Posts tagged: five forces

Pharmaceutical Product Managers Could Still Use a Dose of Michael Porter’s Five Forces Competition Theory

We read a blog post by Dr. Jim Anderson, Product Managers Could Learn to Love Lipitor (http://www NULL.theaccidentalpm NULL.com/marketing/product-managers-could-learn-to-love-lipitor). We were interested to learn the steps that Pfizer has publicized that it will take to protect market share once its patent for Lipitor® expires. According to Dr. Anderson, these steps include:

  1. offering cards directly to current retail customers that will not expire when Pfizer’s patent expires. These cards lower out of pocket co payment expenses for these customers to $4.00 per month
  2. Directly delivering the product to retail customers. In addition, Pfizer will notify retail customers who choose to participate in the program when prescriptions need to be refilled
  3. Negotiating with Health Benefit plans to ensure that the cost of Pfizer’s drug is completely aligned with the cost of generic alternatives

The common theme that runs through each of these three steps, as we see it, is an effort to lower cost for retail customers (only) and improve access (for retail customers only) to this medication. The third step, negotiating with benefit plans, could end up benefiting Pfizer at the expense of benefit plans.

If, in fact, Pfizer has taken these three steps as Dr. Anderson contends, we think they could have done a much better job had they paid some serious attention to Dr. Michael Porter’s Five forces (http://hbr NULL.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1). As long as Pfizer has demonstrated that their production costs are lower for Lipitor than is the case for their competitors and, further, that they can retain profit margin despite keeping retail customer out of pocket costs at no more than $4.00 per month, then the card program works. Ditto for the notification program.

Nevertheless, we think they should have attempted to identify customers using their drug for unexpected conditions with an eye towards identifying higher margin markets which, if developed skillfully, would permit Pfizer to retain present pricing levels despite a pending onslaught of generic competition.

Further, we hope that Pfizer thoroughly briefed its benefit plan partners about its planned three steps well in advance of notifying the public of its plans. All three steps could end up benefiting Pfizer at the expense of its benefit plan partners — not a skillful tactic over the long run. We think that methods of defending Pfizer’s market position could be formulated that would benefit benefit plans as well as Pfizer. These latter methods deserve study in that we don’t think that Pfizer should hastily burn its bridges with benefit plans. After all, benefit plans provide very high volume conduits into the marketplace.

If you are interest in product management approaches and are grappling with products in commodity markets, then we would like to hear from you. Please contact Ira Michael Blonder at +1 631-673-2929 to further a discussion. You may also email Mike at imblonder@imbenterprises.com.

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