Expert insight:

Defining pharma’s value to stakeholders in 1 single measure

By Edouard Demeire, expert-trainer of The Pharma Brand Planning Course & Pharma Marketing for Non-Marketing Functions.

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Delivering VALUE in Pharma … it sounds so evident that the industry should be delivering value, but what does it mean in the context of a pharma company’s business relationships with its stakeholders?  If you were to take a piece of paper and write down your definition of ‘Value’, what would your definition look like? Can you give an operational definition of value so that you, as a pharma manager, can ensure your team is delivering value to external stakeholders?

Many pharma companies operate standardized approaches in their various functions:  commercial teams write brand plans every year, sales teams hold quarterly cycle meetings, medical teams do trials according to GCP standards, market access departments develop value dossiers, etc. While it can be good to have Standard Operating Procedures to ensure standardized high quality, the question is: How to make sure all this activity is actually adding value rather than repeating what has been done before?
 

The following definitions reflect different views of value from the perspective of the teams that interact with external stakeholders:

Medical Value is often referring to a performance indicator of medical affairs activities inside pharma companies as it is both unethical and non-compliant to measure profit impact of a medical affairs activity.    Hence, one would for example assess the value of an advisory board which brings together oncologists, pathologists and artificial intelligence specialists to understand and establish new treatment algorithms for cancer therapy.

Customer Value is defined by commercial staff inside pharma companies as the total lifetime sales value of an account or an individual health care professional.     They then design and apply a customer engagement strategy, mixing digital and face-to-face interactions, based on the potential value of each client.

Value Based Market Access often refers to analyzing the additional benefits to the patient of a drug treatment, comparing it to its additional cost to a specific healthcare system, subsequently defining a value based price and developing value messages.

Corporate Social Responsibility defines value creation by identifying compliance and sustainability of the business model and the social initiatives pharma companies deliver to society.  

Shareholder Value is a relatively well defined concept as it entails delivering returns on the investment a shareholder makes in a pharma company.   Managerial indicators of financial value include measures such as Return on Capital Employed rather than gross margin or profit.  

Patient Value may well include very different drivers than what a treatment option delivers to a HCP.  For example, patients may define the efficacy of a treatment as its ability to reduce symptoms whereas HCPs look at survival, cure and other measures.   Patients may also value more a drug’s mode of administration than HCPs do as this has a direct impact on their ability to live a normal daily life.   Finally, patients often value information about their condition to the extent that they participate to patient organizations, search the internet, etc.

Which one of these definitions is right?   Well they are all right, but unfortunately, they all reflect a very partial view, often addressing single stakeholders.   In order to develop a holistic brand strategy and to ensure that each of the silo functions of a pharma company effectively and efficiently deliver value, a more holistic approach is required.
 

To integrate the different views of ‘Value’ in a single and well-defined measure, we need to consider the following:

  • Value in the pharma industry needs to be analyzed separately across each of the stakeholders.  It does not make sense to directly compare the added benefit of greater survival for a prescribing doctor to the added cost that a payer will need to finance and the benefits the patient finds important.  
  • Value only becomes relevant when it is perceived, and when the perceived value is important. 
  • Finally, value can only be compared across different competing treatment alternatives. 

    ​A few examples: 
     
  • A HCP may perceive gains in workload efficiency delivered by patient compliance service
  • A Payer may perceive a gain from a targeted therapy because it reduces pressure on drug budget (since it avoids prescribing an expensive antibody to non-responding patients)
  • A patient may perceive a benefit of a therapy by suffering less symptoms, regardless of the additional survival benefit a therapy delivers.
  • Nurses and pharmacists may perceive a lot of value from receiving training by the medical department of a pharma company on how to administer a new infusion therapy.
  • Society may perceive value delivered through Supply Chain Management, for example when bringing rapid solutions in the case of natural disasters.
     

An all-encompassing measure of the value contribution of a pharma company to its external stakeholders could then be defined by the sum of values it offers to each stakeholder:
total_value_formula.png

In this formula, each of the benefits and costs need to be identified for each stakeholder. A few examples of each category are given below.

  • Product Benefits: overall survival, better tolerability, quality of life, …
  • Non-Product Benefits: educational services, patient management support, cost effectiveness modelling publication support, …
  • Financial cost: extra costs or savings in drugs, hospitalization, travel costs, income loss, …
  • Other costs to the stakeholder can include opportunity costs, time spent, …

Each product or activity your cross-functional team provides should be assessed against how much total value the activity delivers. Depending on the health care system, it can occur that value increases with some stakeholders, but is destroyed for other stakeholders (e.g. payers) as a new drug explodes the drug budget.

As long as the added perceived benefit is much greater with more important stakeholders, value will be added. At the same time, the value destruction may be limited with the payer by ensuring their perception of the added patient benefit is correct. Do pharma managers systematically assess how each activity adds value or limits value destruction to key stakeholders in a disease area and country?

Last update: September 2017