Multiple Indication Muddle

Pharmaceutical drugs often treat multiple health conditions, and sometimes the dosage varies considerably depending on the patient or the condition being treated. Under these circumstances it becomes necessary to look at how a drug and its competitors are used in real life before one can adequately compare their performance in the market place.

Likewise, comparing products only by unit volume can significantly distort the market picture and lead to decisions based on incorrect information.  Let us look at a simple, hypothetical example:

  • we have information that 45% of Competitor X’s volume goes toward treating conditions very different from those that our drug treats – how should we account for this in our market analysis?

Some Factors That Influence Market Calculations

Common sense suggests that we should not calculate market shares based on the total volume of Competitor X, since a large portion of that volume represents non-competing business.  However, we cannot simply deduct 45% of Competitor X’s volume from the market total.  Why?

  • The market continually evolves, it may be 45% today, but what will it be tomorrow?
  • A significant portion of Competitor X’s volume may flow through channels in which we have decided not to compete – against what volume of Competitor X do we really compete?
  • A standard course of therapy using Competitor X may require a different number of units than a standard course of therapy using our drug – how can we tell whether our drug is gaining or loosing market share?

We Need A Better Market Definition

We now realize that we need to make some decisions about how to define our market. In other words, we need to develop some rules for turning total product volume into something more useful. In this simple example, we need to take into account

  • how products are used and
  • where they are used.

In real life, the factors that need to be considered may be much more complicated.

We also need to gain agreement from business leaders about what these rules should be and what reports will be needed to support their decision making process.  Several discussions will probably be needed, because we have to collect and interpret data that will help us come up with suitable rules.

We Need Appropriate Data

This data may come from a variety of sources, both internal and external to the organization.  Depending on the complexity of the market and the available budget, we may

  • conduct primary research
  • buy syndicated data
  • acquire data from other sources like distribution partners or the Federal Government.

In this example we may need to look at

  • number of units being used to treat various conditions
  • product volume in various channels
  • which conditions are being treated in which channels.

We Need Customized Calculations

Using our example, we may have determined the following, also hypothetical, rules

  • Competitor X requires 4 units per course of treatment while our product requires 3 units
  • We have determined how much to discount Competitor X in each channel
  • We have chosen to create two market views: a Nation Total and one only for Hospitals

Now that we have determined the rules, we have to set up calculations that apply these rules and turn total product volume into something more useful.  But we cannot rest on our laurels – as the market changes, these rules may need to change — this means we periodically have to start this process all over again.

To see how this process is used in real life, take a look at one of our Case Studies.

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