Warzocha Zbigniew

Michalak Jacek

Herbszt Renata

Marketing in a pharmaceutical company

Introduction

The primary function of marketing is to gather market information. Decision-making in a marketing system usually takes place under conditions of uncertainty. The fact of the uncertainty’s existence makes it necessary to create an appropriate framework for decision making that will allow the reduction of risk associated with the fact that the market is a dynamic category that is affected by many variables. A previous data collection and its analysis are a starting point. All marketing actions are focused on gathering knowledge about the consumer and his behaviour, therefore, establishing cost-effective spheres of action and enterprise’s objectives could happen through a systematic collecting of information about the market and constant observation of changes taking place in the consumer (PYKA 2002).

The functions of marketing in management relate to developing a marketing strategy. This means each time creating a system, which has to take into consideration the interdependence occurring between various instruments and activities. A primary task in an instance of marketing management is to develop integrated operation systems enabling achieving both, current objectives as well as long-term ones, because marketing oriented enterprise cannot be limited in its actions merely to passive adaptation to an existing situation. By consistently implementing the concept of marketing management, an enterprise meets the needs of buyers, while achieving its own benefits (KAŁĄŻNA-DREWIŃSKA, RAK Iwankiewicz was co-chairing-1997).

General characteristics of the pharmaceutical market in Poland

The pharmaceutical market in Poland is counted among the most attractive sectors of the economy. According to IMS Health, throughout the entire year 2007 the value of the pharmaceutical market compared with the year 2006 increased by 7.5%. It distinguishes itself for its high average profitability, relatively high annual average growth and, above all, an undisputable social importance. The promising as well as diverse features of this market, although great barriers to entering this market, contribute to an increase in the intensity of competition, and to formulation of more offensive strategies by units operating in this sector.

The pharmaceutical market is one of the medical market sectors, beside medical service and medical equipment sectors (Figure 1).

MEDICAL MARKET

PHARMACEUTICAL MARKET SERVICE MARKET MEDICAL EQUIPMENT MARKET

Government health care Medical equipment

DRUG SECTOR Private health care Analytical equipment

DRUGS OTC available without prescription

DRUGS RX available with prescription

Figure 1. Medical market structure.

Source: Own compilation based on data provided by the examined company.

The pharmaceutical market is divided into two sectors, namely: ethical drugs RX (original and generic - as replacements for original drugs with the same active ingredients and pharmacological effect) sold by prescription and ordained only by a physician, and non-prescription drugs (Over The Counter - OTC). These sectors identify in advance target groups of people at which the marketing offer will be aimed. Therefore, in this industry a growing importance is attached to the marketing orientation of pharmaceutical companies, wholesalers and pharmacies that are trying as best as they can to meet the needs of their patients, while simultaneously ensuring high profitability of the achieved turnover. The main premise of today’s marketing orientation is attracting loyal customers, who will demonstrate attachment to a given brand and repetitively make purchases from a specific manufacturer in a given warehouse or pharmacy. When looking at the pharmaceutical market from the marketing efforts perspective we can observe specific factors which significantly influence the selection of particular instruments that have an effect on physicians and patients.

In an instance of prescription drugs the targeted sector consists of physicians and other institutional decision makers (the Ministry of Health, the National Health Fund). With OTC drugs, marketing efforts will focus primarily on patients and pharmacists whose behaviour in the process of buying non-prescription drugs is comparable to the behaviour in the so called fast moving consumer goods market (FMCG) - where the targeted customer is an individual who wants to change and improve his or her lifestyle in the age of a rapidly changing civilization.

Marketing organization in a pharmaceutical company

The research aimed to explain the role marketing plays in an organizational structure of a company in the pharmaceutical industry, and its object was one of the larger organizations of this type operating in the Polish market. The company engages in developing, manufacturing and selling drugs. It is part of a group operating globally, with headquarters in Florence (Italy). Currently it is one of the largest Italian pharmaceutical companies that in 2004 achieved global sales of 2.0 billion euros. It hires 10 000 employees in more than 100 countries around the world, including more than 736 members of research personnel. Thanks to innovative products and a strong team of representatives, the company is establishing its position in Germany and abroad, recording above average growth rate of drug sales.

In 1992, the company opened its representative office in Poland, and the headquarters is located in Warsaw. Preparations offered in Poland are used to treat illnesses in therapeutic areas such as cardiology, gastroenterology, thyroid disease, diabetes, painkillers and anti-inflammatory drugs, infusion preparations. As a member of the German Association of Pharmaceutical Companies, the company guarantees innovation by conducting scientific research. The purpose of its research is to help sick people and improve the quality of their life. As part of the Research and Development Division the company specializes in preclinical and clinical trials and also oversees the course of clinical trials. While producing both prescription drugs, as well as OTC, the company operates a comprehensive, supple marketing activity. It is always present in specialist press, it organizes and sponsors symposia and scientific conferences for physicians and pharmacists, participates in exhibitions and national, as well as international, trade fairs. The company advertises drugs for sale without a physician's prescription in daily newspapers, online, radio and television and during numerous public events. In addition, throughout the country and abroad, a network of this company’s representatives operate to reach out with professional information about the preparations to physicians in their offices, hospitals, regional and specialist clinics as well as pharmacists in pharmacies and wholesalers. An efficient distribution system ensures the availability of drugs in all major pharmaceutical warehouses in the country. Sales promotions play an important role in strengthening the position of a broad range of preparations, as well as in introducing new drugs to the market. The company leads a number of promotional activities aimed at both; pharmaceutical wholesalers and open pharmacies and hospitals.

The organizational structure of the company has a divisional structure character, because each director of individual departments manages a specialized division which accomplishes specific objectives (Figure 2). Department directors report to the president of the company.

The marketing department reports directly to top management (General Manager). Employees of this department are first and foremost concerned with establishing and creating strategic plans and current operations’ tactics (called direct) through the use of medical representatives’ services. Although medical representatives are not a part of this department, there is close cooperation between them. The marketing department also formulates and quantifies objectives and then forwards them to be executed. It has free access to the entire customer database, all contacts’ records and marketing activities gathered by medical representatives. Based on this knowledge, personnel of this department create their own analysis and reports on current needs. The analyzed unit has thirteen people.

administration personnel

FINANCE DEPARTMENT DIRECTOR

marketing manager

drug registration

department personnel product manager

SALES DEPARTMENT DIRECTOR

scientific consultant

regional manager

medical representative

Figure 2. Organizational structure of the company’s representation in Poland.
Source: Own compilation based on data provided by the examined company.

Marketing Manager who coordinates the work of the Product Manager is a part of this department. His responsibilities include leading advertising campaigns and promotional products and services, promoting new products, increasing sales efficiency and brand recognition. He advices internal and external customers - from research, through planning, introducing into the market, to monitoring results. He prepares contracts and coordinates their implementation (close cooperation with the sales department) and analyzes market data concerning the sector, consumers, competition’s course of action and the results of their own products and services (Figure 3).

Main tasks of Marketing Manager

leading advertising campaigns and promotional products and services

promotion of new products

increasing sales efficiency and brand recognition

helping internal and external customers

preparing contracts and coordinating their implementation

analyzing market data

Figure 3. Main responsibilities of a Marketing Manager.
Source: own compilation based on data provided by the examined company.

Product managers are responsible for realizing previously established anticipated sales of a given drug or group of drugs - from detailed planning of this sale through completing it owing to the promotional budget and shares. There are five managers in the company, each of whom has his own assistant. Besides the above-mentioned managers, science consultants are also a part of this department (2 people); they assure correct medical content of created promotional materials. Therefore, we can see that marketing actions are an important aspect of a company's activities. The company realizes how important marketing actions are, and is aware of the role that is played by advertising in the process of deciding drug purchase, as evidenced by an increase in financial expenditures related to ads’ production and broadcasting. Presently, in order to obtain satisfactory results in sales, a properly conducted drug promotion policy is necessary. This is why the medical representative, who is a link between customers and the company, is a very important element.

In the sales department we can identify regional managers and report to them medical representatives. The main task of this department is logistics - importing drugs after taking into account sale volumes forecasted by the marketing department. The main responsibilities of regional managers are: monitoring the effectiveness of medical representatives’ work and supporting them in carrying out their assignments, direct contact with customers in important matters, analysis of activities performed by medical representatives, assistance in developing strategic plans based on knowledge about the market.

The main task of medical representatives is developing and maintaining good relationships with physicians and pharmacists. Generally they are required to have medical education, although now many companies are looking for candidates for this position with an education that is related to medicine such as: rehabilitation, biology.

The work of medical representatives is primarily promoting drugs to physicians and ensuring a presence of given company’s drugs in pharmacies. The basis for evaluating the results of work of medical and pharmaceutical representatives (traders) is a tangible outcome of this promotion. Therefore, these positions are filled by people who posses skills and knowledge useful both, in their relations with physicians and pharmacists. The experience gained from working in a fast moving consumer goods industry is helpful in dealing with pharmacists. Pharmaceutical companies have also observed that it is easier to teach medical knowledge about their product to a merchant, than to develop the so-called outcome orientation and ease in interpersonal relations in a physician. Currently, physicians themselves seem to be less interested in working as medical representatives (Fig. 4).

THE RANGE OF MEDICAL REPRESENTATIVE”S RESPONSIBILITIES

Figure 4. The range of medical representative’s responsibilities.
Source: own compilation based on data provided by the examined company

Medical representatives report to regional managers on the following activities:
• implementation of assigned marketing tasks and their approval in the system,
• creating their own customer base consistent with the requirements of the company,
• direct contact with customers.

Medical representatives establish their own customer base. This base takes into account all the necessary information regarding customers, organized according to representative’s needs and the plans imposed on him. In addition, it also contains a full description of records on interactions with these customers, types of performed activities, descriptions of visits, distributed marketing materials, information leaflets. Through their daily work representatives constantly supplement the database with additional information. Thanks to data collected in this manner it is possible to evaluate the effectiveness of medical representatives’ actions, and to examine customers’ reactions to the company's activities. Directions of this database are indicated by the marketing department. All planned activities are based on knowledge acquired this way.

For representatives, information organized in the database is a documentation of previously done work that allows them to evaluate the customer, return to meeting records, determine visit schedule in the future, collect necessary notes, current and concerning operational activities in the future. A synthesis of this information with the representative’s detailed plan and company’s operational plan facilitates the accomplishment of indicated assignments and a continuous monitoring of their execution. For supervisors it provides information about the efficiency of a representative’s work and makes data accessible concerning the market and representative’s customers. Compiling a list of marketing materials provides better support for many representatives from the time the material is ordered until it is sold to customers.

Planning at the strategic and operational level

Planning allows the company to lead a marketing policy that is fully integrated with the work of representatives in the field and at the same time permits to settle accounts with people for implementing the plan’s objectives. Strategic plans are prepared by the marketing department and people responsible for long-term directions of company’s development. They contain a description of operations and specific tasks to be carried out. These tasks are assigned to individual people, which allows for a continuous verification of their progress. The task-defining system permits the specification of a full scope of medical representatives’ operations in combination with the type of customers, region, and given assortment of preparations and their application profile. On the other hand, it ensures a detailed analysis of the degree to which intended tasks were realized. Strategic plans usually apply to a period of one year. These plans take into account results of scientific and medical research, phase IV of clinical trials and questionnaire surveys.

The forth phase of clinical trials has to do with drugs already registered as well as drugs available on the market. Its purpose is to determine whether a preparation is safe for all applications specified by the manufacturer and for all groups of patients.
In phase IV trials, pharmaceutical companies engage in the following matters, namely: compare a drug to other drugs present on the market, monitor long-term effectiveness of a drug and its impact on a patient's quality of life. Much research aims at determining the benefits of a treatment in question in comparison to other traditional or new treatments, and further verifying previously obtained results. Funding for clinical trials comes from both government organizations and the industry (pharmaceutical biotechnological companies). To perform research the company retains physicians who work in one or several health centres. In return for participating in the study a patient is awarded free, specialized medical care, and physicians receive a bonus for their participation in the research. Clinical trials of drugs are not only a domain of pharmaceutical corporations. Very often people conducting research for cognitive purposes create their own research protocols, for example, to evaluate the effectiveness of alternative treatment methods. The obtained results from these protocols are published in scientific periodicals and presented at congresses. Thanks to this data, the progress of medicine becomes possible along with an ability to provide valuable information on the best ways of coping with illnesses.

The company also administers questionnaire surveys among patients. They are useful in planning drug promotion and advertising policies, they also provide information regarding side-effects, buyers’ preferences, comments on dosage and application. Thanks to survey questionnaires the company obtains data about places where customers purchase drugs (in case of OTC drugs), sources from which they draw information about preparations, and customers’ perception regarding credibility of this information. The data obtained from surveys are used by company’s managerial cadre when making strategic decisions. Through the use of a large team of people operating throughout the country, it is possible to keep records and convert information into a freely chosen topic, including the topic of competition’s activities. It is possible to verify the effectiveness of a standard’s implementation, for example when it comes to exposure. Questionnaires are developed on the administrative level of the system, and then distributed according to a certain order (i.e. by specific distribution channel, by pharmacy size, among selected individual stores, by specific zone or among specific employees) to the mobile part of the system.

The company also benefits from research done by IMS Health (a global company concentrated on analyzing the pharmaceutical market). The company conducts market research specially ordered by other companies. Currently, a great number of pharmaceutical companies use its services. Information supplied by them has the highest reliability in comparison to data provided by other research companies. The company prepares special reports on the pharmaceutical market, presenting in them the workings of the competition and defining the size of the market share held by the company and its competition. It also presents anticipated forecasts for the market and workings of the competition that are useful in long-term planning of company’s operations. The company continuously monitors the introduction of new drugs into the market and informs about it other participants operating in this industry.

Currently, a strategic plan for the company’s development for the years 2007 – 2012 is being implemented, aimed mainly at product and sales strategies as well as profitability improvement. The company’s management has formulated necessary objectives to be implemented in the next five years in terms of quantity, value and quality. The strategic objective is to achieve in 2012, from the perspective of value, a 2.3% share of domestic sales and the 10-th position among pharmaceutical companies. In addition to increasing domestic market share held, the company aims to stimulate export activities and to achieve 29.7% share of sales in total sales. In 2012 the estimated value of sales is supposed to reach the level of approximately 432 million zlotys. Export sales target amount is projected at approximately 187 million zlotys. The assumption is that in 2012 total sales are supposed reach the level of approximately 616 million zlotys (Table 1).

Table 1. Target quantities included in the strategic plan

Parameter	Implementation in 2007	Implementation plan in 2012
Retail market participation	1,49%	2,3%
Position on the retail market	21	12
Domestic sale	187 mln PLN	432 mln PLN
Export sale	45 mln PLN	184 mln PLN
Share of exports in total sales	19,4%	29,7%
Profit margin on sales	41,5%	55,9%
Marketing and sales cost	18,3%	28,8%
Operating profit margin	13,3%	19,7%
Net profit margin	10,2%	14,7%

Source: own compilation based on data provided by the examined company.

An implementation of the above-mentioned strategic objectives is associated with a significant increase in revenue from sales, improved profitability of current preparations’ portfolio, developing new products, cost rationalization and activation of marketing and sales activities.

Additions to strategic plans are representative’s operational plans that allow the scheduling of representatives’ visits at any time. Such planning requires a thorough analysis of the execution method of partial assignments, taking into consideration central assignments incorporated into the strategic plan and optimizing them, as well as operational notes concerning accepted liabilities toward customers and meeting dates. By analyzing the execution of detailed plans prepared by a medical representative it is possible to learn about the effectiveness of these plans’ implementation for the entire month, and the method the representative uses to schedule his work. Regional managers are primarily concerned with monitoring the execution of operational plans. Typically, these plans include a period of four months. Included in them are regional and central budgets intended for the promotion of preparations. The regional budget is developed mainly by medical representatives, and it is focused primarily on determining and allocating necessary expenditures needed for visiting clients and organizing scientific conferences, meetings with physicians and pharmacists. The work of each retained representatives is based on a monthly planning system. Specifically, he submits to his superior a plan for the entire month in which he describes how many and what meetings he intends to conduct. He also describes how they will be conducted, since those meeting are not always individual talks with physicians, but occasionally they take a form of, for example, lectures or training. The representative also has to report every day on the plan’s execution. An important function performed by the medical representative is writing daily reports. Thanks to those reports, he can follow the degree to which an individually defined plan was implemented and find out at what stage his cooperation with the company currently is. Creating reports allows him to better manage his time, which is very important for increasing efficiency of his actions. In addition, reports make it possible to compile statements by specific period of time, certain product groups, customer categories and units where the sale is specified (as value or quantity). Users have an option of sorting data within generated reports.

The second method used by the company, evaluating not so much activities themselves as the effectiveness of representative’s work, are the IMS reports, which allow for a rather accurate assessment of the extent to which an employee’s activity influences the level of sales of a given drug in a particular area. The central budget is developed by product managers who specify in it, among other things, the amount of cash supply intended for the implementation of previously defined sales in the entire company.

In its operations the company uses an advanced system to manage, support and plan medical representatives’ work. It was developed by marketing department employees and has been implemented for the last six years. The system was divided into three areas of operations (Table 2), that can operate independently:

1. Registration of representative’s promotional activities.

2. Cost registration.

3. Integration of data in the system with external data, along with their presentation.

Table 2. Opportunities for assistance and monitoring of medical representatives’ work.

Promotion activities	Cost registration	Data integration
- database creation for medical facilities, - managing a database of physicians and medical employees, - reports and representatives’ work schedules, information concerning promotions.	- allocating and monitoring costs, - registration of marketing and administrative costs - monitoring of accounting documents.	- an area is created separately for each customer; it enables IMS or warehouse data to be connected with data regarding promotions achieved by representatives.

Source: own compilation based on data provided by the examined company.

Among the main benefits that the system offers to a manager the following should be included:
• controlling the quality of promotion realized by a representative who supports the quality

of obtained information on preparations,
• increase of effectiveness of scheduling visits achieved by monitoring representative’s work
• own database of contact information freely accessible for any use,
• flexibility in allocation and possible changes to sectors where representatives work,
• reduction of time needed to settle accounts with representatives,
• full control over costs incurred in promotion zones,
• unambiguous data compilation, for example, of IMS with data from a reporting system
When it comes to benefits that the system offers to a representative the following should be mentioned:
• ability to use the database anywhere in the world,
• making work easier through the use of automatic database monitoring in planning, based on

a date of the last visit,
• simplifying cash advance settlements with the company,
• easy access to information on sales,
• swiftness of information,
• simplifying the process of work reporting.

Summary

The pharmaceutical market in Poland is among the most attractive sectors of the economy. It is distinguished by high average profitability, relatively high average annual growth and, above all, indisputable social importance it has when it comes to meeting customers’ needs. Promising as well as diverse features of this market, although high barriers to entering this market, contribute to an increase in the intensity of competition, and to the formulation of more offensive strategies by units operating in this sector.

In the pharmaceutical industry more importance is being attached to marketing orientation of pharmaceutical companies, wholesalers and pharmacies which are trying to, in the best possible way, meet the needs of their patients while at the same time ensuring high profitability of achieved turnover. Pharmaceutical companies are appropriating more financial resources for marketing and sales departments, because they are aware of the growing competition in this industry. A very important role is played by medical representatives who are a link between the company and the customer. In addition to selling drugs, they create and strengthen the image of the company. Currently, pharmaceutical companies outsource the services of medical representatives, because they prefer to employ workers trained in this field. The main premise of today’s marketing orientation is attracting loyal customers, who will demonstrate attachment to a given brand and repetitively make purchases from a specific manufacturer at a given warehouse or pharmacy.

Literature:

Kałążna-Drewińska U., Iwankiewicz-Rak B. 1997. Marketing w handlu. Wydawnictwo Akademii Ekonomicznej im. Oskara Langego, Wrocław.

Pyka J. 2002. Koncepcja marketingu jako systemu komunikacji przedsiębiorstwa z rynkiem. Zeszyt Nauk Górnośląskich WSHand, 5:3-7.

Synopsis

The functions of marketing in the area of management are concerned with developing a marketing strategy. This means each time creating a system which has to take into account the interdependence occurring between various instruments and activities. A primary task in an instance of marketing management is to develop integrated operation systems enabling the achievement of both current as well as long-term objectives, because a marketing-oriented enterprise cannot limit itself merely to passive adaptation to an existing situation.

The subject of the research, that aimed to explain the role marketing plays in an organizational structure of a company in the pharmaceutical industry, was one of the larger organizations of this type operating in the Polish market. The company engages in developing, manufacturing and selling drugs. It is part of a global operations, with headquarters in Florence (Italy). Currently it is one of the largest Italian pharmaceutical companies that in 2004 achieved global sales of 2.0 billion euros. It hires 10 000 employees in more than 100 countries around the world, including more than 736 members of research personnel. Thanks to innovative products and a strong team of representatives, the company is establishing its position in Germany and abroad, recording above average growth rate of drug sales.

In the pharmaceutical industry more importance is being attached to the marketing orientation of pharmaceutical companies, wholesalers and pharmacies which are trying, in the best possible way, to meet the needs of their patients, while at the same time ensuring high profitability of achieved turnover. Pharmaceutical companies are appropriating more financial resources for marketing and sales departments, because they are aware of the growing competition in this industry. A very important role is played by medical representatives who are a link between the company and the customer. In addition to selling drugs, they create and strengthen the image of the company. Currently, pharmaceutical companies outsource the services of medical representatives, because they prefer to employ workers trained in this field. The main premise of today’s marketing orientation is attracting loyal customers, who will demonstrate attachment to a given brand and repetitively make purchases from a specific manufacturer at a given warehouse or pharmacy.