The landscape for pharmaceutical research and development is shrinking, resulting in reduced revenue possibilities and tougher competition. New regulatory and pricing trends emerging this decade bring a paradigm shift that the industry must respond to and embrace to ensure success. The future will bring increased responsibilities to pharmaceutical manufacturers, but will also open the door for new opportunities.
As broad-spectrum pharmaceuticals become increasingly available, the industry begins shifting towards a more specialized focus. Orphan drugs are becoming the focus of development efforts as the specialized area harbors the most opportunity. New patents are being awarded primarily to prescription pharmaceuticals that can address previously untreated – or under-treated – diseases. As a result, the quickest way to an exclusive marketable drug is filling these niche markets.
In 2013 the number of FDA-approved new molecular entities (NMEs) met an industry average of 27, although this number dropped from the 39 approved in 2012. Most of the NMEs approved last year are targeted toward rare diseases or highly-specific medical conditions, proving that Orphan Drugs are becoming the focus for future growth. With such a niche target, large blockbuster releases are entirely impractical. Instead, pharmaceutical manufacturers have favored smaller, more strategically precise launches and as the trend continues into 2014, smaller but more frequent product launches are likely to continue.
This year we will see the regulations for pharmaceutical pricing reach full effect in the UK. The primary factor behind pricing pressure is a push toward value pricing, a pricing model based upon what customers are willing to pay and the perceived benefits one drug may have over another. The shift toward buyer-focused modeling brings increased pressure for pharmaceutical companies to bring lower-priced or higher-impact drugs to the market. While the regulation is currently localized to the UK, it is likely other European countries will follow suit. With proof of customer benefits, the trend is likely to spread throughout global markets, shifting the burden of affordable healthcare to pharmaceutical manufacturers rather than healthcare providers or insurance companies.
Increased global communication will effect pricing models even further. As international transparency increases, customers gain better ability to compare drug prices across various markets for themselves. Greater technological assessments of new drugs will move the power into the buyer’s hands, putting increased pressure on drug manufacturers to lean toward a buyer-friendly market. A pricing paradigm shift throughout 2014 may be seen that could continue to control pharmaceutical pricing through the remainder of the decade.
2013 represented a rather calm year for pharmaceutical acquisitions and mergers. The relaxed atmosphere is expected to dissipate in the coming years as trends shift towards more aggressive marketing. As previously stated, the pharmaceutical industry is moving toward more specialized medicines, and the race to be the first to bring a targeted drug to the market will cause an increase in company acquisitions. Smaller manufacturers can expect to face increased pressure for mergers or collaborative efforts from bigger companies in the interest of protecting margins for emerging prescription drugs.
In situations where acquisitions are impractical, collaboration efforts from major pharmaceutical companies in producing new research and launching new drugs may be the only option for ensuring a return on investment. However, by its very nature, collaboration means smaller margins for each party involved, splitting profits between each functioning entity and while it could mean smaller profits per drug, the speed and technology of collaborative efforts could increase a company’s overall production. The shifting terrain only better serves the anticipation of smaller, more frequent product launches.
Social Media and Digital Marketing
In the past, the pharmaceutical industry by nature had a resistance to social media and digital marketing techniques. With built-in safety concerns, social media marketing brought a higher risk for the company and the potential for a large-scale fallout from aggressive marketing or what may be perceived as negligence. Opening a drug to social platforms carried a responsibility to customer experiences that extended beyond standard health-effect research. The topic shifted into an open forum where individuals can express concerns or negative experiences directly to the marketing branch as well as other customers.
However, the time has come to embrace social marketing. Cultural trends are leading societies around the globe toward internet-based shopping and product research. As society becomes more closely integrated, social media emerges as the cornerstone for successful marketing campaigns. Admittedly, the concept is not entirely new for pharmaceutical companies, and many manufacturers have been testing the social media waters over the last few years. But as we move into the latter half of the decade, pharmaceutical companies may have to abandon their reluctance and dive head-first into social media marketing, as it will increase their marketing range and establish them as a more socially relevant entity.