Pharma client needing to understand impact of insurance coverage on market share

Challenge

A multi-billion dollar U.S. pharmaceutical firm wanted options for deploying promotion funds in more targeted and efficient ways on a key product. Because the product was fairly late in its life cycle in a mature drug class, the client expected diminishing sales growth. They were also engaged in a tough and costly share battle with larger competitors. Most importantly, the company was confronting a major change in industry dynamics. Large health insurers were exerting increasing market power through prescription drug formularies, and the client wanted more precise measures of their effect on share of new prescriptions written (NRx). While physician detailing remained the single largest share of marketing spending, contracted rebates to insurance plans were second in size.

Solution

Marketing Analytics developed a highly customized marketing mix model at a physician/health plan/month level of granularity. The model related NRx share to physician details, samples, events, and formulary status for the client’s brand as well as competitors. Inputs came from IMS and client sources, and the final modeling database contained nearly 18 million records. The models accurately predicted NRx shares in holdout sample testing.

The models found that 27% of incremental NRx were due to marketing programs. Formulary status contributed the most sales lift. In fact, its impact on NRx was the same as details, samples, and events combined.

We then developed an optimized plan using the models and client financials. The most significant recommendation was to scale back physician detailing given its high ratio of spending to effectiveness. Some of these dollars were reassigned to sampling and contracting with selected plans for improved formulary status. The client began implementing recommended changes the following year on a test basis.