India Pharma – Of Markets and Morals

Of late, the pharmaceutical industry has been in the news for all the wrong reasons. First, the government intervened to bring in large groups of medicines under the price cap to make them more affordable to the sick. Even before that happened, companies were caught overcharging for some medicines in violation of the prices set by the national price regulator.  Recently fixed dose combinations (FDCs or products containing two or more medicines in a single dosage form) were banned en masse by the government. All these decisions caused observers to declare that the free market in pharma had all but failed.

Fixed Dose Combinations (FDCs) – convenient but deadly

Recently, an expert committee found about a 1000 of these products to be irrational in nature which means that they could potentially harm patients who consumed them. Commentators pegged FDCs to constitute nearly 50% of the $15 billion domestic Indian pharma market. It is impossible to believe that such a large market exists without consumer demand to match.

These medicines have been available for years – in some cases, over 30 years. To be sure, this doesn’t make it legitimate. If FDCs have been deemed to be unsafe for patients by experts, then we must accept the verdict. What is wrong is wrong and one should not defend it.

What one should definitely do though, is debate how to make things better. Why were irrational combinations approved? What systemic shortcomings should be plugged to ensure that this doesn’t happen again? What kind of punitive action should be forthcoming?

Rather than engage in such conversation, the discussion in the public domain has been completely a moralistic one. Pharmaceutical companies have been labeled greedy and corrupt. They have been accused of caring nothing for human lives and focusing only on making profits instead.

This is not to absolve companies at all, but what seems to irk some commentators more than anything else is that no laws were broken and so it is difficult to lay the blame squarely on one party. To confound matters, the courts immediately granted stay orders on the ban. This prompted commentators to wonder if companies bent the rules. Why else have state regulators – who approved most of these products – not stood up to defend their case, they ask?

Instead of such conjecture, would it not be more fruitful to understand why this was allowed to go on for so many decades?

Governance and Free Markets

If FDCs were irrational, why were they authorized in the first place? If the rules stipulated that licenses obtained from state regulators be validated by the central regulator, why were there no checks in the system to make sure that was done?

Obviously, there isn’t an appropriate approval system that seeks proper documentation. There is no proper adverse event reporting (AER) system in place that helps gather real-world evidence of the harm caused by such medicines. Absent all these systemic check-points, the government action seems ham-handed and open to moralistic judgment.

This is probably why an informal survey carried out by a leading business daily found that 40% of doctors disagreed with the ban on products they had routinely used in thousands of their patients over many years.

It is common knowledge that the governance system is severely underdeveloped in India. Yet, when a PIL was filed in the Supreme Court of India, the judges threw the case out saying something to the effect that they had bigger priorities to work on! An indifferent judiciary kills free markets.

In this backdrop, does a ban seem like the best solution to the problem? It seems more like a reaction by a hapless regulator to fill the void created by an inefficient judicial system. Yet, there is not a single voice appealing to reform this system. That would have been more logical than moralistic jingoism.

Aside from the lack of science to support the products, the ban is based on the fact that these FDCs aren’t approved by the US-FDA. This is simply because the single medicines used in creating the combinations are often under patent protection and belonged to different companies. It would take extraordinary effort for these companies to forge deals to create such combination products. India does not recognize these patents and therefore Indian companies can easily formulate combination products.

Voice of the patient

Sadly, what began as an exercise to help patients reduce pill burden and increase compliance to therapy ended up in an overambitious industry effort to create products, not all of which were supported by science.

But, has anyone bothered to ask what the patient wants? It would be interesting to examine if patients complained about problems with these products. What happens to people for who a particular combination that worked to relieve cold and fever for years is suddenly pulled off the market? Shouldn’t consumers have a way of lending their voice too?

Despite being morally correct to do so, no commentators called for the formalization of patient bodies that can have a place at the table during such decisions. No one asked if it was right for government to decide what’s right for people. No one asked about personal choice.

On one hand, it is common knowledge that goods with great demand that are banned by governments, find their way to consumers through a parallel marketplace that we commonly call the ‘black market’. The government knows this through its strict regulation on alcohol, narcotics, gold and other such goods. Sadly, it learns nothing. Is it morally right to allow patients to buy low grade medicines off the black market? If the government cannot tell people about legitimate medicines, can we expect them to “protect” citizens from spurious and counterfeit ones?

Corporatization of Free Markets

On the other hand, it goes without saying that exploiting loopholes in the law is definitely not a smart business decision. History has taught us that such seemingly short-term benefits can turn out to be disasters in the medium to long term. Companies considered market leaders and ‘too-big-to-fail’ have disappeared after doing so in the past. Why do executives not learn from history then? Are they evil, scheming Scrooges as they are made out to be?

Perhaps, corporate incentives are completely misaligned. They are too skewed towards profit. While this in itself is not bad, it can encourage risk, recklessness and avarice especially in a system with a grossly underdeveloped governance structure.

What about internal ethics and governance policies of companies? Even if local laws are not stringent about submitting scientific evidence to back up the therapeutic benefit of these products, shouldn’t drug-makers have gathered evidence anyway? It is no excuse at all as observers claim,  and rightly so.

Morals and Markets

At the end of the day, whether for moral reasons or economic ones, companies should know that irresponsible behavior undermines the very nature of the free markets that they advocate for. Popular moralistic sentiment mistakes corporate behavior as the epitome of the evils of privatization and the subsequent failure of free markets. The irony is that bans, punitive government action and continued interference prove time and time again that markets are NOT free at all.

Much reform in the space is required to set markets free in the true sense. To argue against free markets by pointing out recent failures is to not understand what free markets truly mean.

Not much can be said if the government is forced to intervene because of reckless corporate behavior. The key question is who will stand up and take the responsibility of breaking this vicious cycle?

Until then, we will misguidedly worry about markets becoming detached from morals instead of using the opportunity to push for reforms that will truly benefit patients. And that is through a free and fair market.

“Your industry is my opportunity”

As prescription power shifts, the power of the brand erodes and pharma continues to chase product over service, the rise of healthcare ecosystems led by Amazon and Reliance is imminent.

A few years ago, when Netflix was becoming popular in India, friends and I sparred with a model to price medicines that way.

Would pharma companies allow patients access to their whole portfolio of medicines for upfront subscription fees, just like Netflix allows viewers access to hundreds of movies, TV shows and documentaries?

“Will our industry allow this?” wondered a friend. “Won’t it affect their business if an Amazon Prime like model is built?” As it happened, Amazon Prime and companies that followed, dropped prices further and expanded content, creating greater customer interest.

This week Amazon and Reliance announced their entry into Indian healthcare. Almost predictably, they chose to exploit the weakest link of the value chain i.e., distribution. For long, the movement of drugs from factory to pharmacy has been inefficient, locking in about 30-35% of value, making Jeff Bezos’ comment quite relevant.

It is unlikely that either Amazon or Reliance, will merely distribute medicines and not extend to other parts of the sector.

Their motto, as evidenced by their past businesses is to ‘serve at scale’. And this is what the pharmaceutical industry should be watching with bated breath. While the giants are recent in their foray into the Indian healthcare space, their past successes provide lessons to incumbents.

D.I.Y. Healthcare

For long, different parts of the industry provide services to consumers of healthcare (patients, families, and caregivers). Pharma makes medicines, doctors prescribe them and retailers ‘fill’ those prescriptions. When patients ask for additional information, the doctor provides it grudgingly, as it consumes time better spent treating other patients.

Doctors employ counselors, or staff that provides this information. However, the sheer numbers or the repetitive nature of such tasks gradually erodes sensitivity and compassion required to deal with the ill. As a result, customer experience suffers.

Newer players in the area noticed these inefficiencies and rapidly used technology to reach out, engage and use far more satisfying experiences to acquire patients onto their platforms. They realized quickly that the need in the healthcare sector was not for new products but efficient services.

That incumbent pharma giants had exited the area opting to focus on selling products instead, made the model more attractive.

People need more to recover from illness than just a pill.

Beyond doctors and medicine shops, people also need gyms to work out, fitness gear such as clothes and accessories, healthy food, family doctors referred to as primary care, access to specialist doctors called tertiary care, health insurance to pay for it all, healthcare at home, access to diagnostic facilities and a health watch or other wearables that helps them to keep a tab on their health.

A ‘health concierge’ would be helpful, an app to manage all of this would be convenient, and if it all happened in the comfort of their homes that would be the cherry on top! As COVID changed old habits, people quickly realized the comfort of Do It Yourself (DIY) healthcare.

Healthcare ecosystems

Technology can link together diverse services and companies that provide a comfortable and a one-stop-solution to healthcare consumers. Technically called ‘ecosystems’ – this maybe the next innovation in healthcare.

Reliance and Amazon understand ecosystems well.

They will create them by linking these healthcare players together. This might involve either forming such companies or acquiring controlling stakes in existing ones like Netmeds. The result will provide a very strong and efficient healthcare ecosystem. It is quite likely that other players like 1mg and Cure.fit will enter the race.

New price structures will evolve

Such a re-organisation of healthcare may also solve for its biggest problem today – high cost. Subscription-based services could emerge as a mode of payment.

Rather than paying large sums upfront for hospital and medicine bills, Amazon, Reliance and other players could evolve a subscription model to pay for healthcare

This is well on the lines of the ‘Netflix’ model that my friends were thinking of. Prices at easily affordable monthly/annual subscriptions that cover the whole gamut of services offered via the network, will allow companies to acquire consumers at scale.

Also, since the ‘serve at scale’ model will be a ‘consumer acquisition’ one as opposed to the ‘patient acquisition’ one practiced today, the model will have multiple entry points for consumers to enter.

A 16-year-old student looking for fitness can join, as can a 55-year-old looking for tertiary care. Anyone looking for meditation or yoga facilities will be as welcome as someone opting for a health insurance policy. This might provide clues to the unfolding of Reliance/Amazon’s strategy in the sector.

What will aggregate therefore, is a base of people and not necessarily the ill. Staying attractive to people with varied needs and preferences will require the company to continuously stay low-priced while driving up the quality of their offerings.

Such innovation will be desperately welcomed in the world of medicines where high prices often exclude more people than include them. In a market with this new avatar, the government may not need to enforce price controls and can focus on ensuring competitiveness.

Erosion of the brand

Where would such structural shifts leave pharma? When medicines become a small part of the ecosystem, the bargaining power of these massive companies may relegate pharma to becoming suppliers of high-quality yet affordable medicines. Of course, innovative products will have an edge, but that is less than 10% of today’s market and unlikely to grow larger.

Private labels are a well-known evolution of most retail chains. Big Basket, Flipkart, Walmart, Tesco, Amazon, Reliance and almost every other retailer has a host of them that drive profit. While they develop their own private labels, they use scale to bargain hard with manufacturers and pass on those discounts to consumers, thus retaining their loyalty. With the rise of private labels sourcing generics, pharma brand power can erode.

Shift in prescription power

Healthcare ecosystems will own or control doctors, hospitals, and e-pharmacies, and will influence prescriptions, the purchase, the availability, and the fulfilment of those prescriptions. Think of it as a manifold scale-up of the corporate hospital model at very different price points. This can drastically erode the power of the pharma brand as we have seen with generics in Latin America and Europe.

Prescription power has been gradually shifting for years. When people gawk at the price of medicines prescribed to them, retailers show them options of the same medicine that are much cheaper. Decisions are made on prices, yet pharma does precious little to provide information that can allow consumers to make educated choices. Digital health companies have gleefully grabbed that white space and are therefore becoming more popular with the common man.

What then of the current doctor-brand promotion model that companies spend hundreds, if not thousands of crores to build and maintain? The big boys announced entry into an industry that is tired, old, unimaginative, and driven by the wrong incentives.

When my friend asked if the industry would allow a Netflix-like model, he probably did not expect that years later, Bezos or Ambani might well say “your industry is my opportunity”.

 

The sordid tale of Ranbaxy

The case of the Singh brothers (Malvinder and his brother Shivinder Singh) is one of hope and despair.

The hope that employees, shareholders and the lay public had from the legacy of the great Dr. Parvinder Singh who put his sweat and blood into creating a company that India could be proud of. And despair when this sordid tale finally ended yesterday with the news of the arrest of a senior executive and one or both brothers – sons of the great Dr Singh.

Ranbaxy was much loved in India. So much so, that when the erstwhile CEO of Pfizer said unpleasant things about its products and processes in the early 2000s, Pharma professionals across the board in India stood with the company – many in person, many more in spirit.

Ranbaxy was a great company built on the vision of Dr Singh and one that sought to put the Indian generic industry on the global map along with Dr. Reddys and Glenmark.

In the late 2000s, in less than a decade since Dr Singh’s passing, when news broke out that the Singh brothers had sold off the company to the Japanese, many of us were disappointed. Yet we sought solace in the fact that Indian companies seemed to be cutting their losses (with Piramal also selling to Abbott) and expected that the proceeds would be invested in diversifying the equity that Ranbaxy carried in healthcare. As the SRL and Fortis groups came up, we had high hopes that the Singh brothers were showing the way to other entrepreneurs too by carving out a new path.

In the years that passed, as news of the data fudging, manipulation and the very integrity of the group came under scrutiny, people gave more heed to what were earlier dismissed as rumours and conjecture. That at Ranbaxy, profit always came before patient. No matter the cost. Drugs, sometimes unfit for consumption- with glass residue in them- were palmed off. This came to light only when the diligent USFDA put a halt to batches bound for  US shores. No recalls were ever made in India and one shudders to think of what may have passed for medicine to the hapless millions of this land.

With their integrity in tatters, the news of financial embezzlement and attempts to escape from paying penalties to Daiichi Sankyo were the final nails in the coffin for the brothers.

A half-hearted attempt to gain public sympathy  by renouncing the world to join the Radha Saomi sect didn’t cut ice with anyone who followed the case.

The arrest yesterday and the all-too possible conviction seems to have ended speculation that the rich and powerful can get away with murder. India is well on its way to seek a seat at the world table. Making an example of these once-powerful tycoons being brought to justice will do its global image a world of good.

A strong country is one with a strong judicial system, tight corporate governance and one that can demonstrate that no one is above the rule of law. Surely, a fierce patriot like Dr. Parvinder Singh would have wanted this. Even if those behind bars are his own two sons.

Pharma’s Digital Lens

As I meet more people and discuss their digital ideas and strategy, I think Pharma looks at digital through the wrong lens. The question I am often asked is: “This is my business model, how can tech help?” I think trying to answer the question framed that way cannot lead to the write answers. It is simply too product-centric. It is all about me, my Rx and my brand.

Instead if the question was to be re-framed thus: “I get a sense that it’s not business as usual. The fundamentals are changing. What should I do?”, I think business leaders could open their marketing teams to considering many more possibilities than they currently do. This would be true customer-centricity since the concern here is about how to serve the customer better in a changing environment, rather than worrying about I, me and myself.

Trying to make teams think of how to use technology in the existing business model and in the current framework can be misleading. The shift is fundamental. Do business leaders think this is understood and internalized well by everyone?

Maybe the real problem is that the shift is slow and imperceptible. Fundamental shifts creep upon us and are imperceptible until we are engulfed by it. For eg: the shift to a rental economy (I rent a car instead of owning one, I rent a home away from home, instead of staying in an expensive hotel) wasn’t felt and perceived by everyone. Yet, today, Uber and AirBnB are a way of life. Similarly, today, we can’t imagine life without touchscreens, but Nokia was King not so long ago. There are many more such examples of how imperceptible fundamental shifts have damaged the businesses of many a strong incumbent.

So if pharma marketing teams feel that fundamentals aren’t changing in the way customers behave or the way business is conducted, then probably forcing them to adopt digital won’t work. It explains why so many say “we do a lot of digital”. You don’t “do” digital. You “go” digital i.e. transform. You “do” digital if you are either forced to do it, or you don’t understand or agree with it. If you don’t feel the shift, then you probably don’t need digital. So, don’t do it.

However, if you’re worried about missing out, or that its not right to avoid digital, then maybe you feel the change in your gut, but you aren’t too sure. So look more closely. Do you know your customers really well? Or do you think you do? Are they still the same? Or are there signs that things have changed?

Once you understand and agree that the shift is indeed happening then begin to re-examine the basis of your current business model and framework. Look for areas which don’t appeal to your customers and see if tech tools can help you regain the engagement of your valuable customers.

That’s the essence of transformation:

1. Ask if you notice shifts in macro factors such as environment, customer behaviour and business basics.

2. Update your understanding of each factor.

3. Identify areas in your model/framework that are outdated.

4. Can tech help to update?

This would be the right lens through which pharma looks at digital.

Digital Awareness to Digital Utilitarian

Two unrelated new articles caught my attention last week. The first one was about a prominent Indian pharmaceutical company who seemed to have got into the news for their digital strategy. The second one was a comparison of prices for mobile data across the world.

The first news article about the digital strategy of a pharmaceutical company intrigued me, as it did many others – given a tweetchat that ensued during the day. My intrigue was about how this company used technology to do more of the same, rather than to carefully consider the different options that technology throws open. This is a classic case where digital is ‘done’ instead of the business transforming to leverage technology.

I will not embark on a long post on the merits of digital transformation since I wrote a bit on the topic in the past. Suffice to say that technology is best utilized when its potential is understood. Instead of looking to find how technology can help a business do more of what it is already doing, business leaders must seek to understand what new tech tools can offer and how those new options can transform the way they did business. “Moving beyond the pill” is not merely the stuff that ppts are made of. It is right here in the real world.

It is well known that there is tremendous growth in technology and the number of tools that have emerged from it. What is not so well known is that those tools have application in the pharma business model and can solve for many an inefficiency that business heads have worried about. Very rarely do business heads seek insights into the tech that they buy, or the tools that they deploy. Business plans, when looked at from the window of such insights, can look inadequate and tech can then be very meaningfully deployed to get much better results or to achieve a business objective in a much easier and cost-effective manner.

This is the essential difference between being digitally aware versus being a digital utilitarian.

A digitally aware business head generally considers digital to be ‘in addition’ to organizational objectives, thinks of technology as more important than strategy and will spend huge resources to buy new tech and as the novelty wears off, declare tech to be of no use.

A digital utilitarian will on the other hand, understand that the need to change is not because tech is available, but because the fundamentals of business and customers have changed. These business heads realise that customers are well into the digital economy. Doctors, patients and caregivers alike, search for a lot of health-related information on the net. Can you therefore not afford to be where people are looking for you and insist on pushing more money after bad, on a sales force that doctors increasingly reject? A digital utilitarian will thus, be acutely aware of the challenges that the changing environment has on his business and will look for tech solutions to *transform* the way he reaches out, engages and converts his customers.

Typically, pharma businesses grow when more doctors prescribe their brand and patients consume it. This means that these two sets of customers need to be familiar with the brand. The current pharma model falls short on both fronts. The company with the largest sales force in India can barely cover 3/4^th of the doctor universe. Others fall woefully short. On the patients’ front, in most cases, pharma is still learning how to.

This brings me to the second article that caught my attention – the one comparing the prices of mobile data around the world. No one needs to be told about the penetration of mobile phones in India or the emergence of high speed and dirt-cheap (Rs. 18 per 1GB data compared to global average of Rs. 600) data connectivity. How many pharma managers have changed their plans or even thought about this? When I recommended this to clients I was countered by the lack of speed that accompanies the cheap prices. They don’t seem convinced even when I tell them that online video audiences are expected to double to 500 million by 2020. What does that say about speed and connectivity?

Almost every pharma business worries about increasing awareness, penetrating and gaining access to new customer groups and geographies. If these are your business challenges, shouldn’t you be looking for tech options that can help you achieve this? At such cheap data prices, you have so many options to create live channels, conduct social media campaigns, create communities, reach specific targeted customer groups or even something as mundane as increasing the number of contacts with your targeted doctors at a fraction of the cost of hiring new reps.

Technology offers a plethora of solutions and more to tackle these mundane problems that have plagued pharma for years. Pharma on its part has moved from being digitally illiterate to digitally aware. The next step towards business transformation would be to become a digital utilitarian.

Will 2019 be more of the same for pharma?

What’s new in 2019?

Nowadays, the most significant impact on the Indian industry is anything that happens in the US, more so, since most Indian majors have more than 50% revenue dependence on that market.

Trend 1: 2017-18 saw most of these companies build a very differentiated portfolio that included biosimilars, complex generics and differentiated formulations. The existing volatility around the ACA (Affordable Care Act) can mean that hundreds of thousands of Americans could lose their healthcare cover. If this happens, the FDA will look for ways to increase generic penetration and that would be big opportunity for Indian manufacturers.

Trend 2: Another mega trend could be the entry of ‘non-traditional’ players into healthcare. Amazon which is all set to become everything from an employer insurance aggregator to the next generation retailer to a global healthcare logistics specialist will probably disrupt almost every stakeholder in the healthcare arena today. Amazon’s interest spreads from primary care (tele-medicine) to healthcare at home services. The quicker Indian pharma learns to partner with such ‘non-traditional’ players, the better for them. What will be interesting to observe is will this relegate pharma to mere low-cost manufacturers instead of ‘patient care providers’ as they fancy themselves to be?

Trend 3: Increased power in the hands of patients is likely to upset a lot of current equations. Very vigilant healthcare media reporting has done well to harness patient power in some cases in India (J&J hip implants and Fortis dengue overcharge case). As patients and caregivers become more aware, pressure on the government and regulators will increase. How this plays out on pharma margins will be interesting to observe.

What about digital?

Some pharma companies have advanced capabilities of digitized process (manufacturing, quality, supply chain etc) but very few companies have actually appreciated the importance of digital technology in customer engagement. Pharma is traditionally a very product-oriented industry and therefore it is natural that it would embrace new technology into improving existing processes.

Therefore, companies are looking at how technology can help it to reduce inefficiencies in processes that are internal to the organization and I would think that internal digitization is definitely more widespread than its use externally (to engage customers / provide great experiences). Pharma still thinks of revenue as a product of volume and price. It hasn’t appreciated the possibilities of creating new service streams that patients would appreciate, value and pay for. This is the ‘white space’ that is being rapidly occupied by healthcare start-ups with billions of venture capital (VC) dollars flowing in.

A bit of shift in thought process is needed for pharma to apply digital technology externally to compete or reclaim that space.

Year of the Elections

On the political front I wouldn’t expect too much change with the general elections 6 months away. I think the govt has created enough political plank using healthcare and will tout it (PMJAY, reduction in prices of drugs and devices, hospital costs of surgeries getting reduced, implant patients being compensated etc.). Traditionally in India, healthcare (or education) has never been an electoral plank and politician understand that announcement of sops, loan waivers, direct cash transfers (DCT) etc will work more for the immediate term than announcements that will take a few years to materialize.

In a nation that depends solely on votebank politics, it is unlikely that any populist measure will ever be withdrawn. Drawing an analogy from the MNREGS scheme, even if the NDA doesn’t return to power, it is unlikely that a new govt will withdraw a scheme that has been touted to provide healthcare cover to 50 crore Indians. One may expect tweaks and small changes, but I believe the scheme will stay.

India Pharma 

In the domestic arena on the M&A front I would expect a lot of more niche alliances. Niche alliances aren’t very expensive and offer the opportunity to buy differentiated and complex products at relatively cheap prices. However the odd large deal cannot be ruled out if the US market opens up in the way Indian majors expect it to. In a market where no one can ever challenge the need for patent-induced monopolies that are the sole reason for high medicine prices, I believe there will be a greater urgency to introduce generics as a compensatory mechanism. This augurs well for Indian pharma companies – both large and small.

Do you think 2019 will be more of the same for pharma?

 

Don’t make it feel like it’s marketing

Changes in pharma marketing will be profound with the advent of technology. Digital marketing will allow pharma marketers to engage the customer in very meaningful ways which were not always possible through the work of sales reps.

While sales reps are important in the scheme of things, they are but one channel. In-clinic time with doctors is massively decreasing today and that is because neither the channel (rep) nor the content can engage the doctor and hold his attention.

Through digital it is possible for pharma to know more about their customers than they ever have in the past.

This additional knowledge is thought to hold the key to understanding the customers needs and wants. Through this pharma can offer better services to them, thereby building loyalty along the way.

None of these tenets are new. This is what marketing is about. However, most of it has got lost along the way as pharma-doctor engagement became tactical and transactional; from information sharing and knowledge building to ultimately benefit the patient.

Overseas – especially in the US, pharma is more advanced in the use of digital technology considering that the market is matured to these advances. In India, pharma is scraping the tip and tentatively exploring these options. We have started to see pharma companies create websites, run email contact campaigns, conduct online CMEs and webcast them, create apps for their brands as well as explore the creation of discussion forums and social pages.

While all these are great initiatives, not integrating them will not allow doctors to understand the context of each initiative. Therefore, each digital piece is likely to be viewed as a random one. If doctors are unable to link all its initiatives, the company also risks their customers not consuming/linking key pieces of information. This can make the strategy look incomplete and leave customers with a sub-optimal experience.

Is Digital effective?

This can be viewed in two different ways. The first way is to view digital marketing as another channel of marketing. This makes it integral to the entire marketing strategy and increases its overall effectiveness. This makes it almost impossible to evaluate the effectiveness of individual pieces of the strategy and say that it was digital intervention alone that drove the success.

The second way is to re-assess the things we measure to define success. Generally marketing campaigns measure their success against increased prescriptions for their brands, more sales, higher market share etc. Yet as David Ogilvy said, “I know half of my advertising budget works; I only don’t know which half”.

The good part though is, digital can track and stream data like no other channel ever could.

We know how many people opened emails, how much of the email they read, clicked on a link, watched a video, visited a website, how long they stayed, what content they read and where they went from that website. These are the sort of metrics that digital marketing can throw up and these are the ones that should be measured to determine success or determine the specific lift that digital intervention provided to the marketing campaign.

The best part of digital is that when done right over a period, it becomes predictive.

Now very few other marketing tactics can tell a marketer in advance what their customer is thinking of doing. This predictability can be great differentiation and a source of competitive advantage as Google, Amazon, Facebook, Netflix and your local bank have shown.

Benefits of digital marketing

The time-tested mantra for efficient selling has always been “the right message to the right customer at the right frequency”. Digital adds “through the right channel” to it.

The new channels that tech allows access to help marketers to reach their customers at the place and at the time of their choice. Specific to pharma, doctors would always be inaccessible except for the stipulated days and hours at which they chose to meet sales reps.

Today pharma can reach doctors at a place of their choice, at the time of their choosing and through a channel that they most love. It could be a video, an infographic, a webcasted seminar, an email or in some cases a virtual rep. The choice therefore empowers the customer to seek info when he deems fit rather than having it thrust at him.

Of course, this isn’t as easy as is made out to be. To ensure that the doctor ‘consumes’ their content, pharma must make it very relevant and interesting. To make it relevant, they need to know as much about the doctor as possible.

The fundamental shifts in marketing are that it becomes all about the doctor/patient (customer-centric) rather than product-centric; it becomes data-driven (the more pharma knows about the doctor, the better they can serve him) and it focuses on experience (if the doctor finds pharma to be too nosy or the content uninteresting, he simply dumps them). This moves pharma marketing from the ABC – awareness (of the brand), (prescription of the) brand and CRM – to the CDE – customer, data and experience.

How relevant is digital marketing?

Currently, Pharma marketing is all about the ABC – awareness (of the brand), (prescription of the) brand and CRM. This is exactly why pharma hasn’t truly grasped the essence of digital marketing. Digital marketing moves it to the CDE – customer, data and experience. In simple words, this means that marketers must focus less on their product and focus completely on the customer.

In the digital economy there are 3 rules:

1. Your business is not to sell your product. It is to engage your customer
2. Your differentiation is not how good your product is. It is how well you know your customer (data)
3. Your competitive advantage is not the size of sales force, or the number of SKUs you sell. It is the experience that you create for your customer which determines how loyal they stay to you.

Products have stopped to differentiate. Experiences have begun to differentiate. Does this mean that product selling is not important? On the contrary, the CDE of digital marketing only strengthens product sales. Through digital channels, you can engage the customer better. And engaged customers don’t need to be sold to.

Is Pharma Coping?

Pharma was for a long time in denial and even today the odd digitally illiterate executive exists. However, most of the pharma has now moved to the digitally aware phase where the newly initiated are smitten with technology. This explains why there is so much buying/subscribing to tech products and large-scale digitization of internal processes. This is a very important stage of the transformation cycle, but in their excitement, they often forget that success rides on three pillars – people, business models and things. When companies focus on technology (things) they ignore the other two that are the more important pillars.

Pharma will cope soon. After all, it is exactly what it has always wanted to do – engage with customers, ensure relevance of marketing content and ensure spontaneous brand recall. With digital there is a difference – it won’t feel like it is marketing.

 

 

 

‘Amazonization’ of Healthcare

Whether Amazon succeeds in the healthcare market, or not, remains to be seen, but the reason I believe healthcare is about to get ‘Amazonized’ is because of what Chris Holt, Amazon’s leader of Global Healthcare said recently. 

“When we think about the healthcare space, our overall philosophy of obsessing around the customer has served us really well. So, we start with the customer and we work backwards.”

This thought process is so anti-healthcare, that it comes like a breath of fresh air. Incumbents might smirk at it, but customer obsession is the primary reason why Amazon and other tech companies have built giant corporations in unbelievable time-frames.

In India, Amazon recently announced their interest in buying stake in Medplus, India’s second largest organized pharmacy chain after Apollo. So, the question on everyone’s mind must be: will Amazon disrupt the Indian pharmacy space?

Amazon has always had a track record of creating fundamental changes to any industry that they enter. The distribution part of the pharma industry especially in India has always been ripe for disruption and as an industry observer, I was amazed about how the glaring inefficiencies in the distribution part of their business always escaped the attention of CEOs and put it down to the strong union that dominates it. And this is exactly what can make or break Amazon in this space.

Amazon has had bitter experience with Drugstore.com in the past, when its ambitions to sell prescription drugs got lost in a maze of regulations, logistical challenges, and pre-existing business alliances that effectively blocked it from huge segments of the market.

This time, Amazon has the scale and reach to pose a serious threat to the pharmacy sector, despite the challenging economics. Also, the retail pharma scenario in India is highly fragmented and no one store holds a bulk of customers like PBMs do in the US. Consolidation if at all, is rare and this likely explains why Amazon plans to buy stake in India’s second largest retail chain with close to 1500 pharmacy outlets.

“We are just trying to figure out what we learned in other industries and how we have architected our own infrastructure to figure out how we can bring that to healthcare and help healthcare migrate to simpler solutions. “ – Chris Holt

Amazon’s biggest advantage in the area is that it is comfortable operating at loss or on very low margins, something that Indian retailers abhor. With the entry of Walmart (through Flipkart) and now Amazon, the margins will see new lows. This augurs well for patients, but not for drug manufacturers who will see squeezed profits but cannot escape this business since it will be volume intensive.

I had expected Amazon to be more interested in recently established online pharmacies instead of brick and mortar ones, except that Amazon already has an established presence in the online space in India. They have a well-functioning logistics arm that serves their Prime customers. This can surely be used for drugs distribution also. What they didn’t have was a brick-and-mortar format presence. Considering the hazy regulations around online pharmacies and the continuing habit of customers purchasing from brick-and-mortar pharmacies than online, its possible that Amazon sees the brick-n-click model as more India-centric.

I also believe that Amazon understands Indian consumers better than most other pharma players including retailers due to their dependence on data and business intelligence. So, this move could be better thought out than we can possibly see at the moment.

About data privacy rules and other regulations in the healthcare space, I think that is a battle Amazon has already fought through its terrific presence in India. How data privacy rules shape up in India will be interesting to observe, but my personal belief is that it will by and large mimic the GDPR. Amazon understands GDPR and should therefore be comparatively better prepared. Policy makers however, must be wary of online giants trying to influence policy to their advantage.

It would quintessentially not be Indian if we didn’t protest anything and everything at first and then buckle down quietly later. ‘Dharna’ or protests from retail chemists or opposition from the government on a potential entry of Amazon in the pharmacy space is expected. Online pharmacies are being vehemently opposed by the traditional pharmacy owners, but their concerns are mostly unfounded leading govt to announce “policy papers” that are supportive to e-pharmacies. In my opinion, it would be quite stupid to expect Amazon to only stay in the online pharmacy space. If successful, it would not be too long before Amazon disrupts most of the current model – either alone or with the entry of other tech giants.

“We aren’t trying to fit into any traditional definition of how things work in healthcare. We’re trying to bring our own capabilities to the market. We’ve seen a tremendous willingness among our customer base to try out new things even though they know that it might not be something that they’re used to.” – Chris Holt

In the past, Amazon has shown itself to have a ruthless, ‘winner-takes-all’ approach and it is that monopolistic approach to business that will worry the government more than anything else. But, if patients, caregivers and consumers are happy, the ‘Amazonization’ of Healthcare will be complete.

India looks to Artificial Intelligence to solve Health Infra Problems

 In early June, the government think tank Niti Aayog unveiled its discussion paper on national strategy on Artifical Intelligence (AI) which aims to guide research and development in new and emerging technologies. While the paper per se focuses on five sectors for India — healthcare, agriculture, education, smart cities and infrastructure and transportation, this post will focus on healthcare alone.

In the paper, the think tank says India is not leading in healthcare because of issues such as shortage of qualified healthcare professionals and services like doctors, nurses, technicians and infrastructure. There are 0.76 doctors and 2.09 nurses for every 1000 people (as compared to WHO recommendations of 1 doctor and 2.5 nurses per 1,000 people). Hospital infrastructure is creaky and bursting at its seams with 1.3 hospital beds per 1,000 people as compared to the WHO recommendation of 3.5 hospital beds per 1,000 people.

Amazingly, the government believes that AI, and not fixing the inherent problems that are rotting the sector from the inside, can play a major role here. In the backdrop of India’s stretched and limited basic healthcare infrastructure, at one level the strategy for AI is indeed a bit like putting the cart before the horse.

New tech such as AI can often be spoken of to solve problems, but one forgets that tech is only an enabler and is not a substitute. It is only as good as its supportive infrastructure. The “intelligence” in AI basically comes from massive data repositories that the machine gleans information off. Not sure if India has much of that to boast of.

Even in the West where data is meticulously collected, stored securely and analysed, massive deployment of AI has still not happened and is still being tried out. In India which has 66% population in rural areas and 67% of doctors in urban areas, the requirements are still fundamental such as the need for physical hospitals, healthcare professionals and last mile connectivity for drugs and pharmaceuticals.

In a country where people in remote villages are just becoming aware of the magical effects of electricity; where clean drinking water and two meals a day are aspirational, talks of broadband, the internet and AI seem quite out of place.

Like most things that come from govt, these are noble intentions which pave the road to hell.

Over the long term, technology upgrades in the healthcare delivery model can create efficiency especially at the point of care level (in PHCs, clinics, hospitals etc). There are definite areas where the existing burden of care on doctors can be eased. But this has many pre-requisites – from as basic as having physical hospitals and doctors, medical supplies, electricity, and water to advanced things such as cloud-based tech, data privacy and security, trained personnel etc. The starting point would be to collate and build out massive data repositories, do away with silos and get different data collection points to inter-connect.

In a country as large and diverse as ours with a population as immense, this is a colossal project – one that can take years. Paradoxically, we Indians are great at managing scale (as we’ve seen with General Elections, the Kumbh mela and Aadhar enrolments) but are terrible at relatively basic tasks (simple queues, traffic rules and building roads & ensuring health and sanitation). One worries that we might succeed at putting up the technology but forget basic training and infrastructure creation.

If we get all that right, the potential is unlimited in areas such as screening and diagnosis, home healthcare, DIY healthcare for primary health (tend to simple cuts and wounds, treat common colds, aches and pains etc) and making health care participatory (arming patients with enough information for them to understand and participate in treatment).

Lessons can be drawn from tele-medicine (eg: The Sky program launched by World Health Partners in Bihar which didn’t do too well due to lack of participation from both providers as well as the targeted social groups). This of course, doesn’t mean that nothing new will work. It just means that a lot of things have to be in place for this to work.

One shouldn’t fall prey to the fallacy that technology is the panacea to all problems.

A good way to foretell the future is to study the past. And the past in this case doesn’t hold much promise. We have had “digital India” and “make in India” and now we have “solve for India”. The intention is noble, and the premise is strong. However, it doesn’t account for the fact that a very wide and capable ecosystem is necessary for innovators and entrepreneurs to survive. Especially those of the social nature who will dedicate their work to helping out strata of population that will not necessarily have the ability to pay. This will require major govt funding and backing which we haven’t really seen before. Plus, the fact that it takes years for such an ecosystem to thrive and investors have to be patient.

One must but look at China and how Govt invested millions of dollars into building such an ecosystem that is on the verge of catapulting China ahead of the US in terms of innovation. A recent MIT report that compared China and India in the race for dominance in AI, didn’t have very kind words for India.

There is a need to reskill many people in a short span of time. Insufficient research support, poor data quality, and the lack of expertise in the field will be stumbling blocks for India. China has had an early start with a robust digital infrastructure and their unmatched ability to produce PhD-level mathematicians and stem engineers.

The AI game is on. India is playing catch-up with China and the West in terms of technology, research prowess, investment, and most importantly, data, which is the lifeblood of AI.

How India grapples with issues such as water scarcity and poverty alleviation, while daring to believe that AI can change the world will be fascinating to watch. However, it’s important to remember that AI is just a tool, it is not an end.

 

The Digital Economy

The first time I heard the term ‘digital economy’ in the medical context, it was from a reputed doctor who was a co-panelist and speaker at a company town hall event on digital marketing. It did not surprise me one bit that the doctor knew more about the digital economy than most of the pharma marketers gathered in the audience. But, it set me thinking.

The digital economy is the effect that advancements in technology have on the ways of doing business. Things change in the digital universe only in shape and form. The principles stay the same. It is probably why marketers think that everything is new. They have simply forgotten the old.

Customer engagement, not products or services

While in the analogous world the golden rules of marketing have gathered a thick layer of dust, the digital world is brutal. It is ruled by customers who are spoiled for choice. In this economy your business is no longer only about your products or services. Customers believe product quality and features to be hygiene factors that are to be taken for granted. They do not give brands that dupe them a second chance. Not only do they expect honest and transparent business, they pay a premium for brands and companies that engage them.

Rule 1: In the digital world, your business is to engage customers in the most meaningful ways.

Data, not money

It goes without saying that customers will never engage with brands that do not recognize them. In the words of Keith Weed – the CMO of Unilever, customers today are informed, presumptuous and impatient. If you do not know enough about your customers to engage them almost instantly, they will ‘bounce off’ your website. They presume that you are tracking them and that you know everything about them. And it makes them impatient if they think brands will make them waste time by getting to know them when all they want to do is satisfy their needs. This makes data the new currency – not money. Money is just incidental for customers to get what they need and they will choose to spend that money wisely. Brands or businesses that do not know them, will not get their money.

Rule 2: The digital economy is powered by data – not money.

Customer experience trumps all else

If customers expect you to know them well and are willing to engage only with those who do, there is a reason for it. Let’s say you Skyped with your friend one morning and she told you about a new book or a video game. It fascinated you. You never heard of it and you want to know everything about it. Instantly, you Google it and read up every review that you can lay your hands on. Once you have, you want to buy it. Amazon it is! All in the matter of a few minutes. And since you’re all happy, you want to watch a new flick on Netflix.

Now imagine if this scenario had played out 15-20 years ago. You would have had to go over to your friend’s place to have that conversation and then walk over to the lone book store, then off to the bank to withdraw some money and then back to the store to buy the book or game CD. And if you had the energy to watch a movie, then you would trudge off to the local single-screen cinema to try your luck with buying a movie ticket on the black market.

Rule 3: Customer experience is your competitive advantage

Digital has made everything so easy! In the new world, experience trumps everything else. Digital natives keep ‘in touch’ on social media, text their friends more than speak to them, transact online, cannot remember when they last went to a supermarket or to the bank and don’t know what it means to have to wait for a cab!

Its almost like the physical world doesn’t exist anymore.

Why would you think that doctors and patients are any different? Digital has (in most cases) done away with time and distance. One can talk to a doctor on call and not have to go to a clinic or hospital (unless in emergencies). Doctors can get all the information they need at the click of a button. They don’t depend on medical reps anymore for it. And that’s probably why they don’t value meeting them so much anymore.

This is not to say that medical reps have no jobs to do. Far from it! It means the nature of their jobs have gone back to being what they were originally meant to be. The time-tested yet now forgotten – serve the customer. Its time to brush the dust off those principles.

I didn’t say this – the doctor at the town hall did. Doctors get the digital economy. You can be dead sure that he and his colleagues aren’t waiting with bated breath for pharma to start participating. Its time we accepted that and played by the rules.

 

Is GSK shedding legacy to build its future?

Towards the end of March, GSK found itself becoming the top contender for Pfizer’s Consumer Business. There was much speculation of how GSK CEO Emma Walmsley would find the $20 billion that Pfizer had reportedly valued its business at. However, within 24-48 hours, not only did GSK back out of bidding at Pfizer’s auction, it even announced a decision to buy out Novartis’ stake in its Consumer Healthcare arm for $13 billion. The surprises kept coming. As GSK share prices rose in appreciation, Ms. Walmsley announced that she had asked for a “strategic review” of the Horlicks brand and other consumer nutrition products.

The announcement most affects its Indian arm, GSK Consumer Health which is the largest consumer business for GSK in the world. Horlicks contributes about 75% of the total business and if the brand is sold off, the listed entity will whittle down to 25-30% of its current size.

What is surprising is that not so long ago, Emma Walmsley had said, “we will still continue to invest in India and we consider it a strategic market” referring to its consumer arm which is the largest in the world. Yet, within a short period of time she announced a possible sell-out for Horlicks which outsells Pepsi in India, as reported a few years ago. In fact, the brand is so well entrenched in the consumer psyche, that in some parts of southern India, Horlicks is synonymous with hot milk.

This begs the question why? It’s quite possible that a global spinoff for the consumer business maybe getting considered, which explains the regaining full control of Consumer Health from Novartis. It is unlikely we would witness a separate deal for India alone, and it seems quite plausible that this would be part of the global sale process.

GSK has three core businesses – Pharmaceuticals, Consumer Health and Vaccines. Apart from this it has a joint venture (JV) with Pfizer called ViiV, a specialty business focused on HIV. It is quite well known that activist investor Neil Woodford had quit the Board of Directors of GSK in 2017 citing Ms Walmsley’s resistance to his demand of splitting up GSK’s businesses to unlock value. At that point it wasn’t very difficult to understand why she had resisted. Selling off GSK’s ‘undifferentiated business’ (pharma and consumer) to focus on its ‘differentiated’ parts (vaccines and ViiV) would have left GSK a much small – albeit more profitable – enterprise.

The problem for GSK is that its pharmaceutical arm doesn’t have any strong brands in market or in pipeline. After its biggest brand, Seretide, lost its patent exclusivity, there has been no new success that comes anywhere close to filling that void. GSK must desperately be looking for a product that is in former CEO Witty’s words, “blockbuster capable”. This could explain its recently renewed foray into Oncology.

Yet, the foray is just beginning, and the business will take years to develop. GSK just spent considerable cash buying the Novartis share of the Consumer Health business. So, any large mergers or acquisitions to quickly gain share in Oncology can be safely ruled out for the time being.

That said, GSK Pharma faces strong headwinds with its US subsidiary looking for ways to stabilize and grow ever since flagship brand Advair lost its patent protection. It was assumed that its diversification and strength in Consumer Health would help to de-risk Pharma. So, focusing on pharma at the expense of Consumer Health, currently seems strange.

GSK Pharma R&D doesn’t have much to talk about, forcing Ms Walmsley to considerably downsize the team and exit over 30 projects. It is possible that GSK could be looking to ‘buy innovation’ – low value biotech acquisitions to boost the differentiated specialty portfolio which is a high margin business.

Recent hire, Dr Hal Barron has strong Silicon Valley contacts, having worked in Alphabet-funded Calico before joining GSK. There have been a few such instances of ‘buying innovation’ recently. Gilead bought Cell Design Labs for around $500 million, Novartis bought Advanced Accelerator Applications for $3.9 billion and Roche bought Ignyta for $1.7 billion. This seems like a new trend, as innovation happens more in smaller, agile Silicon Valley based companies than in tired, old Big Pharma R&D sites.

Selling off Consumer Health could give GSK the required war-chest to buy innovation as it prepares to reignite its growth engine. Given Ms Walmsley’s enviable legacy of heading consumer businesses, one expected her faith in GSK’s Consumer Health to strengthen. Her decision to strategically review Horlicks and other brands gives one a feeling that GSK is willing to shed its legacy to build its future.