Pharmaceutical product launch strategies 

A literature review by Dr. Maria Niki Aigyptiadou 

Background: Definition and necessity of launch strategies

According to Dundas and Krentler (1982), launch strategies are tools that are used to guide new product launches, and determine the performance of a new product (Craig, 1992, Biggadike, 1979, Hultink, 1995).  

Crawford (1987) has shown that new product development is a very risky business, especially in the light of the fact that the product launch itself requires the largest commitment of resources, as demonstrated by Urban (1993) and Montoya (1994). Several authors (La Francis, 1994, Sapienza, 1993, Di Masi, 1991) provided evidence, according to which, this is particularly true for the pharmaceutical industry, where new product development has very long lead times, and is limited by regulatory constraints. Lead times and regulatory constraints have a direct impact on the timing of the launch of a new medicinal product.

 

Literature on risk reduction of new product development

In order to reduce the risk of failure during new product development Cooper and Kleinschmidt (1993) studied new product success factors, including competitive advantage, synergies, project familiarity, market attractiveness, and competitive situation. As an extension to the above, Montoya-Weiss and Calantone (1994) have identified a number of determinants associated with new products, which include strategic factors, market environment factors, development process factors, and organisational factors. The organisational factors have also been emphasized by the work of Fischer and de Weerd-Nederhof (2001), who have linked the individual actions of persons and their changing social environment with the new product development process. Hyland et al (2001) linked product innovation with continuous organisational improvement in the context of organisational culture, and a ‘’product innovation charter’’ has been introduced by Crawford (1994).

 

Success factors determining the global introduction of new pharmaceutical products

The variables with a significant influence on the success of the global introduction of new pharmaceutical products has been evaluated by Yeoh (1994). Successful global introduction was defined as approval of a drug in six major industrialised countries within four years of introduction. Using logistic regression, five variables were found to be significant in this respect:

  • technological familiarity
  • product differentiation
  • competitive intensity
  • source of technology
  • national origin of the company.

These five variables together determine the overall global success of a new drug, in the context of a good launch strategy that addresses such issues as positioning within the industry, which and stimulates actions from competitors.

 

Formulations of launch strategies are as important as the strategies themselves

Yeoh (1994) noted that companies in the global pharmaceutical industry need to develop a sustainable competitive advantage through a reorientation of the new product development strategy, which results in a flow of successful new drugs. The marketing models that have been developed to date are useful with respect to explaining marketing phenomena, but marketers working for global pharmaceutical companies need to develop more focused marketing models that allow the manager to understand, interpret and predict events and issues relating to market performance.

Aaker (1995) has contributed to the subject of strategy formulation and implementation via the strategic market management framework that takes into account both the external environment, as well as the internal capabilities of the company. Aaker’s approach has proved valuable in the sense that the framework represents a system that facilitates the integration of management practices in order to make strategic decisions, as well as to create a culture in which the strategic vision of senior management can be communicated.

However, a large number of issues have been identified in the application of the simplified Aaker framework. Pan (1999) has suggested that although the Aaker framework is comprehensive, it does not give adequate importance to various elements. As a result, vital pharmaceutical industry specific factors would be overlooked by managers who simply use the Aaker framework on its own. By ensuring that the relevant pharmaceutical industry factors are viewed as a separate input construct, a more in-depth understanding and appreciation would result and this would lead to the adoption of a holistic approach. Pan proposes that relevant pharmaceutical industry factors have a direct impact on the identification of tactical launch decisions and do therefore, need to be taken into consideration when formulating launch decisions.

 

The New Product Launch Strategy model for pharmaceutical companies

The New Product Launch Strategy (NPLS) model for pharmaceutical companies was developed with the intention of facilitating new pharmaceutical product performance, which, according to Trim and Pan (2005), is determined by a combination of a set of strategic launch decisions and a set of tactical launch decisions. This takes into account the work of Rothwell (1972), Cooper (1979 and 1980), Hopkins (1980), Craig and Hart (1992), Cooper and Kleinschmidt (1993), and Montoya-Weiss and Calantone (1994), who all focus on the fact that a launch strategy can determine the performance of a new product on the market. Since strategic launch decisions are made early in course of new pharmaceutical product development, as opposed to tactical launch decisions, the NPLS model represents a holistic view of the decision making process, according to which refinements are made possible through time.

Pan (1999) modified and simplified the Aaker framework (Aaker, 1995) in three ways:

  • the framework was given a new product development focus in the context of the dynamics of strategic marketing
  • the framework was simplified in order to incorporate the application of new product launches
  • the framework was redesigned to support the identification of the strategic launch decision which are important to a new product.

The simplified framework encompassed two main elements (Trim and Pan, 2005):

  • an external analysis, e.g. customers, competitors, the market and the environment in which the new product would compete, leading to the identification of opportunities and threats
  • an internal/self-analysis of the company, e.g. the company’s overall performance and strategic options, leading to the identification of strengths and weaknesses.

The opportunities and potential threats for a new product were defined. In regard to the internal self-analysis, the company’s resources, reasons for past successes and failures, and the company’s culture and the morale of the staff were studied. The strengths and weaknesses of the company relating to new product success were determined and this provided depth to the subject matter.

The simplified framework was made industry specific and were categorised into four groups of issues:

  • product issues,
  • regulatory issues,
  • technology issues, and
  • geographic issues.

The product issues highlight the importance of product innovativeness, or in other words, the uniqueness of the new drug. This is what the sales force needs to concentrate on.

The regulatory issues were classified by LaFrancis Popper and Nason (1994) in different types that impacted on the timing of new pharmaceutical product launch. Different regulations in various countries can cause marketing related problems that need to be overcome. They can also determine whether a new drug is successful or not. So, a new product launch strategy model is considered to be valid only if it takes adequately into account all the relevant regulatory issues that govern the industry.

Technology familiarity is important as it provides valuable research, marketing knowledge and intelligence. Feedback from the sales force regarding their experience with previous product development policies and practices is important.

The geographic issues take into account cross-national differences regarding factors affecting new product success. It is important to appreciate cultural value systems, personal norms, socio-economic factors, economic development and political situation in a country or region, as well as the national degree of competition. These factors need to be addressed in advance because they will determine the choice of strategies to be implemented, as well as the tactics to be used.

 

Strategic and tactical launch decisions

Trim and Pan (2005) classified the strategic launch decisions into three groups:

  • product strategy, e.g. product’s image and branding
  • market strategy, e.g. market targeting, competitive activities
  • company strategy, which reflects the corporate culture and mission, as well as the launch process.

This ensures a holistic view is taken of the company and how it interacts with the environment. The product strategy encompasses a product’s image and branding, and the market strategy is the group of strategic launch decisions. The latter determines market targeting and competitor related functions. The company’s strategy reflects the company’s culture and mission, and the new product launch process.

Tactical launch decisions are influenced by both strategic launch decisions and pharmaceutical industry factors. Pan has grouped these in terms of the marketing-mix and the product decisions can be defined as tactics relating to the branding and assortment of the new product. New product performance is the final output of the overall NPLS model for the pharmaceutical company, and is normally measured in terms of profitability, generated within a specific time period.

This way, in the NPLS model:

  • the elements of the situation analysis and the pharmaceutical industry factors determine the strategic launch decisions,
  • the pharmaceutical industry factors and the strategic launch decisions determine the tactical launch decisions and
  • the strategic launch decisions and the tactical launch decisions determine the new product performance, measured in terms of profitability, generated within a specific time period.

 

The strengths and weaknesses of the NPLS model

The strengths of the NPLS model include:

  • The identification of strategic and tactical decisions. The identification of strategic and tactical decisions were perceived as most valuable and the model functions were viewed as an acceptable analytical framework that could be used to guide managers through the sequence of problem-solving and decision-making.
  • The advantages of incorporating the simplified Aaker framework. The simplified Aaker framework was described as comprehensive and the framework was viewed as straightforward, and it yielded useful results.
  • Consideration of pharmaceutical industry-specific factors. The necessity to list the pharmaceutical industry specific factors prior to the determination of launch strategies is evident. Furthermore, pharmaceutical industry factors or industry specific issues would stimulate managers’ in-depth thinking of specialised subject matter.
  • The applicability at both corporate level and subsidiary level. The NPLS model provided managers with a comprehensive analysis that would feed into the corporate level decision-making process.

 

At the time of it’s creation, two weaknesses of the NPLS model were identified:

·         The NPLS model’s assumption that there was a one-way relationship between the strategic launch decisions and tactical launch decisions

·         A feedback mechanism was absent that would provide the users of the NPLS model with a means for evaluating their decisions and identifying alternative strategies and tactics.

Therefore, the NPSL model was amended accordingly.

 

Summary

In summary, the NPLS model allows decision-makers in the pharmaceutical industry to link aspects of general management and strategic marketing, and makes a contribution to theory building. Thus, although it has been argued that there is a shortage of pharmaceutical industry specific new product development and introduction models, the existing NPLS model may be of use to mitigate the increased risk associated with the development of new pharmaceutical products.  

 

References

 

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Copyright © 2016 Maria Niki Aigyptiadou

If you wish to use this material for personal or educational use, feel free to do so and please cite as follows: Aigyptiadou MNK. Pharmaceutical product launch strategies. www.agnodiki.eu, accessed on (date).

DOI: 10.13140/RG.2.2.29307.72484

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