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The "innovative core" that Pfizer’s (NYSE:PFE) new chief wants to find assumes drug discovery is the path to reversing a downward spiral that, among many other things, has seen his company’s stock lose $230 billion in market capitalization over the past decade. The "center-of-gravity" for this new Pfizer strategy – the factor of balance holding the plan together and giving it direction – will rest, its managers believe, on getting new drugs to market, and then driving sales by promoting their features and benefits. In other words, Pfizer aims to fix itself using a worldview that has not changed since the dawn of the pharmaceutical industry more than a century ago.

In the United States alone, pharmaceutical companies spend somewhere between $30-60 billion annually on drug promotion; the low end of this estimate is three times the total public health budget for all 50 states combined. The strategic effect of carpet-bombing the marketplace with promotion has been to create a society not only resistant to being influenced by pharmaceutical marketing in general (despite all the resources devoted to brand-building and sales, pharmaceutical market growth is at historical lows and generics make up about 75 percent of all prescriptions filled), but an entire customer base that is proactively shutting down the channels to promote:

  • Professional medical associations are working toward a complete ban on pharmaceutical industry funding of sponsorships, branding, and continuing medical education.
  • Major medical centers and schools are revising conflict-of-interest policies with industry, creating significant new restrictions not just on simple gifts (like notepads and pens), but spanning facility access, samples, and interactions with staff.
  • Legislation has been introduced into the U.S. Senate for a new "academic detailing" program designed to counter promotional claims from pharmaceutical companies.
  • In medical journal circles, influential editors are calling for the complete exorcism of industry financed editorial assistance.

All of this begs a question: Even if the billions spent on research can create a drug with a decent shot at returning the investment in its development, how do you market said drug when the operating environment bans your marketing?

A related issue has to do with managing drug positioning – the target product profile – against a headwind of new initiatives designed to monitor and publicize adverse events once a drug hits the market. Notable among these is FDA’s Sentinel Initiative, which will link and automatically analyze safety data from multiple sources, including electronic health records and claims databases from insurers -- the goal is a system connecting 100 million patients by 2012. Outside research that compares the effectiveness between drugs, studies pooling a large collection of results from many sources, and product liability lawsuits will create a steady, and from the perspective of a drug company, an "uncontrollable" flow of information undermining product claims worldwide. Said differently, promoting the technical merits of a drug is not a sustainable competitive advantage. As a matter of fact, it never has been.

The strategic dilemma for drug companies is that they are organized to make and sell drugs. Technical performance of a new molecular entity may ultimately be good enough to win regulatory approval, but that is just one dimension of a much broader, deeper set of systemic problems facing the industry. The complex challenges of today – where technology, business, government, and society intertwine – require new insights to understand, new methods to address, and a new generation of ideas to experiment with. The challenge for leadership is to adapt to this new context for strategy.

Pfizer linking with Apple Computer (NASDAQ:AAPL) to create a collaborative business around scientific content is an idea that creates a whole new game. So does Pfizer (or PhRMA) working with the FDA (and EMEA) on policy innovation to change the pharmaceutical industry’s relationship to information, one that reflects our times. Pfizer spinning off divisions that account for 40 percent of its current revenue so that it can return to a focus on drug discovery is not innovation – it is strategy as usual inside a broken industry model.

Source: Pfizer Collaboration With Apple/FDA: A Strategic Shift to Scientific Content in Marketing