Is bigger better for drug companies?

imagesPOST SUMMARY: Via the Financial Times: In the first three months of 2015, the total value of healthcare deals reached $95.3bn, accounting for 12 per cent of all merger and acquisition activity this year, and a 70 per cent increase on the same period a year ago. Does this mean pharma is throwing in the towel when it comes to innovation?

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Is it easier to cut R&D spending and instead buy other companies with promising pipelines?  The data would indicate that the answer to that is yes.  Only 2 in 3 medications actually recoup the money spent in R&D but what this data doesn’t show is how much innovation in R&D is stifled because of big company bureaucracy.

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Over the years I have read a lot of consulting reports and one of the top line conclusions is that the big pharma organizations are their own worst enemy.  Organizational issues are often to blame for a wealth of problems, including innovation, but there is also another huge challenge.  The debt created by these mergers and acquisitions often means making cuts to internal departments including digital marketing.

Digital marketing, in healthcare, has never been more important as more and more patients go online to research treatment options.  Consumer packaged companies are spending a lot of money to increase digital marketing capabilities, including heavy investment in analytics. Last month I was retained by a client to do a complete 360 degree of their website analytics.  Rather than just list the data I used the data to tell a story which indicated a high bounce rate and insights that indicated that most people were accessing their website via desktop’s not mobile.  In addition the traffic to their page for a free drug trial was among the lowest pages visited.  Among my recommendations “hire a web analytics person” and “establish the position with actionable KPI’s tied to brand objectives”.

Insight

DTC marketers are going to see budgets cut or, at a minimum, be challenged that their initiatives are actually driving business objectives.  Whether the M&A activity is actually going to lead to a flood of new products or just raise stock prices is yet to be seen but bigger is not always better.