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BRAND EVOLUTION IN PHARMACEU-
TICAL BUSINESS

Managing brand equity has become major imperative

By SHABBIR H. KAZMI
Jan 29 - Feb 04, 2001

The last half-century run of continuous success for almost all companies in pharmaceutical industry, the world over, has come to an abrupt halt. For last five decades the rules of competition were clearly laid out and the success was depended upon the prototype strategies. However, the era of comfort and continuity seems to be over. Following facts are gaining momentum:

* The complex and forceful set of political, economic and social demands of customers and national policy managers on global scale.

* Contraction of margin, lesser time gaps between brand and its first challenger, shifting sources of innovation and new managerial approaches.

* Changes in customer groups, new and recycle technology, mounting pressures from the financial community, the move towards concentration and new competitors.

Cost containment, generic influx, governmental influence and variable ethical standard of different companies to push their drugs are current problems. Besides, customer loyalty for pharmaceutical brands has been deteriorating.

Although, generic competition is less fierce in Pakistan, the doctors have started believing their efficacy. The MNCs claim better quality of their brands but the inferiority of generics has not yet been studied properly. The Quality Assurance System of Ministry of Health is inadequate making quality of available products doubtful.

Emergence of strong cost effective culture in late 1990s, perhaps due to recession in economy, is one of the major issue. The price control is tight and an increase was allowed only recently since last price increase in mid-1990s. Traditionally, promotional expenses and sales support are curtailed once brand achieves market leadership and eliminated as soon as patent expires. This strategy has negative effects on a brand. Reducing marketing support and services makes the brand a commodity, allowing price to drive sales.

Brand equity is the unique set of assets name awareness, customer loyalty, perceived quality and channel relationships - linked to brand name which add value to products giving customers a reason to prescribe, buy and use. One may say that hardly any effort has been made for successful branding of drugs in Pakistan. However, pharmaceutical companies are beginning to recognize the imperatives of brand equity. Branding has become an integral part of value adding process, customer satisfaction and to address brand loyalty issue.

Commoditisation

Brand helps to prevent a product from becoming a commodity bought on the basis of market forces. In theory, brands, unlike patents, have no finite life. However, in practice there is a gradual fatigue of brands over time. Probably no drug brand is so powerful as to protect the brand against the persuasiveness of substantially lower priced generic product. Customer normally do not maintain their support if the brand ceases to be perceived as a bargain.

Nevertheless, consistent brand building and brand maintenance programmes have kept brands alive and profitable well after patent expiration and in the face of sustained generic competition.

For example, Premarin introduced by Wyeth-Ayerst in 1942, continues to dominate to hormone replacement therapy (HRT) market.

* Premarin, a well established with high "top of mind" recognition resulting from sustained promotional exposure over time, has benefited from the increased patient interest generated by both the introduction of transdermal patch (RTI) in late 1980s and the addition in the early 1990s of an osteoporosis claim. In largely patient driven market Premarin has successfully deflected generic competition.

* Contrast this with manufacturers in UK and the Netherlands, which voluntarily supply products in bulk for retail pharmacist (Retail chemist) who repack their own containers to dispense to patients. Bulk packing saved the industry pennies but cost brand awareness at the patient level and, more disastrously, paved the way for generic substitution which was invariably not contested by ill informed patients. In Pakistan, many branded drugs are sold with packing from pharmacies because many patients buy drugs on daily or weekly basis. To a large extent most of the pharmaceutical companies still regard packaging as just a product container rather a potentially powerful vehicle for brand communication.

Differentiation

Brands enhance the ability of the practitioners, buyers and users to interpret and process information, gain confidence and provide the rationale in their decisions.

* In Canada, Ciba-Geigy introduced a slow release (SR) formulation of its leading product, Voltaren, in mid-1986 before three generic competitors were able to launch their own versions of standard diclofenac sodium presentations. Physician confidence in Voltaren and the powerful additional rationale of single dose, long acting formulation offering simplified therapy enabled Ciba-Geigy to convert Voltaren in Voltaren SR sales, maintaining the market leader position.

* Loyalty of brands can also delay the switch to newer therapy. The strong position of ICI in its home country as originator of beta blocker therapy and Bayer of Germany as pioneer of calcium channel blockers continue to dominate hypertensive (blood pressure lowering drugs) market in these two countries.

Managing brand equity has become major imperative in pharmaceutical industry. Many pharmaceutical companies may be reaching the point where they will realize greater profitability from managing existing brand equities than continuing to create undifferentiated new products requiring high levels of marketing expenditure.

The challenges for branded drug manufactures is to lower the prices of their brands with tangible values which competitors particularly generic companies cannot reproduce, to ensure satisfaction above and beyond clinical performance as the basis for brand concept and positioning, and to develop technical insulation to make it hard for generic and branded competitors to copy. In other word, companies marketing brand leaders have to adopt skill of proactive visionary anticipation regarding changing customers' demand and aim and future steps of competition. The branding will have to take into account, market research, overall cost leadership, adequate pricing policy, data based marketing, managing cost and skill shifts, the marketing mix revolution and obsolescing other brands before competitors makes them obsolete.