2019 Kellogg Healthcare Case Competition Slides
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2019 Kellogg Biotech and Healthcare Case Competition Team Tan
Agenda 01
Perceptions and Policies
02
Long-term Implications
03
#GoBoldly
04
Recommendations & Implementation
Perception Leads to Policy
“Mr. Sanders recently proposed a bill that would peg what the U.S. pays for drugs to what other industrial countries pay.” “What started as crank progressive politics is becoming a litmus test for 2020 Democratic presidential aspirants.”
Modern Portfolio Presentation
“72 percent of those surveyed thought Americans should be allowed to buy prescription drugs imported from Canada.”
“FDA Commissioner Scott Gottlieb says the agency is concerned with certain drugmakers' tactics designed to instill fear in patients and doctors about switching from originator biologics to biosimilars.”
Future Projections of US Pharma Market 2019
2020
2021
2022
2023
2024
Revenue Proxy*
770.6
801.5
833.5
867
901.5
937.6
US Market Share**
347.6
361.5
376
391
406.6
423
Profit***
68.5
71.2
74
77
80
83.3
Present Value****
64
65.6
61.5
60
58.7
61
All numbers in billions
Net Present Value of US Profits: $371B
*Revenue Forecast: Sum of top 23 Pharma Companies 2017 Revenues (from financial statements) with a conservative growth rate of 4% CAGR. **US Market Share: Approximation of 45.1% of US share of total global Pharma sales based on OECD Report: OECD., et al. Pharmaceutical pricing policies in a global market. 2008. ***Profit forecast: Average weighted forecast of profits of top 5 US Pharma companies from 2015-2017 (see 10k Financial Statements) ****Discount Rate: Weighted Average Cost of Capital of top 5 US Pharma companies
Policy Impact on US Revenue 450 400
US Revenue (billions)
350 300 250
200 150 100
50 0 2019
2020
2021
2022
2023
2024
*Rand Corp estimation of 20.3% reduction of revenue in the US Pharma industry given Price Control regulation: Sood, N., De Vries, H., Gutierrez, I., Lakdawalla, D. N., & Goldman, D. P. (2009). The effect of regulation on pharmaceutical revenues: experience in nineteen countries. Health Affairs, 28(1), w125w137.
Policy Impact on US Profits 400 350
NPV of US Profits through 2024 (billions)
Potential loss of $75 billion
300 250 200 150 100 50
0 No Regulation
Regulation
Long-term Implications of Policy Profits Suffer
Less Incentive to Innovate
Decrease in Life Expectancy
Negative Impact on Labor Force
#GoBoldly Campaign Launched early 2017 Goal: To improve public perception of the pharmaceutical industry through positive stories
*Source: “Rebranding Pharma” Kellogg School of Management Case Study, Tim Calkins, 2019 Sources: https://innovation.org/ https://www.youtube.com/watch?v=rzLQfUngldk https://www.phrma.org/press-release/america-s-biopharmaceutical-companies-launch-groundbreaking-multi-year-initiative-heralding-new-era-of-medicine
*Source: Gallup Poll 2018: https://news.gallup.com/poll/12748/business-industry-sector-ratings.aspx
Our Findings… Poll on Jan 21, 2019 Local MBA students and professionals’ perception of pharma before and after watching the #GoBoldly Commercial (1-7 ranking, 1= extremely negative, 4 = neutral)
All (n=45)
Pharma/Health (n=21)
MBAs (n=24)
Before
After
%
3.57
4.04
13%
3.55
4.14
17%
3.60
3.96
10%
Roots of Negative Perceptions Media Negativity Dominance
Unaware of R&D investment and resources Lack of awareness Daunting perceptions of “science”
Regulatory and political consequences
Benefits few, costs many
Socially unconscious
Bipartisan drive for policy change
Distrust of scientists
Industry disruption
#GoBoldly: Gap Analysis One-Stop Overview
Resources - Current research - Broad disease spectrum - Various websites
Process Awareness
Resources
-Stages of drug development -Investment and costs -Extent and labor behind research -Regulatory and IP hurdles
Optimize channels Impactful Stories -Patient profiles -Researcher profiles -Patient/Researcher stories
Positive Stories
Collaborations -Patient Assistance Programs -Partnership for Patient Assistance
What’s Missing
Outreach
Already Have
-Broadcast efficiency -Refocus target audience -Social media & digital presence optimization -Community programs
Provide immediate benefit Collaborations
Inbound Marketing
- Draw the public in with directly usage knowledge (eg drug information)
1. Additional Digital Media Advertising
2. #KnowYourDrug Campaign
Current #GoBoldly Digital Media Outreach
Facebook
YouTube
0.3k – 400k views per video
30k – 700k views per video
Increasing Importance of Digital Media • Continuous decline in TV consumption • Increasing streaming service subscriptions for media and entertainment, especially for young adults • One-third of young adults receive news and information digitally
Additional Marketing Efforts More Aggressive Digital Advertising Focus additional efforts on digital media platforms through captivating media contents
Use of existing #GoBoldly and #Together videos Push to additional online streaming platforms
Replace Words with Infographics Increasing popularity of infographics Captures audience’s attention Easier to digest complex information
Collaboration with Digital Content Creators Create in-depth contents related to patients, researchers, drug development processes
1. Additional Digital Media Advertising
2. #KnowYourDrug Campaign
#KnowYourDrug • A supplementary website to addend social media campaigns • #KnowYourDrug • KnowYourRx.org
• Type in any FDA-approved drug
• Shed light on the hidden cost of drug development • Celebrate the scientists, technicians, and engineers
KnowYourRx.org • Comprehensive and interactive website • Showcase drug development histories • Partners are DHHS/FDA and PhRMA members • Millennial friendly
Reinforcing a Palatable Narrative
An Astronomical Scientific effort • •
Searching to the moon and back Each drug is the result of a series of very exhaustive efforts
Reinforcing a Palatable Narrative
Proposed Four Central Tenets of Future Rebranding Efforts
1
Acknowledge setbacks and show progress
Be More Transparent
2
More direct information reduces speculation
3 4
Be More Accountable
Be Consistent and Persistent Changes in perception does not change overnight
Be Bold Face the controversies head on
Thank you! Team Tan
Agenda 01
Perceptions and Policies
02
Long-term Implications
03
#GoBoldly
04
Recommendations & Implementation
Perception Leads to Policy
“Mr. Sanders recently proposed a bill that would peg what the U.S. pays for drugs to what other industrial countries pay.” “What started as crank progressive politics is becoming a litmus test for 2020 Democratic presidential aspirants.”
Modern Portfolio Presentation
“72 percent of those surveyed thought Americans should be allowed to buy prescription drugs imported from Canada.”
“FDA Commissioner Scott Gottlieb says the agency is concerned with certain drugmakers' tactics designed to instill fear in patients and doctors about switching from originator biologics to biosimilars.”
Future Projections of US Pharma Market 2019
2020
2021
2022
2023
2024
Revenue Proxy*
770.6
801.5
833.5
867
901.5
937.6
US Market Share**
347.6
361.5
376
391
406.6
423
Profit***
68.5
71.2
74
77
80
83.3
Present Value****
64
65.6
61.5
60
58.7
61
All numbers in billions
Net Present Value of US Profits: $371B
*Revenue Forecast: Sum of top 23 Pharma Companies 2017 Revenues (from financial statements) with a conservative growth rate of 4% CAGR. **US Market Share: Approximation of 45.1% of US share of total global Pharma sales based on OECD Report: OECD., et al. Pharmaceutical pricing policies in a global market. 2008. ***Profit forecast: Average weighted forecast of profits of top 5 US Pharma companies from 2015-2017 (see 10k Financial Statements) ****Discount Rate: Weighted Average Cost of Capital of top 5 US Pharma companies
Policy Impact on US Revenue 450 400
US Revenue (billions)
350 300 250
200 150 100
50 0 2019
2020
2021
2022
2023
2024
*Rand Corp estimation of 20.3% reduction of revenue in the US Pharma industry given Price Control regulation: Sood, N., De Vries, H., Gutierrez, I., Lakdawalla, D. N., & Goldman, D. P. (2009). The effect of regulation on pharmaceutical revenues: experience in nineteen countries. Health Affairs, 28(1), w125w137.
Policy Impact on US Profits 400 350
NPV of US Profits through 2024 (billions)
Potential loss of $75 billion
300 250 200 150 100 50
0 No Regulation
Regulation
Long-term Implications of Policy Profits Suffer
Less Incentive to Innovate
Decrease in Life Expectancy
Negative Impact on Labor Force
#GoBoldly Campaign Launched early 2017 Goal: To improve public perception of the pharmaceutical industry through positive stories
*Source: “Rebranding Pharma” Kellogg School of Management Case Study, Tim Calkins, 2019 Sources: https://innovation.org/ https://www.youtube.com/watch?v=rzLQfUngldk https://www.phrma.org/press-release/america-s-biopharmaceutical-companies-launch-groundbreaking-multi-year-initiative-heralding-new-era-of-medicine
*Source: Gallup Poll 2018: https://news.gallup.com/poll/12748/business-industry-sector-ratings.aspx
Our Findings… Poll on Jan 21, 2019 Local MBA students and professionals’ perception of pharma before and after watching the #GoBoldly Commercial (1-7 ranking, 1= extremely negative, 4 = neutral)
All (n=45)
Pharma/Health (n=21)
MBAs (n=24)
Before
After
%
3.57
4.04
13%
3.55
4.14
17%
3.60
3.96
10%
Roots of Negative Perceptions Media Negativity Dominance
Unaware of R&D investment and resources Lack of awareness Daunting perceptions of “science”
Regulatory and political consequences
Benefits few, costs many
Socially unconscious
Bipartisan drive for policy change
Distrust of scientists
Industry disruption
#GoBoldly: Gap Analysis One-Stop Overview
Resources - Current research - Broad disease spectrum - Various websites
Process Awareness
Resources
-Stages of drug development -Investment and costs -Extent and labor behind research -Regulatory and IP hurdles
Optimize channels Impactful Stories -Patient profiles -Researcher profiles -Patient/Researcher stories
Positive Stories
Collaborations -Patient Assistance Programs -Partnership for Patient Assistance
What’s Missing
Outreach
Already Have
-Broadcast efficiency -Refocus target audience -Social media & digital presence optimization -Community programs
Provide immediate benefit Collaborations
Inbound Marketing
- Draw the public in with directly usage knowledge (eg drug information)
1. Additional Digital Media Advertising
2. #KnowYourDrug Campaign
Current #GoBoldly Digital Media Outreach
YouTube
0.3k – 400k views per video
30k – 700k views per video
Increasing Importance of Digital Media • Continuous decline in TV consumption • Increasing streaming service subscriptions for media and entertainment, especially for young adults • One-third of young adults receive news and information digitally
Additional Marketing Efforts More Aggressive Digital Advertising Focus additional efforts on digital media platforms through captivating media contents
Use of existing #GoBoldly and #Together videos Push to additional online streaming platforms
Replace Words with Infographics Increasing popularity of infographics Captures audience’s attention Easier to digest complex information
Collaboration with Digital Content Creators Create in-depth contents related to patients, researchers, drug development processes
1. Additional Digital Media Advertising
2. #KnowYourDrug Campaign
#KnowYourDrug • A supplementary website to addend social media campaigns • #KnowYourDrug • KnowYourRx.org
• Type in any FDA-approved drug
• Shed light on the hidden cost of drug development • Celebrate the scientists, technicians, and engineers
KnowYourRx.org • Comprehensive and interactive website • Showcase drug development histories • Partners are DHHS/FDA and PhRMA members • Millennial friendly
Reinforcing a Palatable Narrative
An Astronomical Scientific effort • •
Searching to the moon and back Each drug is the result of a series of very exhaustive efforts
Reinforcing a Palatable Narrative
Proposed Four Central Tenets of Future Rebranding Efforts
1
Acknowledge setbacks and show progress
Be More Transparent
2
More direct information reduces speculation
3 4
Be More Accountable
Be Consistent and Persistent Changes in perception does not change overnight
Be Bold Face the controversies head on
Thank you! Team Tan
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