurprisingly, that disparity can be largely attributed to revenue projections. Drugs pegged for blockbuster status can justify larger expenditures than smaller specialty brands.
But this is not always the case. In fact, the study concluded there is no color-by-numbers approach to launch budgeting. A niche drug could have $50 million allocated for launch, a middle-tier brand $20 million, and a blockbuster only $10 million (see "Spending Range," left).
Common Trends in Launch Spending
The trick is to know what problems you're trying to solve—and where your product can carry its own weight without extra spending.
It would be an exaggeration to say there are no common threads in drug launches. For example, the CEI study found that:
But similarities ended there. To make the most of resources, companies have to know what they want out of their products, identify unique challenges, and budget accordingly.
Let's take a close look at two very different product launches. In each case, the company clearly understood the unique strengths and shortcomings of its product—and used that understanding to launch and commercialize.
To achieve blockbuster status, a drug needs at least two things: great science and even better marketing. What happens when one piece is missing? The team behind Brand 1 knows from first-hand experience.
The Issue: At launch, Brand 1 aimed for peak annual global sales of $700 to $900 million. Although the drug offered only slightly improved efficacy, its safety record and overall tolerability were superior to its competitors. Enthusiastic patient groups and physicians heralded Brand 1's first-in-class status in a market hungry for new options—additional approvals promised to give the drug a shot at blockbuster returns.
Market Research in Phase III
So, what was the issue? Clinical enthusiasm masked the developer's lack of marketing experience. Head-to-head competition with top pharma companies added to the internal limitations: Brand 1's established competitors had presence in the therapeutic area, access to large marketing budgets, and sizeable, veteran sales forces.
The Strategy: The team leveraged Brand 1's clinical buzz to gain advantage over competitors; the company bet the drug's above-average safety profile, fewer side effects, and more convenient dosing would secure physician and patient loyalties swiftly. Brand 1's team knew it had to push aggressively through a saturated playing field, so market-research projects dominated late Phase III.
And it worked—the market-research department received $1.3 million of the total $2.25 million spent during this period. The money was used to develop key messages and collect competitive intelligence in preparation for market entry (see "Market Research in Phase III," below).
But getting through the gates was only half the battle. Because it was a first-in-class drug, Brand 1 needed human support to convince doubters it was better than competitors.
Brand 1 Ramps Up Marketing
The team knew it had to target physicians and used thought leaders, medical education, and journals to expand market reach and develop doctor relationships. Doctors are the best PR tools and Brand 1's company knew informing healthcare providers was a direct and efficient means to get the word out.
There was just one problem—the company didn't have key opinion leaders (KOLs) beyond clinical development, so the team formed a new network of KOLs for promotion and commercial growth. Brand team leaders depended heavily upon the input of these opinion leaders to help push the product towards its full potential.
The Result: In the months between FDA submission and launch, the brand spent more than half-a-million dollars laying the groundwork for its thought-leader program; that figure jumped to $1.6 million in its first year on the market. And the spending continued. The company created an advertising campaign to emphasize the product's advantages and put its weight behind the drug's superior safety profile.
Brand 2 Makes a Push
After FDA submission, advertising spend increased to $2.5 million before jumping an additional $3 million in the drug's first year (see "Brand 1 Ramps Up Marketing," left).
The results so far are mixed, but promising. Brand 1 leapt into the marketplace and immediately grabbed market share from established competitors because the company knew the superior safety profile was its golden egg. The drug, however, still hasn't reached blockbuster status because the brand's revenues currently fuel marketing spend. But the company wouldn't have been able to secure a place in the industry had it not put most of its budget into market-research products.
The ability to identify that need was the developer's greatest triumph, and the brand team's ability to learn from its successes and mistakes will determine the future of Brand 1.
A me-too drug, Brand 2 introduced clinical improvements, but had more modest goals than Brand 1: peak annual global sales of $100 to $200 million, mostly on the strength of US prescriptions.
The Issue: Unlike Brand 1, the developer boasted substantial experience in the drug class and therapeutic area. Without that know-how, Brand 2 might have never made it out of the gate; the market was already saturated by established brands struggling to win physician loyalty.
First-in-Class vs. Me-Too Budgets
From previous experience, the team knew where to hit its target—at niche sales levels, because several brands were already competing for a limited patient population. Even if Brand 2 secured a few years of steady revenue flow, it was a me-too product that already had a short and difficult life cycle.
The Strategy: Brand 2 invested tens of millions of dollars more than Brand 1. At the start of launch, Brand 2 had niche-level goals and blockbuster-level budgets. The company had to make a splash because it was entering a saturated market, so it invested tens of millions of dollars more than Brand 1.
The team decided not to concentrate most of the spending in Phase III (the way Brand 1 did), because, in launching a me-too, it had to convince patients and doctors to switch the brand they were currently using. This meant marketing Brand 2's fewer negative side effects to patients; to doctors, the company claimed Brand 2's drug tolerability encouraged patient compliance.
Here's where deeper pockets and marketing experience pushed Brand 2 forward. To remedy the lag in promotional activity, the company lavished marketing resources on Brand 2: The brand team spent nearly $45 million between FDA submission and the end of the drug's first year on the market. It may seem like Brand 2 was putting all of its eggs in one basket, but the team knew aggressive marketing efforts would pay off.
With so little time, the company concentrated funding to help the product catch up to where it needed to be.
Although Brand 2's commercial development could have benefited from earlier preparation, the company was able to create a profile that highlighted an unmet medical need in its patient population. Brand 2's promising clinical profile proved essential to the brand's success; its positive attributes helped win patient loyalty and a share of the market from well-known brands.
The Result: Between the close of Phase III trials and product launch in the United States, marketing spend increased by a whopping 1,000 percent. The most significant allocations went to developing a product promise, competitive strategy, positioning, and basic branding. During this time, the developer invested $400,000 in market research to understand the market and craft the brand's message for its small target audience.
To make up for lost time, aggressive funding continued in the brand's first year on the market. In the end, marketing allocations jumped from only $2.2 million in Phase III, to more than $20 million in Brand 2's first year (see "Brand 2 Makes a Push,").
The brand team continues to invest heavily in advertising and promotion to drive awareness of Brand 2's advantages, and it has fielded a substantial sales force to carry the message into doctors' offices. If the drug climbs toward its revenue goals, the company will have the flurry of late-marketing activity to thank.
Brand 1 and Brand 2 highlight another telling fact about US launches: It is far more expensive to enter an occupied US market as a me-too product than to launch as a first-in-class drug (see "First-in-Class vs. Me-Too Budgets," left).
The study concluded that me-too blockbuster brands—launching against well-armed competitors in highly lucrative markets—wielded budgets nearly 400 percent larger than their first-in-class counterparts. Even the relatively low-spending niche brands show a sharp divide. Follow-on products spent twice as much as first-in-class drugs.
Teams marketing first-in-class brands, like Brand 1, are more content to let their drugs promote themselves through innovative science, which proves attractive to physicians and patients. Though challenged to mold new markets, these brands spend far less, on average, than follow-on treatments. It's easy to become a leader when you have no competitors.
Follow-on products, like Brand 2, on the other hand, face uphill battles against entrenched competitors. Physicians and patients comfortable with existing treatments resist new drugs that sometimes offer few discernible improvements.
To make matters worse, payer organizations and formulary committees require clinical and economic reasons to shift to new brands. But if a company knows where to zero in on activity—as Brand 2 did—a mad dash to gain market share can work.
No two brands are alike, and it's easy to paint with too broad a brush. In the end, understanding a product's unique outlook, which may include opening a new market or challenging entrenched leaders, helps teams determine where their limited marketing dollars will do the most good.
Drugs are not one-size-fits-all—don't market them that way.
Eric Bolesh is research team leader at Cutting Edge Information. He can be reached at firstname.lastname@example.org