Biomedical Engineering Reference
In-Depth Information
23.1
Introduction
The competitive landscape in the pharmaceutical industry is currently littered with
blockbuster drugs that have either gone or are scheduled to go off-patent: e.g., Pfizer's
Lipitor, Forest Labs' Lexapro, GlaxoSmithKline's Advair, Bristol-Myers Squibb/
Sanofi Pharmaceuticals Partnership's Plavix, Warner Chilcott's exclusivity for
Actonel in Western Europe, and Eli Lilly's Zyprexa. Given the ensuing battle against
generic manufacturers—such as Teva and Mylan, the world's number one and two
generic drug manufacturers, respectively—for market share, it is increasingly valuable
for pharmaceutical companies to manage their marketing resources more effectively.
In that context, an issue that has received limited attention in the literature deals with
spillovers and related externalities in this industry.
Consider for example (albeit briefly, since more details are given later in the
chapter) how one type of spillover may arise and its possible ramifications to
strategy. Much of the Canadian population lives relatively close to the US border
and has access to US television broadcasts; in addition, US-based magazines—such
as the Sports Illustrated—that are circulated in Canada do not have Canada-specific
production-runs (see e.g., Mintzes et al. 2001 ). Consequently, despite the fact that
Canada prohibits direct-to-consumer advertising (DTCA) of ethical drugs, a good
chunk of its population is exposed to such advertising from multinational pharma-
ceutical companies.
This exposure will have an impact on the sales of the advertised pharmaceutical
products in Canada; and while the marketing managers of the Canadian divisions of
these firms are aware of this effect, they may do nothing about it—as noted by the
Director of Marketing Planning at Merck Frosst Canada a few years ago: “ We are
aware but generally don ' it.” do anything differently because of it .” Accounting for
the spillover, however, will likely modify the expected response from other market-
ing activities (such as detailing) and can impact how resources are allocated—
e.g., variation in market response can affect how sales territories are designed, say
for different sales reps in Canada, or how quotas are assigned for measuring and
compensating sales performance. There can also be implications to assessing
marketing effectiveness and determining the appropriate levels of the various mar-
keting activities, such as detailing and DTCA levels in the USA. Clearly, accounting
for such externalities will allow the pharmaceutical firms to fine tune their strategies
and tactics, and help utilize their resources optimally.
23.1.1
What Is a Spillover and How Is It Related
to an Externality?
Intuitively speaking, a spillover arises when an action (such as DTCA by Pfizer)
generates an impact in a manner that was not explicitly intended—for example,
Pfizer's DTCA raises a given consumer's awareness of the disease and makes her
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