Pioneering the Worldwide Health-Care Market - After years of showing low productivity, research and development in leading pharmaceutical and biotech companies is starting to deliver on its promises. The number of new molecular entities (NMEs) registered with the U.S. Food and Drug Administration has reached its highest level since 1997.

Pharmaceutical companies have restructured R&D but continue to invest in the development of new therapies. The valuations of biotech companies have reached record levels. A launch should follow this approval, but complexity in the global market has substantially increased. Every country faces different macroeconomic dynamics, and pharmaceutical companies have to cope with substantial market access challenges.

Dr. Thilo Kaltenbach and Sebastian Herzig of Arthur D, Little outline how pharmaceutical companies need to transform their launch approach to maximize the value generated by investments in R&D.

Number Of Launches Increasing

Last year, the drug approval department of the U.S. FDA recorded the highest number of NME launches since 1997. The number of launches was clearly above average, and, in addition, 41 new drug applications have been sent to the authority. This is good news after years of painful analysis on low productivity, ongoing restructuring in R&D, commercial reorganizations and increasing pressure on medical evidence and prices.

Different Dynamics Per Country

In the past, it seemed natural for big pharmaceutical companies to launch NMEs in known business areas and territories. Customer structures were well known, and new products could easily be integrated into existing clinical practice. However, with changed dynamics in gross domestic product and specific local market access requirements, changes need to occur. Companies have to transform their launch approach to meet these changes and ensure excellent results.

Today, after the rise of the emerging markets and the financial-crisis-related downturn of southern European economies, we need to acknowledge three different types of markets according to their GDP dynamics: ever-growing emerging markets such as China; mature markets with little growth such as Japan, Germany and the U.K.; and declining markets such as Greece, Portugal and Italy.

The dynamics affect types of market access challenges put forward by governments and payers: Growing countries tend to limit growth of health-care spending as a percentage of GDP; this means first of all that there is growth in the pharmaceutical and health-care sector within these borders, alongside the GDP. The same countries also allow for patients' co-payments and thus also use the positive GDP dynamics to foster pharmaceutical market growth from the private sector.

While patients in Brazil and Russia are used to paying for certain medications directly out of their pockets, more and more private insurance schemes are introduced in China to take over costs that the basic insurance system does not cover.

In contrast, the stagnating mature markets impose very sophisticated means to assess the value of drugs compared with existing therapies. The German Institute for Quality and Efficiency in Health Care (IQWiG) assessment following German health-care reform AMNOG as well as the U.K. logic of quality adjusted life year (QUALY) are perfect examples of this.

In the third market type, governments and payers in the declining southern European countries have the tendency to introduce rigid and immediate price cuts, simply to keep the basic health-care provision intact in a crisis.

Pharmaceutical Industry is Losing on Balance of Power

It seems that in many markets pharmaceutical balance of power is shifting continuously from pharmaceutical companies toward the payer side. In times of increasing market access challenge, companies need to defend the value of their products and nevertheless face significant price pressure in their core business.

What does this shift of power mean to pharmaceutical companies' launch approach? The old rules just don't suffice anymore to achieve launch excellence. Segmenting markets, analyzing demographics, carving out a unique selling point and key differentiators of the drug, and convincing opinion-leading clinicians are still fundamental. Furthermore, the innovative solutions required to excite patients, convince payers and ease prescribers need to be tailored to the specific local market. What makes it difficult is that there is no silver bullet.

Each product needs to cleave its specific way to the patient in every single market. It is still essential that the drug is unique and addresses conditions of utmost medical need. However, defining creative solutions to maximize the number of patients that benefit from the new therapy is a key success factor to maximize its potential. A successful launch strategy therefore needs to give freedom and empowerment to each part of the organization to succeed with defining these creative solutions while at the same time it is providing transparency and launch control, and is pushing for best practice implementation.

How Pharmaceutical Companies Respond

Although pharmaceutical companies seem hesitant to leave the old patterns of success and try innovative models, pioneers in the industry have invented quite a few best practice strategies. For example, Roche has helped Chinese insurance giant CPIC through collaboration with Swiss Re to define a complementary cancer insurance product that attracts more than 10 million Chinese people already.

Some companies charge nothing to patients for the last treatment cycles for severe cancer to relieve the financial pressure on families and encourage doctors to initiate life-saving therapies, knowing the patient will not have to cease because of lack of funding. At the same time, some large Chinese pharmaceutical players enter the market for hospitals - a strategy of close alignment with the objective to launch new products in a closed system of payers and providers, leveraged also by new inventions of mobile health care.

Some companies are very good at creating closed and integrated health-care systems, in which it is much easier for them to launch new products and services than launching them right into an open and highly competitive system. German Fresenius has done that with the integration of medical devices, pharmaceutical products and private hospitals. Linde has recently created an integrated world of services around patients with chronic lung diseases.

The company is not only delivering the necessary devices but also operates hospitals, rehabilitation and respiration centers to support patients at each stage of their journeys. Samsung Healthcare in Korea implements a similar strategy, while U.K.-based private health insurance Bupa is expanding into health provision from the payer side.

Implications On Launch Excellence

These trends imply that the launch approach needs to change dramatically. It is clear that products need to differentiate much better from peers and existing therapies based on a superior value they provide. A product that can prove a dramatic improvement of disease conditions will always be prioritized and finally reimbursed at reasonable price premiums by insurance companies. In order to protect these products in a stronger competitive environment against comparable drugs, it will help to create significant value-adding services around it in order to sell a solution, in a closed system.

So how does that translate into a successful strategy? Companies need to create solutions for the medical community, payers and the patient. If they are able to provide positive customer experience with each of the stakeholders and specifically for the patients, their value will be high and translate into profitable business.

The New Key Success Factors for NME Launch

The key success factors in the new world addressing these trends are:

• Implement purchasing-power-adjusted pricing scheme
• Search for win-win solutions with payers
• Create positive customer experiences with patients
• Sell solutions, not products
• Adapt corporate strategy locally to seamlessly fit new therapy into system

In order to successfully implement these factors, creative thinking is needed. Companies must hire the best people and create an environment of transparency, trust and freedom in order to achieve that. They need a local footprint. A Chinese health-insurance strategy requires sound knowledge of the local health-care ecosystem with its specific incentive structures, regulations and customer needs. In order to develop a differentiated pricing strategy in Europe, sound knowledge of trade routes, invoicing pathways and regulations are essential.

There is much more than cash discounts to offer payers fair conditions for reimbursing groundbreaking new therapies. Elements of warranty, risk sharing, payment terms, and free of charge services can be used in order to have an affordable package around a medical value to be provided.

And it certainly helps to put the patient in the center, to transform patients into consumers and create positive customer experiences. Why not create a Starbucks-like shop for diabetes patients? Or create online access to the world around the needs of a person suffering from Morbus Gaucher? How about offering a one-stop care center to support Amyotrophic Lateral Sclerosis (ALS) patients at each stage of their threatening disease pathway? And why not install a platform that evaluates cancer patients' eligibility to participate in a clinical trial for their specific condition?

There are many more innovative solutions to add to the standard launch plans companies have used for years. Still, preparations need to start early. A clear vision of the future health-care ecosystem is essential. Market access and commercial departments have to work closely with R&D teams from phase two onward to ensure the necessary health and economic aspects are implemented into trial designs. Study participants should be interviewed on their daily disease-specific needs in order to develop defined service solutions.

Challenging times are testing creativity and putting more pressure on change and value provision. Pharmaceutical companies will have to transform their approach to launch excellence, implementing new business models for groundbreaking therapies.