Magazine article Marketing
It is hard to imagine a UK sector in which it can take 12 years and cost pounds 350m to develop a licence for a product, yet it is a criminal offence to then promote that product to consumers.
Even worse, a sector where product patents are lost overnight, leaving the way clear for rivals to market generic versions and wipe millions in revenue from the original patent-holder. But this is the pharmaceuticals market.
Pharmaceutical companies are not only facing increased competition and regulatory hurdles, but also a drop in research and development and downward price pressure.
Research and development is one key battlefield. Companies must have products in their decade-long pipe-line. But the investment required to develop a drug is a deterring factor, and the sector is facing up to a shortage of R&D activity.
'Everyone knows Pfizer is likely to make its numbers for the next two or three years,' says Jan Leschly, chief executive of venture capitalist firm CARE Capital and former chief executive of SmithKline Beecham. 'But what happens in three to four years if it doesn't have new drugs in the pipeline? If it hasn't been more productive in R&D, it won't continue with it.'
Pharmaceutical companies are banking on faster development times and higher success rates cutting the cost of developing drugs. But in the meantime, there has been a huge growth in merger activity, much of which has been driven by a lack of drugs in the larger firms' pipelines.
Datamonitor analyst Linda McNamara thinks licensing partnerships and mergers - such as the acquisition of Pharmacia by Pfizer in April - will become commonplace. 'Big firms are interested in acquiring smaller companies to boost pipelines. Johnson & Johnson, for example, has a history of such practice with the acquisition of Centocor, and has since moved on to Scios and the Link Spine Group.'
Yet no matter how much faster development times become, or how many mergers are made, it remains an offence to promote prescription-only drugs to UK consumers.
The only people manufacturers can advertise to directly are health professionals, such as GPs. And these ads have to fall within guidelines drawn up by the Association of the British Pharmaceutical Industry (ABPI) that go well beyond the legal requirements controlling the advertising of prescription medicines. The guidelines are administered by the Prescription Medicines Code of Practice Authority.
This is not the case in the US or New Zealand, where drug companies are free to advertise directly to consumers - and spend billions doing so.
The pharmaceutical companies are obviously in favour of adopting this approach. Some in the UK agree, maintaining that consumers would be better-informed if they could be approached directly.
John Young, marketing director at Pfizer, argues that evidence shows consumer ads in the US have led to more patients being appropriately diagnosed and treated for diseases such as diabetes.
'We believe that provision of information can make a significant difference by helping to raise awareness of serious medical conditions and encouraging patients to discuss their condition with their doctor or another healthcare professional,' says Young. 'Although provision of information on medicines to consumers would need to be done in a way appropriate to the UK, there are significant benefits for consumers and the NHS in patients simply having access to information on medicines that their doctors have.'
However, it is unlikely that the UK will adopt the US approach.
One reason is that the US is moving even further down the road of self-regulation. Continued government crackdowns have resulted in some of the biggest healthcare fraud settlements in US history - in June, AstraZeneca agreed to pay dollars 355m (pounds 221m) to settle charges over the way it priced and marketed prostate cancer drug Zoladex. …