“Drug” Companies are Missing Their Moment to Write a New Narrative

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John G. Singer examines how the ongoing coronavirus pandemic may create a new dichotomy for global healthcare – and why pharma companies still wedded to the market models of the past risk getting left behind.

 

“Drug” companies have a unique opportunity to invent a different market for themselves. It begins by telling a new story about “value” they create at a system level and in collaboration with customers

 

As the cascading collapse caused by the coronavirus threatens to shutter doctors’ offices because of a drop-off in patient visits, the USD 30 billion/year pharmaceutical marketing industry in the United States remains committed to the past, including its DTC media plans to drive patients into doctors’ offices.

 

“The fine line of advertising, especially for pharma and especially now, is how to continue to get the word out about products,” said David Kyne, CEO at Evoke Kyne, a New York City-based health marketing agency in an article on April 7 in FiercePharma. A colleague concurs.

 

“Initially we saw a little bit of contraction, but that seemed to be pure panic of what everyone was facing,” Jennifer O’Dwyer, president of Evoke in North America, said in the same article. “We’re still too early on to say. If there’s going to be a drop in spending, it might show up in Q3. Right now, we’re seeing that viewership is up and clients are committing to media plans because consumers are home now.”

 

At least in the drug promotion business, we can take comfort that all is still relatively business as usual.

 

For more than a century, most Western companies have been working under a Fordist model of mass production and consumption, where industrial capitalism places the idea of ‘promote-and-push product’ as the center of commerce. The purpose put into the machine is managing “brand.”

 

It’s an entrenched mode of being.

 

This is a view of identity and approach that, up until recently, achieved a sort of benign balance in the friction between contending interests of business and consumer. There’s an entire industry subsystem — of ‘marketing and media’ advisors, analysts, media companies, digital platforms and advertising and public relations agencies that comprise a nearly USD 300 billion economy in the United States — whose revenue models, and the professional fates of executives, are still wed to preserving it. The calcification runs thick, depositing layers of decomposing market theory across mindsets.

 

And as one of the largest advertisers in the overall marketplace, pharmaceutical companies are also affected by the same sort of arterial hardening – they are kinetically-trapped in a belief system that product promotion is a path to growth, and the primary form of defense against competing drug brands.

 

The nature of innovation needs to fit a radically different context. The aim for the pharmaceutical industry in the new world disorder should be for something qualitatively different, more imaginative strategically, more systemically transformative. The industry should be thinking bigger and with an economic orientation based on value creation vs. value extraction.

 

Drug companies seem to be in denial at the existential moment facing its current market form, as a second crisis is now brewing in the offices of its customers – physicians. There are already signs that the pandemic is taking a toll on an increasing number of the approximately 500,000 primary care physicians in the US, including internists, family doctors and pediatricians.

 

In Enterprise, Alabama, a rural community in the state’s south, the number of paying patients has dropped 75 percent, according to Dr Beverly Jordan, a family doctor and pharmaceutical industry customer.

 

“At a time when we are struggling physically and emotionally to treat our communities, it is horrifying that we’re having to consider how we’re going to keep our doors open,” she explained last week to the Los Angeles Times. “We are hurting.”

 

Just to ‘keep the lights on’ and survive the pandemic, doctors are asking for advance payments from the Centers for Medicare and Medicaid Services. To their credit, health insurers are also accelerating payments to doctors and hospitals to ease a cash crunch that has led physician practices to furlough workers.

 

(Highmark, the Pittsburgh-based Blue Cross and Blue Shield insurer, announced this week that it would provide USD 30 million in advance payments to more than 1,700 local primary care practices participating in its value-based reimbursement program. UnitedHealth Group said it would speed up USD two billion in claims payments to medical and behavioral health providers for fully insured commercial, Medicare Advantage and Medicaid members. The company said it would also provide up to USD 125 million in small-business loans to clinics partnered with its subsidiary OptumHealth.)

 

There’s a difference between maximizing shareholder value vs. creating stakeholder value.

 

Economist Mariana Mazzucato, a professor in the Economics of Innovation and Public Value at University College London (UCL), argues that the way the word ‘value’ is used in modern economics has made it easier for value-extracting activities (like DTC advertising) to masquerade as value-creating activities. “And in the process rents (unearned income) gets confused with profits (earned income); inequality rises, and investment in the real economy falls.”

 

Markets have always been shaped, Mazzucato notes. They can be reshaped now to better reflect and foster real value — creating a more sustainable and inclusive economy.

 

The future of strategy and competition in the pharmaceutical industry is a model that goes broader than pharmaceuticals; it also lies in servicing health. More specifically, it lies in transitioning away from an industrial-era view of ‘market’ and business bounded within the context of discovering, pricing and promoting the technical merits of a physical product (i.e., drug), to a model based on embedding “drug” within entirely new systems of health production.

 

Said differently, “drug” companies have a unique opportunity to invent a different market for themselves. It begins by telling a new story about “value” they create at a system level and in collaboration with customers.

 

In the next healthcare, the DTC ad campaign is the last thing to preserve.

 

John G. Singer advises business and government on health system vision and value innovation. He leads Blue Spoon Consulting, the pioneer of ‘big design’ as a methodology to drive large-scale system change.

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