Closing the Marketing Strategy-Tactics Gap: An Institutional Theory Analysis of Pharmaceutical Value Chain

Abstract

This chapter identifies a strategy-tactics gap in most previous studies of pharmaceutical marketing, and addresses it by systematically analyzing the marketing strategies used in practice with the help of a unique dataset of court discovery documents unsealed in a recent litigation. Adopting an institutional theory perspective, we examine the dominant logic that underlies pharmaceutical marketing strategies, and contrast it with the organizing logics of the value chain partners. Four distinct marketing strategies with carefully crafted interdependencies emerge from our analysis: (1) market penetration strategy involving a focus on segmentation and penetration, (2) evidence-based strategy involving production of science, (3) medical education strategy involving development and dissemination of standards of care, and (4) surrogate selling strategy involving leverage of peer-to-peer influence among target physicians. Together, the strategies uncovered in our analysis provide coherence to the observed marketing tactics and show that they are largely consistent with the logic of consequences which conflicts with the logic of appropriateness guiding the actions of the value chain partners. The institutional theory analysis shows that: (1) pharmaceutical value chain is characterized by conflicted logics, (2) that are amplified by pharmaceutical marketing strategies thereby, (3) inviting regulatory intervention to constrain and restrict pharmaceutical marketing efforts. We propose an open systems framework that elaborates on value chain interdependencies and compare it with the economic framework that characterizes most current research. We close the chapter with an agenda for future research into the theory and practice of pharmaceutical marketing.

Appendix: Background Note on Analysis of Court Documents for Mapping PM Strategies

Data background. Several key litigations involving pharmaceutical marketing practices have been processed in US and international courts including: (a) TAP Pharmaceuticals who settled its nationwide class action lawsuit by paying $885 million to consumers and insurers, (b) AstraZeneca who pled guilty and paid $335 million for promoting Zoladex, (c) Eli Lilly who was charged for marketing practices involving Evista and paid $36 million dollars to the US government, and (d) Schering-Plough Corporation who paid $435 million dollars as part of their plea agreement to settle charges for marketing drugs. In fact, six out of the top ten pharmaceutical companies⁶ in 2007 have faced recent or current litigation due to their marketing tactics.

The case we selected, United States of America ex. rel David Franklin vs. Pfizer Inc, and Parke-Davis, Division of Warner-Lambert Company, involved marketing practices related to Neurontin^® (chemically known as gabapentin) which was marketed in over 100 countries, used by over 12 million patients and was generating revenue of over $2.7 billion. The FDA initially approved gabapentin in 1993 for adjunctive treatment of partial complex seizures in adults older than 12 years in age and for dosages not exceeding 1,800 mg/day. However, by the mid-nineties, gabapentin experienced its highest growth in off-label treatment of pain syndromes (e.g., neuropathic pain, migraine) and psychiatric disorders (e.g., social phobia, bipolar disorders). Parke-Davis admitted that it used marketing and promotion strategies for unapproved, off-label uses. Under current United States law, it is neither illegal nor unethical for physicians to prescribe a drug for purposes unrelated to its FDA approved uses. Physicians are privileged by law to prescribe a drug for treatments for which they believe there is sufficient evidence of efficacy based on scientific evidence in peer reviewed journals and expert recommendations. Pharmaceutical companies are legally restrained from directly marketing and promoting a drug for off-label uses. As such, the marketing practices used are not illegal per se. They are illegal only if they are used to directly promote off-label uses.

Data characteristics and analysis. The court documents were obtained directly from the attorneys, and supplemented with archived data from a website of all pertaining documents housed at the University of California, San Francisco (http://dida.library.ucsf.edu). The documents included internal correspondence, details of sponsored activities and programs, exchanges between drug companies and physicians, and sworn depositions from key individuals. In analyzing these documents, we adopted an inductive approach with multiple coders. Two teams, each involving a lead researcher and a student, were constituted. The first team initially combed the materials to extract the key strategies and associated networks that had a direct or indirect bearing on the company’s relationships with physicians. The second team then independently extracted the key strategies and networks, and met with the first team to resolve differences and integrate extracted strategies. Further, to ensure that the inductively derived descriptive patterns are not idiosyncratic to the gabapentin case but reflect broader industry practices, we supplemented this analysis with review of secondary materials including: (1) media reports and articles (e.g., Business Week, The Wall Street Journal, CBS News), (2) industry (e.g., PhRMA) and association (e.g., AMA) reports and materials, (3) federal sources (e.g., FDA), and (4) scientific journal articles, books, and editorials. This supplementary evidence is also summarized in Table 24.1.