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Digital Marketing: Is Pharma Still A Laggard?

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‘Brand Marketing’ in the pharmaceutical industry, across the world, has mostly remained tradition bound, despite its rapid embracement of modern state of the art tools and technology in most other areas of the business.

Many other industries have been demonstrating over a period of time, how innovative usage of ‘Digital Marketing’ can provide cutting edge advantages to attain business excellence.

Expanded reach:

Today, ‘Digital Marketing’ has expanded its reach much beyond just business. This is currently being adopted even by the political parties and quite successfully. Besides promoting political candidates to win elections, imaginative deployment of high-tech tools is helping these parties to create game-changing favorable ground-swell, across the world.

Now, Indians have started witnessing it, even in the hinterland. It all started with associated glamor and grandeur, to a large extent, from the last general election of the country. Extensive utilization and usage of digital platforms, ranging from social media to high tech 3-D speeches of the political power seekers, have helped heralding the dawn of a new genre of political marketing in India. It helps creating favorable public opinion, capturing a much larger pie of the voters’ mindshare much quicker than the traditional form of marketing campaigns, without even an iota of doubt.

The ‘T-Factor’ changing the operating environment:

Though pharma marketing fundamentals would mostly remain the same, the overall environment in which the industry operates is continuously evolving, at a fairly rapid pace. The ‘T- factor’ or the ‘Technology Factor’ is hastening this process of continuous change.

We are experiencing how pivotal role the mobile or smart phones and tablets are playing at this juncture, when people spend more time with these devices than PCs. Simultaneously, general engagements and interactions are growingly becoming more digital than physical.

All these are setting new trends related to doctors’ and patients’ engagement initiatives, including, seeking, managing and communicating information to achieve desired goals.

Pharma industry is slow in adopting ‘Digital Marketing’:

As I see it, some global pharma companies have started experimenting with ‘Digital Marketing’. However, that is no more than just a very small component of their overall brand or corporate marketing strategy, driven mainly by:

  • High operational cost and lower commensurate returns of traditional pharma marketing.
  • And, The ‘Zing Factor’ – sheer energy, enthusiasm and liveliness of it, as an in-thing.

This is vindicated by the fact, while the global digital spending by pharma industry is expected to be around US$2.2 Billion in this year, the total sales and marketing expenditure of just one global pharma major – Novartis was US$ 14.6 Billion in 2013, according to a BBC News report of November 6, 2014.

Digital space cannot be ignored:

While giving example of powerful impact of digital media on brand marketing process,

I would cite the instance of recent ban in the country of ‘Maggi Noodles’ manufactured by Nestle, as ordered by the Indian Government authorities.

The first complaint on the product quality of ‘Maggi Noodles’ was reported from Uttar Pradesh (UP).

There, a product testing laboratory allegedly detected ‘lead and MSG’ much above the permissible level in ‘Maggi’, which is mostly consumed by children. It created an immediate mass furor in the social media. The impact of public outrage in the digital space, based on this just one incident, was so intense in just 24 hours that it influenced many with the same intensity of negative emotion, almost in no time.

Absence could be very costly: 

All-time active presence of a company in the digital space is important. Absence of it, at times, could invite disastrous consequences.

In the above case, Nestle management, as I understand, was rather quiet on the social media during the critical period of public fury. Consequently, the inevitable happened, as usually transpires under the fierce pressure of social media.

‘Maggi Noodle’ was immediately banned in the country, without probably following the due process of law, as the Bombay High Court ruling says. The brand image suffered a huge immediate blow. Revenue of billions of dollars vanished in the thin year, almost overnight.

What would have happened with Nestle management being alert with proactive skillful communication in the digital space during this critical time of social media outrage? Probably, the damage inflicted on ‘Maggi Noodles’ brand could have been minimized. Who knows?

That’s the power of the digital space as we experience today. Thus, it needs to be optimally leveraged by the pharma industry, without further delay, with creative ‘Digital Marketing’ engagements.

‘Digital Marketing’ in pharma – a quick look:

For the benefits of all readers let us recapitulate what does this process really entail? ‘Digital Marketing’ in pharma is construed as a targeted, measurable and interactive marketing process of brands or disease related services using digital technology. It ensures immense flexibility and offers a broad spectrum of variety, for patients’ engagements of various types, and reaching out to doctors for increasing prescription generation.

Engagements and interactions with doctors, patients and other relevant stakeholders through digital channels, such as, social media, smart phones/tablets, health applications, e-mails and e-detailing are of immense importance today, as a sizable number of them are looking for more and more instant information, which could be product, disease or any other service related and important to them for a better quality of life.

Its relevance:

‘Digital Marketing’ would soon assume high priority for all round pharma business in India, just as it has already happened in many other industries. The speed of its becoming a critical center piece in the pharma marketing strategy formulation exercise is directly linked with the increasing speed of Internet and smart phone usage by people of all ages with enquiring minds.

On the other hand, rapid change in market dynamics and extremely busy schedules of the important doctors, triggering fast decline in the productivity of traditional product detailing, would hasten this process of change.

The key advantages:

The key objectives of both ‘Traditional or Physical’ and ‘Digital Marketing’ in the pharma industry are basically the same, such as, building brand perception and brand preferences, giving rise to excellence in business performance.

According to a paper of April 16, 2014, published by Salford Business School, Manchester, UK,

The key advantages of ‘Digital Marketing’ over ‘Traditional Physical Marketing’ are as follows, where the ‘Digital Marketing’:

  • Helps businesses to develop a wider customer base as it does not rely on physical presence or interaction.
  • Encourages customers to interact directly with businesses.
  • Is not limited by conventional opening times – customers can interact at a time and place convenient for them

Calibrated increase in usage of ‘digital media’:

Both traditional and digital forms of marketing are currently important in the pharma industry, though in varying degree. Each pharma player has to carefully evaluate one’s current and future product-mix and customer base as they would decide either to initiate or scale up marketing operations in the digital space.

Well calibrated increase in the usage of contemporary ‘Digital Marketing’, keeping in mind rapidly changing aspirational mindset of young Indians, including doctors and patients, with smart phones being a key enabler, would help the Indian pharma industry, significantly, as we move on.

Starting with selective approach:

Initially a company may be selective in its ‘Digital Marketing’ approach, which could be based on digital penetration in the geographical regions or areas and its demographic configuration.

For example, if a particular region shows high smart phone usage for community or group chat within the general population, a pharma company may explore the possibility of creatively designing a smart phone based ‘digital patient chat group’ as a part of its patient engagement initiative,

In this ‘digital patient chat group’, the members suffering from chronic or even serious ailments can discuss with each other the issues for which one is seeking a solution, where even the pharma companies can intervene, wherever they can add value and is legally permissible.

A few examples:

To add a perspective to this discussion, I would give below just a few examples, at random, of various ‘Digital Marketing’ initiatives of global pharma players:

  • Merck (MSD) uses cervical cancer vaccine Gardasil ’s Facebook fan pages to drive awareness and traffic to their cervical cancer site.
  • Pharma brand Cephalon promotes pain relief by creating an interactive website.
  • Boehringer Ingelheim worked with Doctors.net.uk to run a 12-month campaign to raise awareness and sales for its Asasantin Retard, an antithrombotic agent which helps prevent the formation of blood clots.
  • AstraZeneca’s online campaign for Nexium aimed to educate the patients and build their brand preference. The tactics included coupon downloads, driving qualified potential customers to the site and encouraging them to talk with their doctor about Nexium.
  • Novartis set up a patient focused website targeting all four major organ transplants drugs.
  • UCB Pharma partnered with social media platform patientslikeme.com to bring an Epilepsy community to its site.
  • GSK developed a promotional website aimed at HIV specialists. The site, at www.sciencexchange.co.uk, offers HIV specialists a one-stop-shop for exchanging information on HIV and its management.
  • Sanofi uses YouTube with a number of product messages

Conclusion:

Today in India, we witness even various political parties, which used to be very traditional in their approaches, have started using a wide variety of digital marketing tools successfully by deploying astute domain experts, to achieve whatever they want to.

On the other hand, despite spectacular evolution and progress of digital technology in many verticals of the pharma industry, its marketing models, by and large, still don’t seem to find these highly productive tools much useful, as compared to a large number of different industries.

Currently, digital information and communication channels are catching growing number of eyeballs of even the doctors and patients. Despite this shifting paradigm, with large to very large field sales forces trying to reach the increasingly busy doctors, pharma industry is still relying heavily on traditional and physical marketing models, including promotion through medical journals and even the direct mailers.

Intriguingly, barring a limited number of global players, pharma industry in general, and Indian pharma companies in particular, seem to be far lagging behind in creative digital marketing initiatives.

As the pressure would keep mounting for more returns from every rupee spent on sales and marketing, pharma marketers would require to reassess the differential value addition potential of digital marketing media. While doing so, they would first feel the need to augment their traditional marketing models with selective and synergistic digital interventions and thereafter to spearhead the core communication of brand values together with customer engagement and interaction initiatives with the help of digital media.

The effectiveness in working out a game changing crafty blend of both brand and patient-centric communication package with digital tools would separate men from the boys. It would demand top quality cerebral inputs from the pharma marketers – a requirement that is not so easily available in the current space of pharmaceutical marketing, dominated by a wide variety of freebies.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

After Mollycoddling China Cracks Down on Pharma MNCs…But Why Now?

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In tandem with exemplary growth in the healthcare sector, China has started confronting with some consequential hazards in form of serious regulatory violations involving, besides many others, hospitals, pharmaceutical pricing and food and drug safety, which reportedly include contaminated milk powder and rat meat sold as mutton.

A recent report indicates, there are rampant kickbacks at various stages in the healthcare delivery process. For example, hospitals get kickbacks from drug and device companies, and hospital executives give a portion of these kickbacks to their doctors, involving even the pharma MNCs.

While looking back, in 1997, China took its first healthcare reform measures to mend the earlier not so good practices, when medical services used to be considered just as any other commercial product or services in the country. As a result, staggering healthcare expenses made Chinese medical services unaffordable and difficult to access for a vast majority of the local population.

In April 2009, China, a country with over 1.35 billion population, unfolded a blueprint of a new phase of healthcare reform to provide safe, effective, convenient and affordable healthcare services to all its citizens. An incremental budgetary allocation of US$ 124 billion was made for the next three years to achieve this objective.

The core principle of healthcare reform in China:

The core principle of the new phase of Chinese healthcare reform is to provide basic health care as a “public service” to all its citizens, where more government funding and supervision will play a critical role.

This reform process will ensure availability of basic systems of public health, medical services, medical insurance and medicine supply to the entire population of China. It was also announced that priority would be given to the development of grass-root level hospitals in smaller cities and rural China. The general population will be encouraged to use these facilities for better access to affordable healthcare services. However, public non-profit hospitals would continue to remain one of the important providers of medical services in the country.

Medical Insurance and access to affordable medicines:

Chinese government has planned to set up diversified medical insurance systems to provide basic medical coverage to over 90 percent of the country’s population. In tandem, the new healthcare reform measures will ensure better availability of affordable essential medicines at all public hospitals.

Highly lucrative healthcare business destination:

New Chinese healthcare reform process carries an inherent promise of a large additional spending worth billions of US dollars every year catapulting China as one of the most lucrative healthcare markets of the world.

China’s healthcare spending has reportedly been projected to grow from US$ 357 billion in 2011 to US$1 trillion in 2020.

Consequently, this huge investment has started attracting a large number of global companies of various types, sizes and nationality competing for the right size of their respective pies of profits.

In that process, as the media reports highlight, global pharmaceutical players started fast increasing both their top-line revenue and bottom-line profits from the booming Chinese healthcare market.

Pharma MNCs growing bigger, outpacing local industry:

Another report highlighted, “60% of China’s healthcare stimulus money ended up going to non-Chinese multinationals”. Quoting a recent JP Morgan report the article indicated AstraZeneca, Sanofi, Roche, GlaxoSmithKline, Novo Nordisk, Johnson & Johnson and Pfizer realized over 30 percent growth from their China operations in the early part of 2011.

With the slow down of business in Europe and in the United States, even large global pharmaceutical players like, Bayer, Sanofi, Novartis, Eli Lilly, Novo Nordisk and many more have reportedly invested huge resources for capacity building in sales and distribution channels, local manufacturing and R&D.

Chinese Government woke-up:

Kick starting the reform process and in the face of high level of corruption, Chinese government initiated monitoring the effective management and supervision of healthcare operations of not only the medical institutions, but also the health services, together with basic medical insurance system, in good earnest.

It has been reported, though the public hospitals will receive more government funding and be allowed to charge higher fees for quality treatment, they will not be allowed to make profits through expensive medicines and treatment, which has been a common practice in China.

Violations meted with harsh measures:

Accordingly, with increased vigil in many of these areas since last couple of years, Chinese regulators have started cracking down on the culprits, who are being meted out severe and harsh punishments, consequently.

In 2012, seven public hospital directors were reportedly sent to jails for accepting kickbacks. One corrupt drug regulator was even executed along with two food-company managers involved in a poisoned milk scandal, as the report mentions.

Pharma MNCs targeted for alleged corrupt practices:

As stated above, the new healthcare reform measures include regulation of prices of medicines and medical services, together with strengthening of supervision of health insurance providers, pharmaceutical companies and retailers.

China has now reportedly targeted Multinational Companies (MNCs) for allegedly corrupt practices, including price-fixing, quality issues and consumer rights. This has forced some MNCs to defend their reputations in China where global brands often have a valuable edge over local competitors in terms of public trust.

Recently, in an effort to reduce drug prices, China has initiated probes involving 60 drug manufacturers.

According to a recent report, to make the pricing system for medicines more effective, the regulatory agencies in China are investigating the costs and prices of drug manufacturers including global pharma majors like:

  • GlaxoSmithKline Plc (GSK)
  • Merck & Co.
  • Novartis AG
  • Baxter International Inc.

The regulators are expected to go through the details of 27 companies for costs and 33 companies for pricing, as per the July 2, 2013 statement posted on China’s National Development and Reform Commission’s (NDRC) Evaluation Center of Drug Pricing.

The report highlights that a possible impetus for the NDRC to probe into pricing and costs of domestic and foreign drug companies was the announcement of China’s National Essential Drugs List in March, which increased the items on the list to 500 from 305.

Clampdown on government spending:

To exercise control on public expenditure towards drugs, the government has also reportedly clamped down on drug spending, placing some foreign drug makers’ products under price controls for the first time.

Since 2011, the Chinese Government has reduced the drug prices four times, including 15 percent reduction earlier in 2013, though the price reduction will be as much as 20 percent for the expensive drugs. At the same time, the government has reduced tax rebates on investments.

Mr. Chen Zhu, Health Minister of China has reportedly expressed that healthcare in China is still too expensive and there is still inadequate control over improper use of drugs in the country.

Another report indicates that Nestlé, Abbott Laboratories and Danone are under investigation in China for “monopolistic” pricing.

Crackdown on bribery and kickbacks:

An article in a similar context mentions that the “Chinese police started an investigation into the Chinese unit of the biggest pharmaceutical manufacturers of UK – GlaxoSmithKline and Senior executives at the unit are suspected of ‘economic crimes”.

On the same subject, a different news report also indicates, a senior Glaxo finance executive in Shanghai and employees in Beijing were detained as part of a corruption investigation.

Recently a Chinese Security Ministry official has reportedly said that GlaxoSmithKline (GSK) executives in China have confessed to bribery and tax violations.

The same report quoting the ministry highlighted that the case against GSK involved a large number of staff and a huge sum of money over an extended period of time, with bribes offered to Chinese government officials, medical associations, hospitals and doctors to boost sales and prices. Concerned executives also used fake receipts in unspecified tax law violations.

Interestingly, earlier in 2012, Global CEO of GSK reportedly admitted that the company made “unacceptable” mistakes in “mismarketing” their antidepressants Paxil and Wellbutrin, which were the subject of a US$ 3 billion settlement with the Justice Department of the United States. At that time the CEO was reported to have said “very sorry” for the incident and “determined that this is never going to happen again.” 

Another very recent news highlights that currently China is investigating at least four pharma MNCs as it widens its probe. Chinese enforcers had suggested that these pharma companies were using the same tactics to boost their businesses in the country.

It is now learnt that anti-trust body of China - State Administration for Industry and Commerce (SAIC)  has also visited  Shanghai office of UCB. 

Happening elsewhere too:

Reports of similar alleged malpractices have started surfacing from elsewhere in the world too. For example, in Denmark, a country known for low incidence of corrupt practices, a Norwegian cardiologist was reportedly charged with taking 2 million kronor, or about US$ 350,000, from Merck and Pfizer, despite the fact, Danish law prohibits doctors from accepting money directly from the drug makers. The concerned doctor allegedly used the cash to buy expensive furniture and salmon-fishing holidays in his home country.

Last year, both the Department of Justice and the Securities and Exchange Commission of the United States reportedly charged Pfizer and its subsidiary Wyeth for paying millions of dollars in bribes to officials, doctors and healthcare professionals in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia during 2001-2007 in violation of the US Foreign Corrupt Practices Act. They had also set hefty fines on the two to settle the charges.

Conclusion:

To effectively address serious and longer term healthcare related issues of the country, the Chinese Government has already started implementing its new healthcare reform measures earnestly. Possibly to maintain equity, stay on course and uproot corrupt practices, they have now started cracking down on the violators in all seriousness, be they are from within the country or beyond its shores.

So far as the pharma MNCs are concerned, such harsh measures are being taken for alleged malpractices probably for the first time ever of this scale and that too with full media glare.

All these measures coupled with pricing pressure and gradual rise of local Chinese players, would make the Chinese market increasingly challenging to  pharma MNCs.

Some global players have already started feeling the scorching heat of tough Chinese measures. But China is too powerful a country and too lucrative a market for any entity to flex its muscle to stall the current juggernaut, at least, till the ‘Dragon’  achieves its objective of bringing down public healthcare expenditure to its expectations…Or is there more to the problem than meets the eye?

Thus, the key question emerges: 

Why has China, after mollycoddling the pharma MNCs for so many years, now started cracking down on them so hard?

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.