Customer Value Integration

Talking about the needs for transformation in the healthcare and pharmaceutical sector would be stating the obvious. We don’t lack thorough analysis of the issues – we know that R&D pipelines are dry, that regulatory concerns increase both from a safety as well as from a cost/benefit perspective, and that the blockbuster sales model of the past will no longer suffice. In other words, this is not the time to search for the reasons for change but to actually implement new solutions.

It is an interesting observation that not merely regulatory institutions or payors request more from the industry, but patients are also increasingly demanding earlier access to treatment. A major impediment in European healthcare systems is the time necessary for patients to get access to innovative treatments for seriously debilitating and life-threatening illnesses.

Securing patient access to the latest innovations sometimes takes years and varies widely across Europe. This is because there are gaps in research and lags in time to approval, time to reimbursement, and clinical implementation. The underlying causes of these delays are manifold and can only be addressed if all healthcare stakeholders – pharmaceutical industry, academia, science, clinicians, regulators, payors, patients, and health policymakers – collaborate to find new solutions. And such solutions must not be limited to or isolated in discovery or development or commercial operations. Instead, the required transformation will span the entire process – from ‘the bench to the patient’s bedside’.

Many drug companies already cope with significant change. Hence, the question is where and how to embark on this transformational journey in order to stay ahead of the game, maintain the autonomy and capacity to act, and achieve superior results.

Experience shows that in the majority of cases, developing a winning vision is the most powerful first step towards fundamental change. The traditional sales model of the blockbuster era is outdated, which means new concepts of drug commercialisation are required. Pharma executives throughout the industry and across global markets are evaluating alternative business models, pursuing new customer segments, making operations more sophisticated, and realising the value of new systems. With all these changes taking place – from detailing to promotions, from reimbursement to treatment guidelines – we can distil the shifts with the highest impact on the market, discover the underlying drivers, and ultimately identify the factors constituting the new commercial model in big pharma.

A new research study by Capgemini* shows a type of forward integration that appears to build on a trend we discovered a few years ago: the evolving role and increasing importance of commercial business functions for value creation. We call this ‘Customer Value Integration’, a form of forward integration specific to the pharmaceutical industry, which complements the traditional value creation delivered by R&D. Customer value integration offers the opportunity to branch out to various stakeholder and customer markets in the pursuit of additional and more-than-incremental value.

Clearly, all major pharmaceutical companies are currently refining their business models – making strategic acquisitions, shedding non-core assets, etc. – some evidently with significant success, others without apparent reward.

A form of customer value creation is inherent in many of these initiatives: be it a biopharma player that has developed a dedicated reimbursement support and disease management function for patients to obtain easier access to high-priced products; or a pharmaceutical company that has contracted with a government to provide prescription drugs in exchange for offering exclusive disease management services to certain patient populations on chronic medications; or the specialty drug manufacturer that has invested in a more granular segmentation of the market to better understand the requirements of various decision makers and craft more customer-driven sales and marketing offerings.

However, responses from study participants suggest that in many corners of the pharmaceutical industry there is a gap between executives’ perspective of and response to the market and how the market actually evolves (and with what speed). Relationships with payors appear fairly strained, while physicians are looking to pharma for help.

Customer value integration means focusing on the needs of the various customer segments, following the established ‘P-P-P’ (physicians, payors, patients) model of commercial pharma. There are lessons to be learned from forward integration in other industries. In addition, pharma has to develop and refine a set of new competencies in order to meet the challenges of today.

Ultimately, customer value integration will take different shapes and forms depending on the focus of individual companies on their therapeutic area, their product life cycle stages and, of course, the nature of the product.

Capgemini, Customer Value Integration – How to Re-Tune Pharma’s Commercial Model in Light of Changing Stakeholder Influence, Global Research Report, 7th Edition, April 2008, can be ordered at monika.hespe@capgemini.com

Guenther Illert is Head of Life Sciences, Capgemini Consulting Central Europe.