Table Of ContentPHARMACEUTICAL
PRODUCT STRATEGY
Using Dynamic Modeling
for Effective Brand Planning
PHARMACEUTICAL
PRODUCT STRATEGY
Using Dynamic Modeling
for Effective Brand Planning
Mark Paich, Corey Peck,
and Jason J. Valant
CRC PR ESS
Boca Raton London New York Washington, D.C.
Library of Congress Cataloging-in-Publication Data
Paich Mark.
Pharmaceutical product strategy : using dynamic modeling for effective brand planning /
Mark Paich, Corey Peck, and Jason Valant.
p. cm.
Includes bibliographical references and index.
ISBN 0-8493-2729-6 (alk. paper)
1. Drugs--Marketing. 2. Brand name products--Mathematical models. 3. Pharmaceutical
industry--Mathematical models. I. Peck, Corey. II. Valant, Jason. III. Title.
HD9665.5.P35 2004
615′.1′0688—dc22 2004054037
This book contains information obtained from authentic and highly regarded sources. Reprinted material
is quoted with permission, and sources are indicated. A wide variety of references are listed. Reasonable
efforts have been made to publish reliable data and information, but the author and the publisher cannot
assume responsibility for the validity of all materials or for the consequences of their use.
Neither this book nor any part may be reproduced or transmitted in any form or by any means, electronic
or mechanical, including photocopying, microfilming, and recording, or by any information storage or
retrieval system, without prior permission in writing from the publisher.
The consent of CRC Press does not extend to copying for general distribution, for promotion, for creating
new works, or for resale. Specific permission must be obtained in writing from CRC Press for such
copying.
Direct all inquiries to CRC Press, 2000 N.W. Corporate Blvd., Boca Raton, Florida 33431.
Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are
used only for identification and explanation, without intent to infringe.
Visit the CRC Press Web site at www.crcpress.com
© 2005 by CRC Press
No claim to original U.S. Government works
International Standard Book Number 0-8493-2729-6
Library of Congress Card Number 2004054037
Printed in the United States of America 1 2 3 4 5 6 7 8 9 0
Printed on acid-free paper
PREFACE
This is a book about new ideas—new approaches to strategy development
in and commercial evaluation of pharmaceutical marketplaces, new struc-
tural representations of dynamic concepts, and new software tools that
assist in model development and analysis. All innovations, by definition,
replace existing paradigms; this work is organized to take the reader
through the progression from older traditions to new, more powerful,
analytic frameworks.
Chapter 1 details the traditional approach to Brand Planning in the
pharmaceutical industry and highlights some limitations of existing
approaches. Chapter 2 introduces the Dynamic Modeling framework, pre-
sents its key advantages over current approaches, and offers examples of
important insights this methodology has provided to some of our clients.
Chapter 3 guides the reader through the Dynamic Modeling language that
is used in subsequent examples. Chapter 4 describes an important sector
of the Dynamic Modeling approach called Patient Flow, which illustrates
how potential, current, and former patients move through the marketplace.
A simplified example that includes epidemiology and treatment algorithms
is provided and is extended in subsequent text. Chapter 5 shows how the
example in Chapter 4, which we call the Standard Template, can be extended
to meet specific conditions seen in certain pharmaceutical markets.
Chapter 6 describes data formats, sources, and analysis important in
populating the Patient Flow sector of the Standard Template. Chapter 7
employs the Dynamic Modeling language to address situations (involving
patient dynamics) that do not easily fit the Standard Template. Chapter 8
introduces the physician component of pharmaceutical marketplaces by
showing the structure and analysis surrounding Doctor Adoption of pre-
scription therapies. Chapter 9 details how such therapies can be evaluated
on dimensions of Treatment Attractiveness and how such utility calcula-
tions impact marketplace dynamics. Chapter 10 joins the three main sectors
v
vi (cid:2) Pharmaceutical Product Strategy
of the Standard Template to show how pharmaceutical markets are driven
by the dynamic interaction of Patient Flow, Doctor Adoption, and Treat-
ment Attractiveness. Chapter 11 illustrates how fully integrated models
can be used to better understand market dynamics and to develop more
effective marketing strategies.
Chapter 12 details how the Dynamic Modeling approach can be used
to investigate network effects in disease markets and to quantify any first
mover advantage in reaching the marketplace. Chapter 13 addresses how
uncertainty in model inputs can be handled, particularly in cases of latent
markets in which no historical data are available. Chapter 14 shows how
individual models of specific indications can be combined to create an
overall portfolio model. Finally, Chapter 15 demonstrates how the Dynamic
Modeling approach can be used to analyze pipeline portfolio dynamics
associated with the drug development process.
Much of this work uses a progressively more detailed model of a
hypothetical pharmaceutical market to illustrate the details and resulting
power of the Dynamic Modeling approach. Versions of the sample models
throughout the book are available through our Web site, http://www.Lex-
idyne.com, and accessed using software available from various vendors.
ACKNOWLEDGMENTS
This work would not have been possible without the dedicated efforts of
a widely dispersed team, the members of which go far beyond the names
listed on the front cover. We would like to thank Tom Waters, Harvey
Kane, Pat Roberson, Steve Zollo, Mike Masiello, Tao Woolfe, and the rest
of the talented folks at CRC Press for giving us the opportunity for, and
assisting us in the completion of, this book. Without their guidance and
patience, the process would still be in the conceptualization stage.
Our thanks go to our colleagues, clients, and business associates who
generously offered their insights and contributions to this work. Cynthia
Willey, Sue Steven, Steve Peterson, Julie Stafford, and Steven Bloom went
above and beyond the call of duty in contributing some of the real-world
examples and vignettes shown throughout this work. A very special thanks
goes to Julie Stafford and our strategic partners at AXIA Management
Consultants for their tireless efforts in positioning this book and providing
thoughtful and timely feedback throughout the development process.
Lindsey Carmichael and Kirk Solo were instrumental in providing content
suggestions and directional feedback during both the early and late stages
of this book’s development. Molly Shea was a valuable behind-the-scenes
member of our team in terms of industry research, chapter editing, and
content discussions over the course of this project’s development. And,
as always, thanks to Dean Tavalry for his guiding wisdom throughout the
years.
As practitioners of the Dynamic Modeling approach, we have been
blessed to benefit from a unique vantage point created by those who
have come before us. Most notably, our heartfelt appreciation goes to the
irreplaceable Barry Richmond—you are sorely missed.
To our families and friends who endured, with lasting patience, not
only the development of this book but also the years of consulting
vii
viii (cid:2) Pharmaceutical Product Strategy
engagements (usually far from home) on which it is based, we can only
give our everlasting thanks for your love and understanding.
And finally, to our parents who so selflessly gave each of us the support
and resulting freedom to pursue whatever paths life’s journey presented
to us. We are forever in your debt.
THE AUTHORS
The authors are principals at Lexidyne, LLC – a leading international
consultancy in the conceptualization, application, and implementation of
the Dynamic Modeling process for analysis and strategy development.
Lexidyne counts four of the world’s top 10 pharmaceutical firms and three
of the world’s top 10 biotech firms among its current clients, as well as
Fortune 500 companies in the automotive and basic materials industries.
In addition, several major consulting firms have utilized Lexidyne to help
develop their capacity to use these innovative techniques with their own
clientele.
Mark Paich has a doctorate degree in System Dynamics from the Mas-
sachusetts Institute of Technology (MIT) and is widely recognized as one
of the premier practitioners of the Dynamic Modeling approach over the
past quarter century. A former specialist at McKinsey and Company, he
has been instrumental in mentoring and fostering the talent of an extraor-
dinary number of the individuals who practice in this arena.
Jason Valant has over ten years of consulting and modeling experience
and has been instrumental in developing data analysis techniques for
examining longitudinal patient dynamics for the pharmaceutical and bio-
tech industries. He also specializes in the application of the Dynamic
Modeling approach to issues of economic development and workforce
planning in both the public and private sector.
Corey Peck has been advancing the state of the art application of the
Dynamic Modeling paradigm to the pharmaceutical realm for nearly a
decade, particularly in the areas of market analysis, brand planning, and
new product development. His expertise extends to other arenas such
as inventory control and pricing systems, CRM initiatives, and the dynamics
ix
