Pharmaceutical companies talk a lot about value creation, but they are constrained by one of the narrowest value concepts of any modern industry: compounding chemicals and placing them in bottles, vials or syringes. This article looks at the strategies used in other industries, and even other areas within healthcare, that allow some marketers to continually harvest more than their "natural share." Even if you're not in the pharmaceutical business, if you're concerned about losing the battle for value you'll likely find some food for thought here.

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Eight Laws for Creating and Capturing Value.
Michael McLinden
If you’re in the marketing business, you’re in the value business. As marketers, it’s our job to
maximize the value that our companies realize from the resources they use (including us) to
create their product. Most of the time when we say, “maximizing value,” it means getting a
higher price for our product, but value can take different forms such as higher volumes, more
predictable revenue or lower costs of sale.
Unfortunately, in the pharmaceutical business this equation is being reversed. Fewer branded
products are being sold, revenues are less predictable and the costs of doing business continue
to rise. We can blame cultural shifts, legal and regulatory constraints and new competitive
pressures, but the fact is that we’re losing the value game.
Part of the challenge is that the pharma industry was never really great at maximizing the value
of its products to begin with. For years we would create new chemical and biological entities,
document their performance with clinical studies and the market would compensate our
companies based on the apparent value of the product. Now, surrounded by a glut of five-
dollar generics, the apparent characteristics of our products no longer carry added value.
Combine this with a generation of customers who have been conditioned that pharmaceuticals
should be free or nearly so, and our efforts to realize values are being challenged like never
before.
We are not the first industry to face such challenges. People from carnival hawkers to
commercial jet brokers have figured out ways to derive more value from their markets totally
independent of the apparent value of the product they handle. I propose that the pharma
world can benefit from some of these time-tested methods. These may not all be things we
can do today, but they deserve consideration as we try to imagine what our business will be like
in coming years. Here are eight of the most obvious.
1) Owning the transaction: The simple rule here is that money sticks to the hands that get the deal
done. This does not bode well for us as our current business model isolates us from our end
customers. Going forward, are there ways to transact more directly so that more value sticks with
us and our customers rather than administrators and distributors?
2) Proximity – the closer you bring the product to the customer at the time of need, the more it is
worth. Anyone who’s ever bought a Coke at the ballpark knows how this works. We, on the other

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hand, almost always have a prescribing physician and a pharmacy counter between us and our
customer the patient. As we rethink our business models it may be worth exploring ways around
this, especially for more mature or commonly used categories. They sell shampoo in beauty salons
and energy bars at workout centers. Where are the high value locations where our patients would
like to encounter our products? Don’t forget the internet. It’s the ultimate proximity marketer for
our times.
3) Scale – some of the most potent value adders are actually subtractors – the entrepreneurs who
break large lots into more convenient units of consumption. Few of us need a metric ton of salt, a
tank load of gasoline or an entire pig. People who break these large lots into smaller consumable
portions can take away some of the easiest added value margins in the value chain – think single-
serving food packages, and “travel versions” of health and beauty products. Applying this to our
business, is it time to re-think the 300-tablet trade bottle? What if instead of worrying about
compliance with thirty-day refills, we made our products available in single dose packages so
patients buy only what they think they need?
4) Aggregation – on the opposite end of the scale, aggregating is one of the oldest forms of
entrepreneurship. Home buyers pay a premium to a general contractor rather than deal individually
with plumbers, electricians and masons. Hobbyists pay for “kits” that put everything for a project
together in one box. In industry, the companies with the biggest “bundle” generally find themselves
in the strongest competitive position. In our business right now it’s the payers and providers who
are reaping the premium for combining our products with other products and services into a single
healthcare offering. Is there a way for us to turn the table and become aggregators ourselves?
5) Authority – the person who a customer trusts for the answer is more likely to be the one who sells
the solution. This should be an easy one for us. Think of all of the knowledge and experience that
we can bring to bear for patients, caregivers and HCP’s. We just need to find the opportunities and
the language to answer questions that are meaningful in language and terms they can understand --
because that’s what makes someone an authority. I’m not saying that this is easy in our current
regulatory environment, but given the growing appetite among the general public for healthcare
information and guidance it may be worth it.
6) Synergy – people will pay a premium to continue to get value out of something they already own.
Think razor blades, Nespresso® capsules and high-octane gasoline. Are there ways to link our
products to other sources of value in the patient or HCP world? Some may say this is the Viagra
strategy, but it could potentially apply to other pharmaceutical categories as well. Does the
appropriate anti-platelet therapy support a patient’s investment in heart surgery? Do arthritis
therapies go with expensive tennis racquets?
7) Relationship – people like buying from others they know and trust. How are you building familiarity
and trust for your brand? Hint: this has to involve more than adherence programs.

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8) Novelty – people will pay more to be the first to get something new. Unfortunately, we’ve been
saddled in recent years with the image of an industry that would rather peddle retread technology
than true innovation. What can we do to better help the public not only see the novelty we offer,
but also to anticipate and demand it?
Okay, so there are a lot more questions than answers here, at least no answers to which I can do justice
in this limited space. Still, these are time-proven approaches that we know work in other industries,
which could work for you?
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