A Changing Marketplace

From RESULTS, Chapter 2, Digital Marketing

Nobody can deny that the marketplace is in great flux. Audiences are shifting where they spend their time. Once, they got their information from radio, TV and newspapers, and they networked at dinner meetings. Today they are spending more time on web and mobile devices, consuming digital content. The media are fragmented – and so are attention spans.

In spite of the regulatory environment, the politics, the internal challenges, and all the other countless excuses that can be made, pharmaceutical and health-care marketers must face the realities of a new age.

The Affordable Care Act is here to stay. The payment dynamic is changing, with payments being tied to outcomes like never before. Clinical trial data, criticized by managed care organizations as not reflecting the “real world” use of products, does not support the payer discussion as it once did . All participants in the health-care ecosystem must come together to deliver results.

This happens in every industry: Over time, the inefficiencies get wrung out. That is in essence what the government is trying to do with the Affordable Care Act. It is trying to pay for outcomes and results instead of for procedures and transactions. Pharma itself has done this for years with its own vendors, funding only those programs that deliver meaningful return on investment. Now pharma is on the other end of the microscope.

In digital media, for example, there are various ways to pay for advertising. There’s CPM-based advertising, or cost per thousand impressions delivered. There’s CPC advertising, cost per click. Then there’s CPL, cost per lead. There’s even CPA advertising, which I refer to as cost per anything, because payment is tied to any “action” mutually agreed to and delivered such as viewing a video or signing up for a newsletter.

Over time the trend between pharm and its vendors has been to push the pricing model down that continuum and pay less for the unguaranteed result and more for the guaranteed result. Now pharma is on the receiving end of the “prove your results” conversation.

The Affordable Care Act affects everyone along the food chain, starting with the provider of health care, the physicians, and the hospitals, who are also getting paid for an outcome, a result. The message to providers is this: Run a CAT scan at your own cost if important, but you will get paid if the patient gets better, not when you perform a procedure. If the patient must be readmitted, then you get less pay because presumably you did not do your job as well as you should have.

This is forcing a sea change within managed care, which is now telling pharma: “We want to start paying for the result and the efficacy of the drug, more so than just the number of pill prescriptions that are written. We want you to share the risk with us.”

So pharma is producing its studies: “Let us show you how efficacious our drug is. Here are the results of the clinical trials.” Managed care is pushing back and saying, “Well, that is nice. But that is in the perfect environment. Let’s see a study based on real world data.” In other words, how does the medicine do under actual prescribing conditions, where some patients just don’t stay with their regimens?

Pharma companies are finding themselves in a lose-lose situation, similar to the situation of many of the vendors who sell them digital advertising space. Digital vendors are often asked to prove the return on investment, or the actual prescription changes resulting from the advertising. It seems vendors have all been in a position where they have shown a phenomenal ROI and the company thought it was too good to be true. If the vendor doesn’t have an ROI to show, it loses, and if it has a great ROI to show, it often loses anyway because the company doesn’t believe it.

Pharma is dealing with that very issue today with managed care. When a company produces the real-world data, the managed care people will say, “We want to see the clinical trials.” When one is positive, they want to see the other, and if both are good, they want to do their own testing instead.