Over the years, pharma companies have explored entering health categories beyond Rx and innovating beyond the core products. In many situations, however, these innovation efforts have been limited to digital health and technology pilots that were never scaled commercially. Some pilots never got off the ground for various reasons. Others got pushed to the Product Brand teams to use as a marketing vehicle and then ultimately were discontinued because that was not an efficient way to achieve a respectable marketing ROI.
In my article on the value of a corporate brand, I raised the idea that a strong master brand is essential if the pharmaceutical industry wants to create “value beyond the pill.” The idea here, from a health and medical standpoint, is that in most categories medication is only one part of the equation in improving a health issue. Lifestyle changes, monitoring, behavioral health and wellness support, and other non-Rx products/services are also critical elements of the solution. To build these types of solutions at a product brand level is limiting—both from legal/regulatory and financial perspectives—so housing these non-Rx offerings under a strong master brand presents greater opportunities for value creation.
But simply acquiring or partnering with companies that offer non-Rx products or services won’t necessarily create the type of commercial value desired. Rather, the industry should aim to gain a deeper understanding of latent consumer health needs and meet those needs through either new or redesigned products and services. This is about creating things that don’t yet exist in a format that is valuable to consumers/patients and HCPs. Then: It’s about building an ecosystem that connects the new non-Rx offerings with the Rx offerings in a way that is meaningful and relevant to customers and stakeholders.
There is another implicit idea driving the importance of innovating beyond the core Rx products. With the vast number of generics available as strong agents in many primary care therapeutic categories, and the advent of more efficient care delivery models, the non-Rx part of the health solution represents a significant opportunity for revenue growth for the pharma industry. To fully succeed commercially at creating “value beyond the pill,” the industry must develop at least some non-Rx services as commercial offerings—i.e., these services are purchased, not given away for free—rather than thinking of them as merely “pill plus programs”.
Having worked in this industry for some time, I can hear the immediate pushback from any pharmaceutical executive reading this article: the profit margins of other health categories are much lower than the Rx category.
This is undeniably true. Yet if margins are the only measure that can justify investment, the pharma industry will have to keep doubling down on acquisition and licensing to complement their organic R&D efforts. And even then, the results may still decline over time, with recent data suggesting that the next decade will be challenging for the industry in terms of top and bottom line.
So, how can forward-thinking pharma executives attempt to justify investments in innovation in non-Rx health categories? How can they defend the idea of growing outside of the core Rx business and building an ecosystem?
An Accenture survey confirms that executives across industries believe ecosystems will:
- Create new competitive advantage
- Allow them to use data and analytics to better serve customers
- Create new customer experiences
- Drive innovation and disruption
While many of these reasons hold true for the pharma industry, here are a few more specific reasons to consider innovating beyond the core Rx business:
#1: Offerings beyond Rx, particularly for chronic conditions, can increase a company’s credibility with health systems and health insurers. Even with the halo of the COVID-19 vaccine, the pharma industry still has credibility issues. The industry’s reputational issues (consider Purdue Pharma/Oxycontin, Valeant, Turing Pharmaceuticals) can’t just be erased. And as our world shifts away from fee-based service to value-based care, particularly for lifestyle-oriented chronic conditions, wouldn’t more health systems and health insurers be interested in partnering with pharma companies that are doing their best to help improve health outcomes and reduce medication costs, where possible, by offering other types of support for better health? From a customer standpoint, this is the basic retail concept of not trying to sell the most expensive/high-margin product in every situation.
#2: Offerings beyond Rx align with consumer health trends and unmet needs, ultimately elevating the pharma company’s corporate brand in the minds of consumers. Nobody wants to take more medicine than necessary. This is reinforced by Seven Trends on Consumer Health, which suggests consumers are prioritizing non-Rx options in managing their health.
Additionally, a NPR-Truven Health Analytics Health Poll showed that, while cost is one reason for not taking Rx medication, there are many other reasons why people would rather not be on multiple medications long-term. Having to take multiple medications for the rest of their lives (unless critical to extend their lives) does not always signify positive health status or wellbeing in their own mind. Consumers will likely have greater affinity for the corporate brands of pharma companies that offer innovative non-Rx options to manage their health and may trust them more when they do take an Rx medication.
#3: Offerings beyond Rx represent the white space and “Blue Ocean” in healthcare, particularly with advances in technology and AI. In Blue Ocean Strategy\, W. Chan Kim and Renée Mauborgne define blue oceans as “all the industries not in existence today.” They discuss two ways to create blue oceans, with the most common way being “when a company alters the boundaries of an existing industry.” Expanding beyond Rx can take the pharmaceutical industry into different directions and create new, agile, profitable business models that don’t exist today.
The pharma industry (and healthcare in general), for a host of reasons, has been somewhat protected from basic business rules: If you don’t disrupt your own business model, someone else eventually will. With the positive associations being made between the pharma industry and wellbeing (because of the COVID-19 vaccines), it seems like the perfect time for the pharmaceutical industry to take some calculated risks in evolving beyond their core business. Now is the time to be inventive in terms of building an ecosystem that improves health outcomes and appeals to consumer unmet health needs, while also potentially creating an entirely new business model.