CASE STUDY - III SOLACE PHARMA

(A SUBSIDIARY BUSINESS OF SJ&G GROUP)

INTRODUCTION Solace Pharma is a subsidiary Business Unit of SJ&G Pharmaceutical Group. Solace Pharma consists solely Orthopedic Product-Portfolios. Pain Killers, Osteoporotic therapies both oral and parental, Muscles Relaxants, Arthritis therapies are the hallmark of Solace Business division. Solace Pharma is known is one of the best Pharmaceutical Companies amongst the Healthcare professionals across the Country. The turnover of Solace Pharma is around 25 million per month and 300 million per anum. The organogram of Solace Pharma is as follows: Country Manager is heading three Strategic Business Units and each Business Unit headed by either Business Unit Manager or National Sales Manager. Sales Managers are reported to BUMs/NSMs and Area Sales Mangers are reporting to Sales Managers. Subsequently Specialty Officers or Field Executives are reported to Area Sales Managers. The overall hierarchy is well defined and very confined at every level. The whole Country is divided into Regions and territories. CURRENT & POTENTIAL PROSPECTS: Orthopedicians, Rheumatologists, Physicians, Neurophysicians and Neuro-Surgeons, Gynecologists, Chest Physicians, Family Physicians and Medical and Resident Officers of Emergencies and OPDs are the prominent current and potential Prospects of Solace Pharma. Currently each SO/FE enlisted 80 to 100 doctors on their lists. Each customer is being visited on weekly basis or at least thrice in a month. MARKETING & OTHER PROMOTIONAL TOOLS: Apart from routine promotional tools i.e. Literatures, Samples, Gadgets, and Patients awareness leaflets, the company is very aggressive in other promotional activities like scientific Local Speaker Programs, Round Table discussion, Ward Presentations, One to one Chamber presentations. Participation in Local and International Conferences and conducting foreign CMEs as well. Company is not very stringent in

discount and other promotional policies to the specific doctors and Institutions. Overall it has very competitive and aggressive Marketing & promotional activities. PRODUCT PORTFOLIOS: The Company has following different therapeutic classes of molecules and Brands. Muto (Meloxicam) (Painkiller) Otek (Piroxicam+bitadex)(Painkiller) Thiolax (Thiocolchicoside) (Muscle Relaxant) Tizpa (Tizanidine) (Muscle Relaxant) Bionic (Ibandronate Sodium) Drate (Alendronate Sodium) Drate+D (Alendronate+Colecalcepherol) Salmocal (Salcatonin) Edonax (Zoledronic Acid) Rein (Diacerein) Cara (Leflenomide)

TARGET AUDIENCE & SOLACE TEAMS: There are three specialized orthopedic segment teams in Solace right now. Following are the teams and their responsibility of products. So, the below data shows that the target audience are the same for all three teams for almost all the products.

TEAMS

PRODUCTS

TARGET AUDIENCE

Solace A

Muto & Tizpa, Bonelift, Drate, Gabafix

Orthopedic Surgeons, NeuroSurgeons, Medical Specialists, Rheumatologists, MO/RMO, GOBs and Family Physicians

Solace B

Otek & Thiolax, Rein, Cara Salmocal, Drate+D

Solace C

Bionic, Edonax

PROBLEM:

Since the target audiences are the same for both teams for all the products and companys marketing strategies in order to get maximum businesses from KOLs are focused regarding the personal obligations, Local and international conferences and CMEs. The Specialty Officers of both teams are visiting same doctors four times in a month. The detailing, knowledge of products, competition knowledge is satisfactory for each Specialty Officer of the company. Since the investment made on these customers are cumulative from all the three teams. Let us suppose, if Solace want to oblige any doctor in any activity then Solace A & Solace B have to contribute 40% each, whereas, Solace C has to give 20% share. The main problem has occurred when all three Specialty Officers of different teams go for professional call to that customer and the consultant have raised their concern regarding the prescription of a product. Therefore, the doctor has asked question from Specialty Officer that which product he/she would prescribe or he/she already prescribing selected brands of the company of Solace A, or Solace B or Solace C from all of these molecules. So, the Specialty Officers are confused in this situation and there is fear of their own companys products cannibalization, but at the same time he has to justify his Business Units ROI on the particular doctor.

QUESTIONS: 1. As an Area Sales Manager or Brand Manager what would be your response whenever you face this problem with your Specialty Officer in doctors chamber? 2. What strategy will be made and adopted for regular and optimal businesses from all these customers for your responsible products? 3. What would be your recommendations to your marketing team in order to promote your products simultaneously to all these audiences? 4. What would be your arguments regarding the specific investments to the selective KOLs to your senior management? 5. If any other solution does you have which is OUT OF THE BOX from the whole scenario?

ASTRAZENECA PHARMACEUTICAL COMPANY: CASE STUDY

Introduction

One of the international pharmaceutical companies struggling to compete in the pharmaceutical market is AstraZeneca International. Operating in over 100 countries, it can reach sales of $24 billion, with an operating profit of $6.5 billion (2006). This case study explores the company, specifically how it operates under the growing but pressured pharmaceutical industry. It explores the basic structure of AstraZenca, as well as the key external drivers that impacts it. It also explores and discusses the current issues that the pharmaceutical industry faces, which may either, have a positive or negative effect on the company. From such, the paper will recommend the future strategic directions that Astrazeneca should take.

AstraZenca International: Profile and Organization Structure

AstraZenca International claims to be one of the world's leading pharmaceutical companies, dedicated to the discovery, development, manufacturing and marketing of high quality, effective prescription medicines that bring benefit for patients and add value for shareholders and wider society (AstraZenca International, 2006). However, it seems that those statements were not merely blind claims as the company has evidences of its success. Their products are available in over 100 countries (AstraZenca International, 2006). In 2005, the totaled sales reached $24 billion, with an operating profit of $6.5 billion (AstraZenca International, 2006).

SWOT Analysis

Strengths

Interestingly, the company claims that its core strength is derived from its outstanding portfolio of products, its global reach and, above all, the creativity and commitment of its employees. It has ten products each with global sales of over $1 billion i.e. products such as Nexium, Seroquel, Crestor, Arimidex and Symbicort (2005). The global reach of the company is also becoming strong, as it is starting to show signs of success in China, growing their business there by over 200% over the past five years.

Strong growth is also being achieved in other Asian countries, in Latin America and in Eastern Europe ( 2005).

Aside from its reach, the company is a member of the Pharmaceutical Research and Manufacturers of America (2002). It protects the company by helping them lobby on the FDA for possible changes in laws that may have a negative impact on the companys operations.

The companys advertising strategies and other public activities have been working well for them. Investments in huge marketing campaigns have turned to results, making Crestol as the fourth selling heartburn drug in the market. Press releases of the company reveal its operational strengths. The corporate relationship management (CRM) tasks of Astrazeneca in Southeast Asia and New Zealand was given to the responsibility of StayinFront, a leading global provider of worldclass enterprise-wide customer relationship management (CRM) applications, decision support tools and e-business systems (2004). Astrazeneca also has award schemes, specifically the Partnership Awards. Reportedly, the company has given 36 healthcare organizations awards throughout the year for strategic friendship. They select winners from a group of over nominations representing health plans, employers, PBMs, hospitals/integrated delivery systems, community health organizations, group practices,

technology vendors, pharmacies, and social/health community organizations (2004). Astrazeneca also invests in medical research through education grants. Recently, it presented a study that examines Impact of Cardiovascular Disease on Type 2 Diabetes. It was also reportedly supporting two other symposias namely "Pathways from Insulin Resistance to Cardiovascular Disease: New Insights into Management and Prevention" and "Double Jeopardy: Diabetes and Dyslipidemia" (2004). Finally, packaging of the company also improves. (2005) tells in his cover story how Astrazeneca gives importance to packaging of its products. Accordingly, the company runs a tri-fold physician's samples for Crestor at 300 per minute, which, according to , is the fastest ever. The goal was basically to add more and more information to educate doctors, pharmacists and customers as well. The packaging strategy involves partnerships with machine vendors that ordinarily don't deal with the pharmaceutical industry (2005).

Weaknesses

One of the weaknesses of the company involves some failures of gambles on important pipeline medicines. Specifically, one case that tells this is the gamble of the company on Iressa a supposed-to-be breakthrough cancer drug. The drug failed to show a survival benefit. There have been safety flags raised with Crestor, for cholesterol, and with experimental drugs Exanta, a blood thinner, and diabetes drug

Galida (2004). It may create a reputation for the company as a business making unsafe or ineffective drugs (2004).

Another weakness is that it is also being affected by the drug shortage crisis. For instance, AstraZeneca has discontinued its Cefotan products. Cefotan has been in short supply due to manufacturing problems and there came a point when the company had reached zero supply (2006).

Astrazeneca is losing legal battles for the past few years. There is also a concern for Astrazenecas image to its stakeholders due to the recent legal defeats of the company. One example is that it pleaded guilty back in 2003 to violating a federal drug marketing law and agreed to pay $354.9 million to settle civil and criminal charges. The company was proven guilty of inflating the price of Zoladex reported to Medicare as a basis for reimbursement, while "deeply discounting the actual price charged" to the physicians. The prosecutor also said that the company also misreported and underpaid the Medicaid rebates it owed to the states for the use of Zoladex," (2003). Another one took place last 2004, when AstraZenecas paid $355 million because of pleading guilty to criminal charges of fraud for inducing physicians to bill the government for some drugs that the company gave the doctors free (2005).

There was a recent issue involving the company of being sued by consumers heartburn medication Nexium(R) because they claim that the company sought to preserve their market share and profits as the patent on their blockbuster drug, Prilosec(R), was set to expire, by initiating a massive and misleading advertising and promotional campaign to deceive consumers into purchasing Nexium, a nearly identical new drug (2004). They allege Astrazenca of launching advertising campaigns that Nexium was proven more effective at acid inhibition than comparable drugs, the suit states. They stressed that the clinical trials alluded to in these ads only compared Nexium at dosage levels twice those of Prilosec (40 mg to 20 mg respectively). No tests were done to compare 40 mg of Nexium to 40 mg of Prilosec (2004). (2006) reported that Astrazeneca had a 40 percent increase in the first quarter of the year and boosted its dividend, but sent the stocks flat, making investors in their products not happy with the results. AstraZeneca officials would not discuss the odds of cutting a deal with generic makers to market an "authorized" generic Toprol, which might mitigate the revenue loss (Ginsberg, 2006ba).

Opportunities

In terms of opportunities, the company has many to be glad about. First, its recent success in countries such as China, Latin America, and Eastern Europe can open

up many possibilities. Another opportunity for the company is the increasing need for innovative drugs, especially on diseases that are currently difficult to cure such as cancer and diabetes. The company has the potential to create breakthrough drugs as shown in their development of Galida and Crestor. Improvements and innovations in oncology medications is also one of the brewing opportunities for the company. Alliances were made by the company to strengthen their capability in R&D in that field. In 2003, it has entered into alliance with Abgenix for broad collaboration, license and investment alliance to discover, develop and commercialize fully human monoclonal antibodies to treat cancer. This alliance also includes co-development component under which Abgenix will generate additional antibody product candidates that AstraZeneca will have the option to co-develop with Abgenix ( 2003). The companies will share development costs and responsibilities for any co-development candidates selected (2003). Astrazeneca also made a licensing and collaboration agreement with Array BioPharma to assist in the development of Array's MEK program in the field of oncology. What was in-store for Astrazenca is its acquisition to exclusive worldwide rights to ARRY-142886 and certain second-generation compounds for all oncology indications (2003). Such alliance strategies are basically to maintain the status of Astrazenca as a leader in oncology. . The company has six different drugs for the treatment of cancer approved in the United States and a number of drugs at various stages of development

including two in clinical trials ( 2003). Investments in Biotech can also prove to be a significant opportunity for the company. Aside from alliances for oncology development, Astrazeneca recently tries to penetrate the Biotech industry. Recently, it has allied itself with Cambridge Antibody Technology for the joint discovery and development of human monoclonal antibody therapeutics, principally in the field of inflammatory disorders, including respiratory diseases. This is an expected move from Astrazeneca since the Biotech sector continues to grow rapidly, as monoclonal antibodies are increasingly being regarded as a major category of drugs to treat serious diseases and can have a shorter time to market and higher success rates compared to traditional pharmaceuticals ( 2004). Astrazenca acquired CAT because of Merck & Co. Inc., a close competitor, bought two small biotech firms with which it had been partnering (2006). The company stated that the acquisitions could help them expand the internal biotechnology research capacity some analysts say they lack (2006). Threats

Finally, threats for the company are plenty, specifically the current condition of the pharmaceutical industry. Pricing pressures were placed on the industry through legislation not only in major established markets, but also in China and India (2005). There are also concerns on productivity and innovation, as well as on drug safety,

competition, reputation, and regulation AstraZeneca Annual Report, 2005). These threats, if not carefully planned and addressed, may hamper the growth of AstraZeneca to a great extent. Many pharmaceutical companies are struggling to meet these demands just to survive. The increasing complaints against the companies marketing practices can also bring down its reputation. Furthermore, the shift of the FDA on the investigation of overpromotions of pharmaceutical companies can also affect the company in many ways. The difficulty of direct-to-consumer marketing can also pose as threat for the company. Pharmaceutical companies like Astrazeneca are currently facing the difficulty in achieving success on direct-to-consumer marketing or DTC, because according to (2000), such companies are resorting to DTC because of recent regulations and the realization that their skills at promoting drugs among physicians are not transferable to consumer marketing. In general, DTC is, for pharma companies is difficult because they don't have the skills and experience needed to market their products to this new audience. They lack insights into customer behavior and as a result, their advertising campaigns to consumers become unclear, giving out inadequate information about their products (2000). Companies also experience problems with FDA's demand that ads contain a "fair balance" of information about benefits and risks. A key question is often whether an ad communicates risk information as clearly and prominently as the benefits of the product it touts (2000).

The issue of patents can also be a cause for concern. (2005) stated that the patent battles are most likely to intensify in the next few years. The cause is that more than half of today s blockbuster drugs (annual sales of at least $1 billion) are expec ted to lose patent protection by 2008, and the entry of new drug entities into the market has slowed down in recent years.

Drivers

There are four main drivers of pharmaceutical industry. (2002) stated: From the standpoint of the pharmaceutical industry, the impetus for change is the result of a combination of political, economic, technological and social factors; all of which have helped redefine the dynamics of this particular industry. Those were the same factors that affect the operations of AstraZeneca.

Political

The company is obviously being influenced in the political perspective. In the previous years, the issue on whether or not Crestor or Galida is safe has been a political issue in the United States. There were basically different factions that are against or favor the drugs, affecting the whole marketing strategy of the company. In general, politics is behind the issue of prescription drug cost. (2003) explained that the law relies on private plans to deliver the drug benefit. In addition, the legislation specifically prohibits the federal government from interfering in negotiations over prices between these private plans and drug companies. (2003) further argues that the current movements and proposals to lower the costs of prescription drugs made the companies to concentrate their interest in political action to preserve a status quo that they literally profit from (2003). As such, (2003) explained that this is a microcosm of the same political dynamic that, thus far, has made it politically impossible to overcome opposition by medical providers and insurers to cost control and universal coverage in American health reform. Lobbying is also becoming a common tactics within the industry, basically to prevent the implementation of proposed legislations that do not favor their agendas. NGOs reported that the 10 most active drug companies and industry groups boosted lobbying expenditures from $43 million in 2000 to $49.8 million in 2001. The number of lobbyists they employed increased from 417 to 541 (Public Citizens Congress Watch, 2002). The organization reported that the companies lobby for a number of issues,

including a Medicare prescription drug benefit, intellectual property protection, patent extensions, and prices. The same organization reported that this activity considerably increased to 12% in the following year. Since 1997, the industry has spent over $477 million lobbying the federal government.

One of the reasons for lobbying is the crisis that pharmaceutical companies currently face - the decline of FDA approval rates. Cohen et al (2005) cites that the most innovative drugs, priority NMEs (as defined by the FDAs own classification system), accounted for just 13% of all drug approvals in the 1995-2000 period, down from 17 percent in the prior five-year period, 1989-1994. The reason for the tight grip of FDA on approval of new drugs is the failure of such drugs to pass clinical trials or to present convincing evidences that the drugs are safe (2005).

Economic

AstraZeneca is being affected by the economics of the pharmaceutical industry in terms an increasing need to demonstrate the economic as well as the therapeutic value of their medicines to those who pay for healthcare ( 2005).

Generally, the rising cost of prescription drugs is one of the long-time challenges

that pharmaceutical companies still face. There was a time when the cost was rising twice as fast as the inflation rate (2001). The statistics showed that: over 10 million seniors, lack drug coverage; millions more are barely insured; employers are dropping their retiree coverage and private health insurers are cutting back their prescription drug benefits (2001). Furthermore, consumers who cannot afford the costs of prescription drugs usually choose not to avail or looking for alternatives, thus putting their health in jeopardy (2001). Basically, the current demands to lower the prices of prescription drugs has been a big problem for pharmaceutical companies, since they justify that the high prices they put on products are for the research and development of new life saving drugs. One economic issue is that demand for prescription drugs is generally thought to be inelastic, (1985; 1997) which means that price increases are not fully offset by decreases in demand. High front-end expenses and development, low success rate for new products, the cost of research, and the complexity of FDA regulations are also being blamed as reasons for the rising cost of prescription drugs (2003).

Social

The social concern of the company is how well the consumers will accept and

see their products. Drug safety is one issue here. Accordingly, decisions on acceptable benefit/risk profiles for medicines have the potential to be positively or negatively affected by a number of factors. These include pre- and post-marketing clinical data and regulatory judgments that reflect societys concerns and aspirations (2005). The norms of people toward drugs can also be an issue, as there are some who do not take drugs seriously, resulting in the decrease of market share. Currently, there are some issues concerning the company that may change the perception of consumers and physicians over them. There is basically growing criticisms regarding their marketing tactics, which is, being unfair and corrupt. (2005) stress that big pharma companies today, upon receiving the go-signal to market directly to consumers, have been abusive and unethical. The main point is that companies are beginning to adopt rent-seeking and are recognizing the power of legal marketing over R&D. This results in many deceptive marketing tactics and misinformation, threatening the credibility of the industry and its capability to innovate new life saving drugs ( 2005). As example of real cases, (2005) cited AstraZenecas case of paying $355 million in 2004 and TAP Pharmaceuticals paid $875 million in 2001, because each pleaded guilty to criminal charges of fraud for inducing physicians to bill the government for some drugs that the company gave the doctors free. Prescription Access Litigation (2006) also recently accused Astrazeneca, along with Pfizer, of overpromotion of Lipitor and Crestor. The allegedly stated that both companies engaged in enormously broad promotional campaigns that have made Lipitor

the bestselling statin in the U.S. and Crestor the 4th bestselling, despite the fact that there are better drugs out in the market.

Technological

The pharmaceutical industry is characterized by stiff competition. The international competitors of AstraZeneca are international, research-based

pharmaceutical and biotechnology companies that also sell branded, patent-protected, prescription medicines (AstraZeneca Annual Report, 2005). Being ahead in R&D, specifically in technologies, is a must because it will leverage a company to the top. Technologies may ease working loads; make them faster and more accurate.

However, being advanced and technologically sophisticated is one question to the industry that remains unanswered. Report shows that there is a decline in

pharmaceutical companies productivity on R&D (2005). There is a trend of investing heavily on R&D but not meeting the productivity goals that the companies target. As Cohen et al (2005) stated, R&D productivity for the pharmaceutical industry has declined considerably with the number of New Molecular Entities (NMEs) submitted for approval dropping by nearly 50 percent, to about 40, and the number of New Chemical Entities (NCEs) produced per company declining by 41 percent (2005).

(2004) stated that throughout the 1990s, the top 10 drug companies in the world, which include Astrazeneca, consistently spent about 35% of sales on marketing and administration, and only 11% to 14% on R&D. (2004) also argues that the excess profits of drug companies are the result of their overpricing, giving them profits through excessive marketing and less investment on R&D.

Added Value

The added value that AstraZeneca claims to offer to its customers are: patient benefit and safety continue to be the core priority; Safety, health and environmental issues remain a fundamental Company consideration; the individuality, diverse talent and creative potential that every employee brings to the business are fully valued and respected; they maintain high ethical standards in their research and development of new medicines; they maintain high ethical standards of sales and marketing practices in all countries of operation; they make a positive contribution to the communities in which they operate; as a minimum, they meet national and international regulations; their CR or customer responsibility commitments are expanded by encouraging their suppliers to embrace standards similar to their own; and new and emerging issues relating to CR are

dealt with appropriately and effectively. However, such claims still need further investigation considering the current issues that plague the pharmaceutical industry as a whole, and the specific legal issues that Astrazeneca currently face.

Future Strategic Directions

Based on the companys report, Astrazeneca has 5 main strategic priorities, which are: products; pipeline; productive use of resources; people; and reputation. In products, the company plans to maximize sales growth by: releasing the full potential of their marketed brands throughout their lifecycle; growing their position in existing markets; expanding their presence in key emerging market; and vigorously defending their legitimate intellectual property rights (AstraZeneca Annual Report, 2005). But while this may be a good move, the company will not be left without any difficulties in achieving such goals. Many private groups are now criticizing their way of marketing, and starting to expose their lobbying activities. Furthermore, there is still the FDA that bars the way, although they can easily counter such criticisms with lobbying tactics.

The company also has the goal of delivering a portfolio of differentiated medicines that meet patient needs. However, they can also do so if they invest more in research and development than marketing. In terms of productive use of resources, the

company plans to improve its leadership, maintain best practice, and develop new practices. Finally, as a remedy to one of their weaknesses reputation- the company sought to maintain the trust and confidence of patients, customers, employees, shareholders, regulators and wider society by: understanding their needs; ensuring that they deliver on their business promises; and living up to their core values and publicly stated standards of ethical behaviour, wherever they have a presence or an impact (AstraZeneca Annual Report, 2005). But while these goals may be good sparks of change, the company needs to consider few more things such as decreasing marketing activities in favor of development of new products, using clean marketing tactics and abolishing their strategy of overpromotion, and the consideration to lower the prices of certain brands that they sell.

Conclusion

Based on the reports, the main aim of the company is to improve its management and marketing strategies. However, it does not mention any new means for improvements; but rather, the company just gave open statements without any explanation on how they will achieve them. It is most likely that in the future, the company will continue to prosper with the continues rise of prescription drug cost but will most likely fail to develop any new innovative products because it will most probably

invest instead to heavy marketing and promotion. In the future, the company may also further decrease its reputation by continuing to overpromote their products. The company should basically hire a new marketing team that will be ethically responsible when promoting its specific brands. However, if it should clash with the opinions of the Board of Directors, then it is advised that the board should review its marketing strategies and look for other possible options. The bottom-line is that, for the next few years, the company can succeed if just continue what it has been doing for the past few years. But it should be warned that there are some consequences to such actions, and that Astrazeneca should prepare to face them all with specific solutions on how it will deal with them.