The U.S. pharmaceutical industry is such a juggernaut that even when faced with scandal-such as the recall of Merck's blockbuster arthritis drug Vioxx-and dwindling numbers of new drug approvals by the Federal Drug Administration, it can still post dramatic gains in sales and R&D investment.
Total drug sales from members of the Pharmaceutical Research and Manufacturers of America (PHRMA) reached nearly $163.3 billion in the U.S. in 2004, a 10.3% increase over 2003. Over that same time span, their total global sales reached $243.8 billion, a 13.8% increase, according to PHRMA's 2005 annual member survey.
Meanwhile, biopharmaceutical R&D spending rose to nearly $49.3 billion worldwide total by both PHRMA's member and non-member manufacturers and laboratories. This does not include involvement from the National Institutes of Health, which contributes some $28 billion towards drug R&D.
The reason for the growth is fairly obvious: The largest generation ever is reaching its later years and demanding more drugs than ever to fight illness and alleviate pain.
Radical changes in industry
Behind the scenes, however, the industry is undergoing some radical changes to ensure it can efficiently and profitably meet the rising demand.
"A vast majority of the drugs being used today were launched in the 1990s," said Navi Radjou, VP for Forrester Research Inc. "There are fewer and fewer drugs in the pipeline with a chance to get FDA approval. It's a major concern to pharmaceutical companies and their vendors."
More than 320 biotech drugs and vaccines are now in clinical trials, said Billy Tauzin, president-CEO of PHRMA. "However, only one out of every five drugs entering clinical trials will gain FDA approval," Tauzin said. "The cost of launching one new drug has increased significantly over recent decades from about $138 million in the 1970s to more than $800 million now. Of drugs that do receive FDA approval, only three out of 10 earn back the average cost of R&D."
To spur innovation and boost efficiency, pharmaceutical companies have begun to outsource some of their R&D activities with longstanding vendors and central laboratories, Radjou said. "It's a tremendous opportunity for companies who want this kind of work, as well as all those vendors with products and services that support outsourcing enterprises," he said.
New technologies will also greatly help drug companies increase profits and ward off threats such as counterfeit drugs increasingly sneaking across U.S. borders. One technology is improved drug identification, ranging from high-quality bar code systems to radio frequency identification (RFID) tags.
"RFID is really a hot button for pharmaceutical companies and their suppliers," said John Stuttard, industry VP for Reed Exhibitions, which produces the major annual trade show INTERPHEX. "There's a lot of investment going in to guarantee drug validity and ensure patient security," he said.
In fact, Stuttard said, RFID is one area in which non-endemic marketers have been able to get their foot in the door with pharmaceutical manufacturers. "It's extremely difficult to get onto a drug company's short list," Stuttard said. "They're very loyal to the vendors they've worked with for years."
Look to trade shows
Marketing to drug companies isn't an easy task, but one of the best methods for breaking through is trade shows and conferences. "We generate more than half our leads from trade shows," said Lynne Pedersen, marketing manager for Romaco USA, a manufacturer of UV printing and inspection devices designed for the drug packaging process. "Trade shows allow you to demonstrate to prospective customers exactly how your products work. That's something you can't show through print ads or marketing brochures."
Web advertising and dedicated marketing sites have also grown in effectiveness, said Alan Bergstein, president and publisher of Bio-IT World Magazine. "The biopharmaceutical industry is one of the most research-intensive industries," Bergstein said. "There are thousands of researchers, many of them with Ph.D.s, that want to get their hands on as much detailed information as possible. The Web is the perfect medium for giving them the educational resources, the white papers, that they want."
If you have an appropriate product or service, taking a scientist-to-scientist approach with your marketing can get you far, said Dr. Mario Ehlers, chief medical officer with Pacific Biometrics. "Though the business side is making more and more decisions these days, the clinical groups at pharmaceutical companies still hold a lot of power and influence," Ehlers said. "Speaking at appropriate conferences and writing peer-review articles for scientific journals hold a great deal of sway and can build your reputation with this audience." M