Marketing Management Lilly- Prozac
3. What are the different ways that Lilly and SmithKline Beecham/GlaxoSmithKline (SKB/GSK) have captured value from their respective drugs? Have these companies done a good job of maximizing their product’s revenue potential?In case of Lilly, they already created the value by getting their patent approved from FDA but capturing value was one of the key differentiators for their success.Below are the different ways they captured value:Lilly- Prozac 1. Savvy Marketing efforts: Lily used detailing tactics, face to-face sales visits to doctors and other healthcare providers to market new and existing products. For this their sales force educated itself about modern psychiatric practices so that they could articulate the product and the problem in an efficient manner to psychiatrists, particularly those who were major prescribers and “opinion leaders” in this area.2. Competitors not competent enough: MAOIs and tricyclics had severe side effects, so psychiatrists loved the new drug which had lesser side effects, which helped prosaic capture value in an efficient manner. Also, difficult to overdose, safer for potential suiciders (depressed 35 times more likely), Lilly used this differentiating factor to their advantage and leveraged it to capture significant market.3. Overcoming Social stigma: There was an inherent social stigma surrounding the whole idea of depression being a disorder, so Lily first educated the customers about this and people became more open talking about this disorder, and there was a general awareness created for the need. This helped consumers identify their latent need and smoothened the whole value capture process for Lily.
4. Direct To Consumer marketing- When FDA allowed advertising at customer level, Lily proactively took the initiative and were one of the first ones to use it strategically. The 30-minute infomercials were mainly run late night, as most of the target audience would watch television at that time. Moreover, they also increased sales calls to doctors by 25%. These efforts made sure that Lily did not lose their market share even when the competitor(Paxil) offered a superior product for the customers.5. Switch from psychiatrists to general practioners: As the word of mouth spread around that Prozac was helpful for curing OCD and Panic attacks, they immediately jumped on the opportunity as their total target market increased from 11.6 to 15.6 (close to 34.5% increase), and changed their market strategy to focus more on General practitioners rather than specialized psychiatrists. This lead to an increase in off-label selling of Prozac and as a result about 60% of their subscriptions came from General practitioners recommendations. This shows they were nimble enough to change their marketing strategy to capture maximum value.SKB/GSK- PaxilSKB/GSK strategy to capture value was also very similar, although their value proposition was a bit different from Lily’s Prosaic. Below are some key strategies they undertook for capturing value:Superior product: Paxil was a late entrant in the market, so they learned from the shortcomings of Prozac and offered a superior product, which had a significantly less half-life and therefore less of side effects. Although this differentiation was not able to fetch them great market share in the 1990s.FDA Approval for SAD indicator in 1999- Due to this approval from FDA for a new indication, Paxil had a whole new market (around 3.7% American adults) to cater to and they leveraged first mover’s advantage to turnaround their sale figures and started having better market share than even Prozac.  Customer Awareness: As this was a completely new market, one of the biggest challenges for Paxil was to educate customers about their latent needs and help them differentiate between SAD (Social anxiety disorder) and its general perceived association with “shyness”. So for the next 6 months after the approval from FDA, SmithKline spent $31.5 million on DTC advertising. Following a similar strategy as Prozac, they focused mainly on television advertising and magazine advertising. Although, they did not spend much (just 1 million) on advertising in medical journals as their target audience was customers and not specialized psychiatrists. Marketing campaigns focused on customer rather than product: Their tag line in the ads was mostly focused on customers, for example, one of the ads said “Your life is waiting”, and through these campaigns they promoted their product in a subtle yet effective way. They wanted customers to realize this need by giving diagnostic “self-test” on their website and make it easy for customers to identify whether they have “SAD” disorder. This helped them capture customer value as customer became more and more trusting.[pic 1]Yes, both the companies have done a remarkable job in maximizing products revenue potential:For Prozac:Expected $70m got $125 million in first year: Clinical test proved that only 60% of times the drug was successful and therefore company estimated a lesser sale as the product was not superior than its competitors, but a focused and strategic marketing campaign helped Lily maximize revenue by more than 78% of their expected revenue.Increased R&D: Lily invested significantly in R&D, this would help them keep a buffer for the future and keep them competitive for future cutting edge pharmaceutical innovations and patents. Sold more than the actual existing market: Identified latent needs and sold 2.5 million prescriptions in 1998 itself. Prozac’s marketing campaigns targeted towards educating customers on their latent needs led to the growth of overall antidepressant market from 40 million to 120 million in next 10 years from 1990 to 2000 in US.Pipeline products: Lily have a collection of new products that were coming up in the next 2-3 years such as Atomoxetine, Duloxetine, etc. This makes sure that they are not relying on a single product to earn their revenue, instead they are diversifying their portfolio of products to maintain a constant flow of revenue.Introduction of 90mg Prozac: Now as the customers need to pay higher for the same Prosaic drug, Lilly changed their selling strategy and focused on differentiating their value proposition by easing the method for customers to use the product. This would help improve their customer’s loyalty and retain them for a longer time period, hence another effort at maximizing revenue as a long term strategy.Switching their marketing from specialized psychiatrists to general practitioners: They were highly aware of the current market trend of focus on cost-cutting, and they used this situation as a value proposition for selling their product. They helped customers save costs from consulting a specialized psychiatrist, when they can get same consulting from a relatively cost-efficient general practitioner. This led to improved sales and hence revenue maximization for Prozac.For PaxilTheir product was superior to Prozac when they entered the market but still they were not able to fully capture the market using this differentiating value proposition, but the real turnaround period for them came in 1999, when FDA approved Paxil for a new “indication” of SDA. They hit a homerun on this new development and fully leveraged this first movers advantage for maximizing their revenue.They had a similar strategy as Lily like increasing R&D investment and maintaining a pipeline of new products. But, one of the other key reasons that support SKB/GSK for doing a good job of maximizing revenue was their extensive DTC marketing. They spent $92 million in DTC marketing, as they were one of the most advertised product, but this extensive spending is justified by great returns which ultimately led them to become 11th most bestselling drug by dollar sales.