Why you need a value story
The purpose of any commercial company is to make profit, right? Actually, we politely disagree.
Irrespective of industry, the true purpose of any organisation or brand is found in the value delivered to customers. Profits are merely a derivative of delivering a valued service or product to customers. However, more often than not, the profit focus gets in the way.
Recently, the pharmaceutical market, in particular the orphan drug area, has seen some rather obnoxious examples of pure profit focus exploiting regulation created to help vulnerable patients – we will come back to those shortly.
The rule of rescue
In terms of delivering true value to customers healthcare is no different to other markets though certain characteristics are unique to parts of the pharmaceutical market place, in particular to orphan drugs:
- The market is monopolistic and supply/demand models of little use
- Patients are vulnerable and the pharmaceutical companies perceived strong
- Pricing models are inadequate as the low number of patients do not allow normal justification of any relevant price point
- Classical price sensitivity is often non-existing
Rather than looking at QALY or cost utility measures the rare disease area is governed by the rule of rescue which is the tendency to assign more resources to patients depending on how severe their disease is or if you prefer, the closer to death they are. In the case of rare diseases (orphan drugs) the rule dictates a commitment to individuals with needs for specialised and potentially costly care even when resources are scarce and beyond economical justification.
It is against this highly sensitive, ethically tightly woven backdrop the value of orphan drugs stands its test. Without any plausible justification of economical value to society the brand´s value story becomes paramount in conveying the worth of the medication in full respect of the ethical basis governing the treatment of rare diseases.
When things go wrong
The legal framework around orphan drugs is not perfect neither is that for other important pharmaceuticals and recent examples of exploitation have surfaced. Common for all examples below is the lack of a value story, or perhaps lack of genuine interest in both what value the product is delivering and the backdrop to this delivery:
- Thalidomide, which was launched in 1957 by Grünenthal, has shown benefit in some cancer indications and was granted orphan drug status in 2001. Celgene now owns the product and the new price tag of 40-50,000 US$/pa. involves a price increase of 800% over a few years. The product is available outside the EU and US where it sells for 1-2,000 US$/p.a. (e.g. D Hemus, 2008).
- Daraprim, which originally was developed to treat malaria, was approved by the FDA in 1953. It has long been used in treatment of HIV (on WHO´s list of essential Medicines). In 2014, Daraprim was sold to Turing Pharmaceuticals for $55 million and with no change made to the product the price was raised fifty-fold, from $13 to $750 per dose.
- In 2001 Questcor bought the rights to Acthar Gel, which is used to treat infantile spasms, a rare form of childhood epilepsy. In 1950 two Mayo Clinic researchers were awarded the Nobel Prize in medicine for discovering ACTH, the active ingredient in Acthar. Half a century later, a company that did not contribute to the medicine’s creation raised the price of a vial from $40 to $23,000 (G. Smith, Harvard Business Review, July 2016).
- In February 2015, Valeant Pharmaceuticals International Inc. bought the rights to two life-saving heart drugs, Nitropress and Isuprel. With no change made to the products their list prices rose immediately by 525% and 212%.
- EpiPen is a life-saving device for patient suffering severe allergic reactions (anaphylaxis) marketed by Mylan. With no change made to the product the price of a two-pen set has gone from less than $100 in 2007 to approximately $600 this year (New York Times, August 22, 2016 & Fierce Pharma, August, 2016). Additionally, Mylan has withdrawn the EpiPen single pack from the market.
There are plenty of examples of companies building, communicating and even driving a convincing value story guiding internal and external activities and, subsequently facilitating strong and profitable market positions for their brands. For one reason, the story resonates with carers and people alike and drives better care for the patients impacted: it is perceived as genuine.
The genuineness or sincerity of your value story is also key in relation to payers. Payers are often perceived as hardnosed however in lack of good economical models they will look to your case presentation and the input from KOLs and other stakeholders, which brings us back to your true purpose…
Successful companies build small but dedicated marketing teams with strong commitment to the disease area in question. Close contact between team and both patients and expanded stakeholder universe is the basis for building real insights not only verbalising the value story but also driving market initiatives.
Be hard on your opinions and ideas. As mentioned, there is a tendency for the profit consideration to get in the way and, additionally, sometimes great-sounding clichés are filling the paper. Make sure to constantly sanity check your statements against your rigorously developed insights and against your stakeholder universe.
The timing of the verbalisation of your new brand´s purpose and value is “early” as it is ideal to consider some of the important value generating elements in the design of phase II studies. But please do not despair if you already are beyond that stage as there is never a “too late”.
Focus on delivering value. In line with the rule of rescue successful companies take significant responsibility and often assign resources way beyond what would be the bare minimum. Deliver on your value story and you will not only improve the quality-of-life of your stakeholder universe (read: customers) but as a pleasant "side effect" you will increase the likelihood of becoming profitable.
Please do not hesitate to contact Peder for further discussions of value stories or commercialisation of products.