Dynamic Allocation of Pharmaceutical Detailing and Sampling for Long-Term Profitability

Montoya, Ricardo; Netzer, Oded; Jedidi, Kamel

doi:10.1287/mksc.1100.0570

Cited by 127 publications

(55 citation statements)

References 51 publications

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“…The values are greater for drugs that generate higher baseline sales and that are in the early stages of their life (Neslin 2001;Wittink 2002). It seems that ROI figures obtained at the individual physician Mizik and Jacobson 2004;Montoya et al 2010) are smaller than those from studies using aggregate data. It should also be noted that in some cases,the authors encountered negative ROIs pointing to an overspending on detailing (Chintagunta and Desiraju 2005;Mizik and Jacobson 2004;Wittink 2002).…”

Section: Return On Investment Of Spending Categoriesmentioning

confidence: 74%

“…Note that in countries such as Germany, it is even not allowed for commercial vendors to collect and sell individual physician or patient data. Individuallevel data, however, are necessary to study important questions such as the flow of information among a social network of physicians (Nair et al 2010) or the allocation of resources across physicians (e.g., Montoya et al 2010). Table 19.2 reveals that several models (36 %) consider a possible interaction among decision variables, e.g., marketing spending categories (e.g., Wittink 2002), other mix variables such as price (e.g., Narayanan et al 2004) and quality (e.g., Venkataraman and Stremersch 2007), and strategic decision variables such as time to market (Fischer et al 2005).…”

Section: Overview Of Model Approachesmentioning

confidence: 99%

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Marketing Spending Models

Fischer

2013

International Series in Quantitative Marketing

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To the surprise of many, pharmaceutical firms belong to the biggest spenders on marketing. The marketing spend-to-sales ratio may be as high as 30 %. Expenditures in the USA alone were $10.9 billion in 2009. Hence, there is a strong interest in understanding how effectively this industry spends its marketing money.The objective of this chapter is to review and synthesize the literature on marketing spending in the pharmaceutical industry. It reviews recent trends in pharmaceutical marketing. It looks at how marketing managers in the pharmaceutical industry actually arrive at spending decisions. The author further discusses models that describe how pharmaceutical demand responds to marketing expenditures. He summarizes findings on the responsiveness and profitability (ROI) of various spending categories.Another focus of the chapter is on normative applications of marketing spending models. Normative models help finding the right budget across spending categories, customer groups, and products. The discussion covers static and dynamic optimization approaches. The author identifies fields of promising future research from this synthesis of the extant literature. IntroductionThe pharmaceutical industry is one of the largest and most profitable industries From 1995 to 2002, the pharmaceutical industry was the leading industry in the USA in terms of return on sales. Pharmaceutical firms still ranked third, realizing a return on sales of 19.3 % in 200819.3 % in (Lundy 2010. Due to the long, complex, and highly regulated development process, firms needed to invest ca. US $ 1,318 million into a new drug in 2005 (EFPIA 2011). The market success of the new product, however, is uncertain. It depends on several factors, among them the entry order position (e.g., Berndt et al. 1995), perceived drug effectiveness (Venkataraman and Stremersch 2007), etc. As a consequence, marketing becomes crucial in order to maximize revenues over the life cycle of the new product. Since product development, distribution, and pricing are highly regulated across the world, pharmaceutical firms are not as flexible as firms in other industries in using these elements of the marketing mix.

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Section: Return On Investment Of Spending Categoriesmentioning

confidence: 74%

Section: Overview Of Model Approachesmentioning

confidence: 99%

Marketing Spending Models

Fischer

2013

International Series in Quantitative Marketing

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“…Montoya et al (2010) found that detailing had only a small impact on a physician in the short-term but had a much stronger, long-lasting effect on the physician's writing of new prescriptions. When detailing was coupled with the distribution of samples, an even greater retention strategy was employed.…”

Section: Literature Reviewmentioning

confidence: 97%

“…The impact of detailing on physicians' prescribing behavior --as Montoya, Netzer, and Jedidi (2010) have discovered --may not only occur in the short-term but also in a long-term. Montoya et al (2010) found that detailing had only a small impact on a physician in the short-term but had a much stronger, long-lasting effect on the physician's writing of new prescriptions.…”

Section: Literature Reviewmentioning

confidence: 99%

Pricing and Promotional Decisions of a Drug Manufacturer with the Presence of a Price-Volume Agreement

Zhang¹,

Gregorio²

2016

IJBA

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Physicians prescribe not only based on the health outcome and costs of a drug, but also based on their personal experience and preference for certain drugs. Thus, drug manufacturers invest a significant amount of promotional efforts to influence physicians, efforts including detailing, invited conferences, and sponsored research, etc. Since a third-party payer must pay for all claims for a drug that is covered by an insurance plan, the expense for the drug may be very high and uncertain. To control increasing drug costs and sales uncertainty, price-volume agreements have been proposed as a way to reduce the risk of higher-than-expected drug expenses. In such agreements, a drug manufacturer has to return a portion to the payer of sales exceeding a pre-specified volume threshold. In this paper, we investigated the drug pricing and promotional decisions of a drug manufacturer in the presence of a price-volume agreement under three different pricing scenarios. We found it not necessarily true that a high drug price or a high quality drug (with a high health benefit) reduces the manufacturer's motivation to promote. We also found that the existence of a price-volume agreement may not increase the drug price, but it does help control the promotional effort. Although a negotiated price may be lower than the price set by the manufacturer, a negotiation may not always be preferred because the manufacturer's profit is reduced by the negotiation and thus an agreement may not be reached under certain circumstances.

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“…They found that sampling stock positively affects the probability of a physician's adoption of a new drug. Finally, Montoya et al ( 2010 ) use a nonhomogeneous hidden Markov model and fi nd that while detailing may be more useful as an acquisition tool, sampling is more useful as a retention tool.…”

Section: The Effects Of Free Drug Samples On Prescription Choicementioning

confidence: 99%

Understanding Sample Usage and Sampling as a Promotion Tool: State of Industry Practice and Current Research

Dong

Xie²

2013

International Series in Quantitative Marketing

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In the United States, drug sampling has been one of the most important marketing practices adopted in the pharmaceutical industry. The U.S. pharmaceutical industry delivered an estimated $18.4 billion worth (in retail value) of free drug samples to doctors in year 2005 alone -more than all other marketing expenses combined. Although sampling, as a marketing tool, has been studied in the marketing literature, especially for consumer package goods; sampling in the pharmaceutical industry is very special due to the constraints that drug samples cannot be legally dispensed directly from the manufacturers to consumers. This creates a unique environment in which doctors play "gatekeeper and decision maker" role in dispensing samples to patients.In this chapter, we fi rst discuss the current industry practice of pharmaceutical sampling in detail, focusing on the following seven topics: (1) why samples are used; (2) the regulations governing pharmaceutical sampling; (3) sample decision support practice in pharmaceutical industry; (4) how drug samples are delivered to physicians; (5) how samples are consumed or dispensing pathway; (6) how samples are used in treating patients; and (7) the concept of "Source of Business" and how it is related to sample usage. We then discuss various sources of data that can be used

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Dynamic Allocation of Pharmaceutical Detailing and Sampling for Long-Term Profitability

Cited by 127 publications

References 51 publications

Marketing Spending Models

Marketing Spending Models

Pricing and Promotional Decisions of a Drug Manufacturer with the Presence of a Price-Volume Agreement

Understanding Sample Usage and Sampling as a Promotion Tool: State of Industry Practice and Current Research

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