MARKET SEGMENTS

Pharmaceutical customers can be broadly divided into two categories: institutional decision-makers and individual prescribers. A biotech company will typically have one or more sales teams assigned to each segment, either directly or through a marketing partner. The decisions made by an institution will vary according to its type -- for instance, long-term care facilities will differ from tertiary care hospitals. Sales forces for institutions may be divided between those focusing on managed care plans and those directed towards hospitals and nursing homes. Virtually all institutions have a Pharmaceutical & Therapeutics (P&T) Committee that decides which medicines to stock and may also establish guidelines or rules for the use of certain high-cost treatments. Consequently, a pharmaceutical sales force often includes specialists focused on institutional P&T Committees.

Individual prescribers, technically free to use any FDA approved medicine, typically develop their own personal formulary based upon their training and the formularies of their patients' managed care plans. Sales forces targeting physicians may be divided into groups focusing on specific medical specialties, particularly if the biotech product is used predominantly by only a few types of physicians, e.g. nephrologists, oncologists or rheumatologists. However, even in the case of specialized drugs, it is important to market to internists and general practitioners as they provide needed specialty referrals and educate patients about new treatment options.

OTHER DEVELOPED COUNTRIES Most other developed nations, including Canada, Germany and England, have more uniform health systems than the U.S. In these countries, the government is essentially the sole purchaser and uses its monopsony power to establish reimbursement amounts for all medicines. Therefore, companies trying to introduce a new drug in these countries face a "fourth hurdle" after the three initial market entry barriers of discovery, development and approval.

These government-managed markets also involve discounts and rebates, usually tied to either total volume of sales or profits. In some countries, reference pricing systems enable the government to set a price based on either the price of the drug in other countries or the price already established for other treatments, branded and generic, that address the same condition. Furthermore, countries such as France have instituted policies to support local industries, providing government reimbursement for products which in the US would be sold as nutritional supplements.

Pricing differences between countries results in transshipment of medicines across national boundaries. This "parallel trade" practice is legal in the EU, and drug companies try to limit it by restricting supplies to wholesalers in countries where their products are low-priced. Increasingly, drugs are now coming into the U.S. from Canada, Mexico and elsewhere, even though it raises significant safety concerns. Since US laws and regulations only allow individuals to carry a 90-day supply of medication for their own personal use across the border, shipping medicines from outside the country is illegal in almost all cases.

DEVELOPING COUNTRIES

International pricing comparisons and purchasing are likely to put more downward pressure on U.S. prices. However, there is a flip side to globalization; developing countries are creating a growing middle class with the discretionary resources to spend on healthcare. The lifestyle and longevity of these populations also lead to chronic diseases typical of developed nations, including cardiovascular diseases, diabetes, cancer, and Alzheimer's. While this trend presents opportunities for increasing sales volume in international markets, actually generating revenues and profits will require that developing countries enforce intellectual property rights and establish marketoriented healthcare systems.

ABOUT THE AUTHOR

Michael D. Miller, MD

Public Affairs & Marketing for Healthcare Innovators Changing Outcomes with Effective Messages www.HealthPolCom.com

Dr. Miller helps early, middle and late stage biomedical companies and other healthcare innovators maximize the value of their research portfolios and businesses. Dr. Miller specializes in creating coherent marketing messages and strategies that enable key audiences such as payers, investors, patient groups and potential Pharma development or marketing partners to fully realize the clinical and economic value of experimental treatments and new medicines. Prior to founding his own consulting firm, Dr. Miller spent over a decade in Washington DC helping organizations such as Pfizer, the U.S. Congress, and the National Institutes of Health speed the development and adoption of medical innovations. For example, Dr. Miller's knowledge and skills have led to accelerated development, insurance coverage and utilization of new treatments for cancer, cardiovascular diseases, erectile dysfunction, infectious diseases and mental illnesses.