Finance: Promotional Productivity

Blair Gibson

Put your cash where it's doing the most good. Although that seems like a simple idea, most pharma strategists don't allocate promotional resources effectively—they overinvest in some brands, and underinvest in others. Given that top companies have several hundred drugs each, all with different growth rates and market shares, these are certainly complicated decisions. But executives can better direct their resources, and make smarter investments, by using portfolio analysis.

While Pfizer, Eli Lilly, and Bristol-Myers Squibb use portfolio analysis, it is generally underused in the industry: Less than half of the top 20 firms integrate it into their annual planning process. As such, companies continue to throw money into drugs that are rapacious cash eaters and fail to move the market-share needle.

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New research from Cutting Edge Information (CEI) shows that 80 percent of pharma companies feel resource allocation is the strongest challenge to brand success. "A chief frustration among brand managers is senior management's apparent willingness to underfund several developing products rather than back a few high-potential and high-performing drugs," says CEI president Jason Richardson. "This practice fiscally handcuffs brands and weakens whole portfolios' commercial viability."

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