There is little evidence that the Malaysian pharmaceuticals industry takes long-term brand building seriously in its prescription market *. A possible reason is the nature of the prescription market being different from others, including the over-the-counter sector (over-the-counter functions almost the same way as other retail markets). The prescription and pharmacist medicinal sectors are highly regulated and subject to government and political intervention. The brand life cycle of the prescription drugs is greatly influenced by their patent protection period. It is accepted that once a patent expires, the pharmaceuticals companies often divert their attention and resources to new products. Little effort is made to maintain the brand equity of the patent-expired drugs because the multinational pharmaceuticals companies (MNCs) are not able to offer/match the low price of the generics.

(*In the Malaysian pharmaceuticals industry, prescription brands are/come mainly from innovator companies)


An Overview of the Malaysian Pharmaceuticals Market

In Malaysia, drugs are available from two sectors - the government and trade (or private) sectors. The government sector consists of the Ministry of Health (MOH) hospitals and polyclinics. The private or trade sector consists of private hospitals, clinics, pharmacies, supermarkets, and Chinese medicine halls. Both physicians and pharmacists have the dispensing rights. The government hospitals are heavily funded with a subsidy of 97.0 percent on drug purchase. Patients visiting the government hospitals pay negligible costs for their medications. Due to the high spending on the pharmaceuticals industry, the government is encouraging the use of generics in government hospitals. Only drugs listed in the national formulary can be prescribed by the government doctors. As for the private market, the Malaysian government does not decide the price of medicines. Instead, market forces are expected to control the price of drugs in this sector. Nevertheless, such an open market policy has failed to achieve public health objectives since the pricing mechanism of drugs in the private sector is not consistent.


Why Brand Equity is Low in Prescription Drugs

Many MNCs try to push their brands through strong clinical evidences. Although efficacy, safety, and quality are the main considerations in the physicians' decisions to prescribe, brands that are solely built on functional benefits are likely to risk being perceived as undifferentiated. Any new drug with documented clinical evidences is powerful enough to get physicians to switch between brands.

A brand needs to be linked with a brand personality to build a relationship with its customers. However, prescription drugs have few factors that appeal through either the visual (color or shape) or other senses (taste, touch, or smell). This builds a barrier between the brand and its customers, and particularly the consumers. In addition, drugs are often associated with illness and side effects. This makes it difficult to develop positive emotional associations with them.

The healthcare professionals are technical buyers that seek high-performance; low-cost products while majority of the Malaysians belong to the low to middle-income groups. The price of medication is an important consideration in the decision to purchase, particularly for patients on long-term medical treatments. In the face of generic competition, many MNCs price their patented brands at a premium to derive extra value for recouping their R&D and marketing investments. Due to this phenomenon, once the generics emerge, many customers tend to switch to them since their prices can be as low as 10 percent of the original brands. Moreover, given the fact that the generics, especially those supported with bio-equivalent studies, are able to produce similar efficacy, it is becoming more difficult for the prescription brands such as Prozac, Tenormin, and Clarityne to survive after patent expiry.

The highly regulated environment of the pharmaceuticals industry in Malaysia restrains pharmaceuticals companies to advertise directly to consumers. Therefore, Malaysians normally buy drugs according to the doctors' recommendations. However, since medicines are often dispensed without proper labels and numerous doctors do not mention the brand names to their patients, many consumers are not aware of the prescription drug brands.


Different Customer Segments

Brands are only valuable to firms if customers perceive the brands as value added. In the pharmaceuticals industry, consumers consist of business-to-business (B2B) and business-to-consumer (B2C) customers. The purchase behavior between B2B and B2C is not the same. The B2C buying process is one-to-one but the B2B buying process involves decision makers from different departments, functions, and locations. As in many other countries, Malaysian doctors place performance as the most important factor in their purchase decision while the consumers depend heavily on doctor's recommendations. Therefore, doctors are very important in bridging the gap between the patient and the drug. It is imperative that a positive word-of-mouth for a brand is created within the local medical community. One of the challenges for the pharmaceuticals companies is to increase the value of the face-to-face communications between the doctor and the sales representatives. Hence, the knowledge, skills, services, and attitudes of the sales representatives are important in maintaining good customer relationships. However, that does not mean that the brand communication should be limited to the healthcare professionals. With the expansion of the Internet and increase of education level, the current consumers are more health conscious. Brands can act as a vehicle for patients to initiate a dialogue with the healthcare professionals. For example, the Xenical campaign motivates people to know more about the drug. Customers are more comfortable purchasing a familiar brand.


Functional and Emotional Needs

Brands should fulfill the functional and emotional needs of customers. When people think of a brand, they think of the relationship and associations they have with the product. A brand adds an emotional dimension to the product-customer relationship. All drugs have fulfilled the functional needs of the customers, which is to relieve illnesses. This is the brand promise or brand essence of the drug. To differentiate the brand promise, positive emotional associations require to be built to create unique propositions in the customers' minds. This means that the drug companies should explore the area of human characteristics by understanding their target audiences, analyzing their own products, and evaluating their competitors. The goal should be to create a brand personality and emotional benefits that support the functional attributes. The creation of a strong brand is dependent on the capability of the company in manipulating the regulations to its own advantage. For example, Viagra, the blue diamond shape tablet, is associated with ‘youth and celebration.' The challenge for the pharmaceuticals companies is to mitigate the negative feelings of the disease and side effects by emphasizing on positive thinking. A drug that offers quality-of-life can strengthen the relationship between the consumer and the brand, and consequently, their loyalty for the brand.


Value for Money

In the face of generic competition, the original brand must deliver a higher performance to justify its premium price. If not, it is easy for the business segment buyers to switch to alternative drugs that are considered value-for-money. It is suggested that pharmaceuticals companies should consider pricing their products reasonably for long-term benefits. This involves leveraging the economies of scale, re-engineering the manufacturing process, capitalizing on managerial efficiency, and understanding customers to enhance the values of any drug. The pharmaceuticals companies are advised to view their products as part of their social responsibility in improving the health of the society. Medicines are different from the fast moving consumer goods or technology products. They have a life-saving mission to fulfill. The entire branding is expected to focus on the customer benefit, which is to improve the patients' ‘quality of life'.


Positive Corporate Image

A good corporate image offers product quality endorsement and credibility. For example, consumers are more confident in purchasing products by Pfizer Inc. than from other unknown companies. In Malaysia, a positive corporate voice is yet to be developed within the consumer segment. To brand a product with an organization, the entire business system needs to be involved in delivering consistent organizational unique selling propositions (USP). In other words, from R&D to the top management, everyone in the organization is expected to understand the customers and the USP of the company and its products.


Product Satisfaction with Improved ‘Quality-of-life'

In conclusion, there are different ways by which pharmaceuticals companies can create and maintain strong brands while working within the constraints of the healthcare regulations and given the nature of the prescription business. It relies on the in-depth understanding of the companies' B2B and B2C customers, as well as its brand development and communications. Pharmaceuticals companies need to go beyond their traditional branding strategies to offer a brand promise that delivers product satisfaction and improved ‘quality-of-life.'

References:

Aaker, D and Joachimsthaler, E (2000), Brand Leadership, The Free Press, New York.
Aaker, D. A. (1991), Managing Brand Equity, Capitalizing on the Value of Brand Name, The Free Press, New York.
Fournier, S, Dobscha, S and Mick, D G (1998), ‘Preventing the premature death of relationship marketing', Harvard Business Review, January-February, pp. 42-51.
Yoo, B, Donthu, N and Lee, S (2000), ‘An examination of selected marketing mix elements and brand equity', Academy of Marketing Science. Journal, Vol. 28, Iss. 2, pp. 195-211.
Zinkin, J (2003), What CEOs Must Do to Succeed, Prentice Hall, Malaysia.

For further information please contact:

Katja Feick
Corporate Communications
+44 (0) 207 915 7856
Katja.Feick@frost.com

www.medicaldevices.frost.com