This chapter examines drug delivery from a market and marketing perspective. It deals mainly with the end market for drug delivery prescription-only medicines (POMs). The market for over-the-counter (OTC) medicines will not be discussed in detail, but differences between it and the prescription market will be highlighted. The chapter also touches on business-to-business marketing that has been traditionally carried out by specialist drug delivery companies, which offer their technologies for licensing to other companies.

With respect to the end market for POMs, the following will be discussed:

•  The characteristics of the global market for pharmaceuticals, its segmentation, and how it differs from that of consumer goods

•  The drug delivery market—variations in the way it is defined, its size, and other characteristics

•  The need for drug delivery products within the global pharmaceutical market and how they benefit patients, doctors, and other stakeholders

•  The role of drug delivery in product development, product life-cycle management, and defending branded medicines against generic competition

•  The trends within the global pharmaceutical market and how they impact on the development of drug delivery products

•  The factors that make a successful product

With respect to business-to-business marketing, the following questions will be considered:

•  How do companies market drug delivery technologies and drug delivery products for licensing to other companies?

•  How do pharmaceutical and biotech companies evaluate these technologies and products?

For the purpose of this chapter, drug delivery products are further subdivided into two separate areas (Bossart 2005):

•  Drug delivery–enabled products: These are products containing drugs that could not be developed by a particular route without the use of drug delivery technology, e.g., protein delivery to the lungs and formulations for silencing RNA.

•  Drug delivery–enhanced products: These are products containing drugs that can be delivered by a particular route, but drug delivery technology has been used to improve their delivery characteristics, e.g., sustained-release formulations for the oral route.

All markets can be broken down into segments with the same characteristics or customer profile. The customers within these segments are therefore likely to have the same needs and preferences. Companies use segmentation to characterize markets and identify gaps within them. Products/services can then be developed to meet the needs of particular segments. The products/services are then advertised, promoted, distributed, and sold through channels best suited to the needs of the target segment. For example, in the 1990s, low-cost airlines revolutionized short-haul air travel in Europe when they identified a need for cheap no-frills flights within the target geographical segment, which they sold via the Internet.

Other stakeholders in the market include governments, regulatory bodies, the European Union (EU), the World Health Organization (WHO), patient advocacy groups, wholesalers, and, of course, the pharmaceutical industry itself (research-based companies and generic firms). Political stakeholders, such as governments, the EU and the WHO, are influential, as the maintenance of good health and the effective treatment, management, and prevention of disease are critical factors to both individuals and society as a whole. At a national level, the availability and affordability of effective and safe medicinal products are issues that concern politicians and voters alike.

Pharmaceuticals differ from consumer goods in that they must receive marketing authorization prior to their launch onto a particular market. In order to receive this authorization, companies must demonstrate that their products have efficacy, are safe, and meet the appropriate quality standards throughout their shelf life. Importantly, the benefits of taking the medicine must outweigh the risks. Developing a new therapeutic entity and gaining market authorization takes on average 12–13 years from the first synthesis of active substance (EFPIA 2013). In 2012, the average cost of this process was estimated to be $1506 million in 2011 dollars (Mestre-Ferrandiz et al. 2012). This figure includes the cost of drugs, which failed in the development (for every 10,000 molecules at the discovery stage, only 1–2 will reach the market), and the cost of capital.

The length of time taken and investment required to develop pharmaceuticals is therefore much higher than typical consumer products. It also means that there is a much shorter time to recoup development costs and obtain a return on investment before patents protecting the active molecule expire and generic versions enter the market. In order to compensate partially for the time lost during regulatory review of the first application, certain countries and regions, e.g., United States and the EU, allow companies a period of additional patent protection for new molecular entities (NMEs). The rules on patent-term extension (US and EU) are listed elsewhere (35 U.S. Code 156; Europa 2009a).

The sale and/or supply of POMs to patients requires physician preapproval in the form of a valid prescription, and the dispensing of medicines is mainly restricted to pharmacies (hospital and retail). In some countries, doctors are also allowed to fill prescriptions especially if the number of pharmacies is limited. Most pharmacies are retail. However, mail-order pharmacy is well established in the United States and Canada, but in some other countries, it is in its infancy or is forbidden.

For prescription-only drugs, the requirement for a prescription and the limitations on the place of sale make the pharmaceutical market very different from that of consumer goods. For example, it is not possible to buy direct from pharmaceutical wholesalers.

Restrictions on the place of sale and supply of OTC medicines vary from country to country. For example, in countries such as Germany and Austria, sales of OTC medicines are mainly restricted to registered pharmacies, while in others like the United Kingdom and Ireland, some OTC medicines can be sold in nonpharmacy outlets, e.g., supermarkets, but the purchase of others is limited to pharmacies.

Another factor differentiating the pharmaceutical market from that of consumer goods is the regulatory and industry code of practice controls placed on the promotion of medicines (Rollins and Perri 2014).

Advertising of POMs to the general public (commonly known as direct-to-consumer [DTC] advertising) is currently banned in all countries around the world with the notable exceptions of the United States and New Zealand. Therefore, in most countries, pharmaceutical companies target their promotional efforts at physicians. This has been traditionally carried out through scientific presentations and posters at conferences, through sponsored continuing professional development for physicians, and by teams of sales representatives who “detail” the doctors on the benefits and risks of the product and provide them with free samples. In the age of the Internet, social media, and smartphone applications, new technology is being used to promote pharmaceuticals to doctors and, where permissible, also to patients. Another effective way of marketing pharmaceuticals are disease awareness campaigns, in which no specific product is mentioned, but the common symptoms, the importance of early diagnosis, and treatment are highlighted, and people experiencing these symptoms are advised to consult a physician. These campaigns are important as they promote discussion of the disease and its treatment, facilitate timely diagnosis, and, together with other promotional efforts, such as physician detailing, impact on sales. They also, to an extent, circumvent the ban on direct advertising of prescription medicines to patients. For example, in Austria, there have been disease awareness campaigns on chronic obstructive pulmonary disease and various vaccines on television despite the direct advertising of prescription medicines being forbidden.

The controls on the promotion of medicines, whether they require a prescription or not, are stricter than for consumer goods. TV, radio, print, or Internet advertisements for prescription (where allowed) and OTC medicines must make the patient aware of both the risks and the benefits and/or inform them where they can access this information. In addition, all claims made during detailing or any form of advertising or promotion must be backed up by data and be in line with the regulatory-approved product information, and firms cannot actively promote use of the medicine for nonlicensed indications (the so-called “off-label” use). DTC advertising in the United States is checked and monitored by the FDA’s Office of Prescription Drug Promotion (FDA 2014b).

TV commercials account for most of the company spending on DTC advertising, but recently there has been an increase in the use of the Internet. In the United States, pharmaceutical company spending on DTC advertising reached a peak of over $5.4 billion in 2006 (quoted in Ventola [2011]) as a result of heavy TV promotion of small-molecule blockbuster drugs prescribed by community doctors. Since then, spending has declined due to former blockbuster drugs going off-patent and losing market share to generics, which are not advertised. In addition, a significant proportion of medicines approved over the last 10 years have been for diseases with small patient populations and/or otherwise fall into the Specialty Pharma segment (typically prescribed in hospital/specialist clinics) making DTC advertising less relevant. Despite this, spending has recently started to rise and in 2014, $4.5 billion was spent (excluding digital advertising) on DTC adverts, an increase of almost 21% on 2013 (Dobrow, 2015). The use of DTC advertising is still controversial. For a full discussion of the pros and cons of DTC advertising, the reader is referred to reviews by Rollins and Perri (2014), Donohue et al. (2007), and Ventola (2011).

In recent years, as a result of several scandals, the promotional practices of pharmaceutical companies have come under increased scrutiny by regulatory bodies and the media. In the United States, this has resulted in regulatory changes and a tightening of the voluntary code of practice of the Pharmaceutical Research and Manufacturers of America (PhRMA 2008), a body representing the research-based pharmaceutical industry. Despite the restrictions on the promotion of medicines, pharmaceutical companies still have to position their product within a market segment and develop a brand and brand image. A full discussion of branding and the development of brand awareness and loyalty, and how companies carry out product positioning and launch and promote product adoption, can be found in the reviews by Rollins and Perri (2014) and Landsman et al. (2014).

For consumer goods, price is a critical component of the marketing mix and in the positioning of a product within a market. For example, higher prices are often associated with products of better quality and added value. Prices for many consumer goods can be said to be elastic in that as their price increases, demand falls. Prices are also affected by the cost of developing, manufacturing, and selling the product, including indirect fixed costs such as rent for facilities. The greater the cost of developing, manufacturing, and selling the product, the higher the price, as companies at the very least have to cover their costs. The company’s business strategy with respect to a particular product is a further factor. This may change during the product’s life cycle, e.g., special offers to entice consumers to buy a newly launched product and/or to gain market share, a pricing strategy that maximizes profit for well-established products facing little competition. Other factors that affect the price include the size and characteristics of the target market segment, e.g., budget or luxury goods; the relative advantages of the product compared with its competitors; the number of products competing within a target market and how differentiated the products are from each other; the type of marketing or distribution channel, e.g., independent shop versus Internet; and the relative bargaining power of purchasers and suppliers, e.g., large purchasers have the power to negotiate better prices and terms and conditions. The prices of OTC medicines sold directly to patients obey these rules to a greater extent than POMs. This is because the patient is the sole payer.

The pricing of prescribed medicines is complicated by the fact that the majority of medicines in many countries are not paid for in full by patients, but through a process of reimbursement by third-party payers. Third-party payers include governments (in the case of state-funded health-care systems/programs), private health insurance companies offering cover for prescription medicines, and pharmacy benefit managers (companies who manage the drug claims, and benefits aspects, of health-care insurance plans).

The pricing and reimbursement of POMs is variable and complex, as reimbursement policies and market conditions vary from country to country (Europa 2013; Rollins and Perri 2014). However, a number of general points regarding pricing policies can be made. Typically, the pharmaceutical company sets the price of the medicine, but third-party payers influence it through various cost-control mechanisms. The company’s pricing strategy depends on whether the product is a patented originator product, an originator product that is off-patent or about to go off-patent or a generic. The price of an originator product will also depend on the stage of its life cycle, while those for generic products tend to be purely market driven. When pricing an originator medicine, companies need to consider development and manufacturing costs (e.g., biopharmaceuticals cost more to produce than small-molecule drugs), the innovativeness of the product, its key selling points and its advantages over existing therapies (including nondrug options), and the level of competition in the same therapeutic area. Pricing of innovative medicines is, in general, inelastic, i.e., a price increase does not influence market demand. However, the degree of price elasticity depends on the extent of competition (other molecular entities and/or generics) within the therapeutic segment, and the ability of a company to set a particular price may be limited by the pricing of other products already on the market. Geography also impacts on the prices that pharmaceutical companies can charge, due to local market conditions and differences in the rules and regulations affecting reimbursement. Price differentials between countries can result in the importing of medicines from countries where the price is low, a practice known as parallel importing. Where this exists, it creates competition and a downward pressure on prices in the importing country despite the owner of the originator product being the same in both countries. Pricing can also vary depending on the customer, with hospitals or other large customers being able to negotiate a lower price than smaller ones. Pricing decisions will be influenced by whether the medicine is for one-off, short-term, or chronic therapy and the frequency of administration. The place of administration—community, general hospital, or specialist center—can also affect price, with products administered predominately in specialist centers being typically able to command a higher price than those used in general practice. Pricing of drug therapies is increasingly becoming the subject of political and public debate. Two recent examples are the price of Sovaldi, a game-changing therapy for the treatment of hepatitis C but which costs $84,000 for the 12-week course making it unaffordable for many patients and its use in programs like Medicaid severely restricted (Palmer, 2015). Another example is Daraprim, a treatment for toxoplasmosis encephalitis, originally developed over 60 years ago whose price was increased by over 5000% after it was acquired by Turing Pharmaceuticals (Thielman, 2015).

For medicines containing NMEs, companies only have a limited time period to recoup product development costs and make a profit before patents expire and market protection is lost. After this, generic versions of the product can enter the market and impact adversely on the originator’s market share. Pricing by manufacturers must balance this against the willingness of payers and patients to bear the costs of the medication, the need for access to affordable medicine, the price of competing products, and internal factors such as production capabilities and business targets for revenue and profit. Sometimes a higher price can be justified if pharmacoeconomic analysis shows that the medicine reduces the overall cost of therapy, e.g., shorter period of treatment, or enables community care as opposed to hospital treatment. The success of such a strategy depends on whether the payer is focused on the cost of the medicine or the total cost of treatment and the amount the patient has to contribute. If out-of-pocket expenses are too high, patients may simply decide not to have their prescriptions dispensed or demand cheaper therapy.

Product sales of patented proprietary medicines are highly dependent on the product being approved for use, and reimbursement, by third-party payers. Countries and organizations within countries have different methods of determining whether a product can be reimbursed, to which extent the costs will be refunded, and the circumstances under which the product can be used. In countries with extensive public health-care systems, e.g., United Kingdom, Germany, and Austria, reimbursement decisions are taken principally at a national level. For example, the UK’s advisory body, the National Institute for Health and Care Excellence (NICE) issued guidance in 2006 advising against the use of inhalable insulin (except under special circumstances), on the grounds that the benefits of avoiding injections did not justify the higher cost of the new product; the product (Exubera) was later withdrawn by Pfizer due to poor sales. In others, e.g., United States, where there is more extensive use of private medicine, decisions on reimbursement are made at an individual third-party payer level, and these may differ between health-care insurance plans and between private and state-funded schemes such as U.S. Medicaid. Ways that the use of prescription medicines can be controlled by third-party payers include inclusion/exclusion of products in drug formularies or preferred drug lists, the placing of medicines into different tiers based on the extent of reimbursement and required patient contribution, restrictions on the use of the medicine, and/or the requirement that the prescribing of certain medicines must be preapproved by third-party payers. Such restrictions tend to affect new and expensive medicines more than cheaper and well-established products even if the latter are still protected by patents. Whenever possible, pharmaceutical companies negotiate with the responsible authorities for state-funded health care, employer, and private prescription insurance benefits, in order to agree prices/rebates and conditions, which minimize restrictions on the use of their products and maximize sales. For some state-funded systems, for example, Medicaid rebates are mandatory. However, it is important to note that prices for reimbursement purposes are often different than the actual amounts paid by the wholesaler, hospital, or pharmacy as a result of discounts and rebates.

In recent years, health technology assessment (HTA) (Sorenson et al. 2008; Arnold 2009) has been increasingly used to assess the cost and benefit of new medicines compared with existing treatments, prior to recommendations being made on their use and reimbursement. Countries like Germany have taken the pharmacoeconomic argument one step further and introduced a system of value-based pricing, in which newly approved products containing a new therapeutic entity or a new combination of actives can be priced higher than competing therapies based on the added benefit they bring to patients (AMNOG 2010). The price of products deemed to be without added benefit are based on comparative therapies. Both HTA and value-based pricing have resulted in pharmaceutical companies having to present the pharmacoeconomic case for their products and in some cases modify their pricing strategies through patient access schemes in order to ensure that their products will be used in a particular market. For examples of such arrangements for the NHS in England and Wales, see the NICE website (NICE 2014).

The exact definition of a drug delivery product is open to interpretation. From a formulation viewpoint, a drug delivery product can be described as one that has been deliberately designed to modify or localize the release and/or distribution of a therapeutic entity and/or improve its bioavailability in a manner that could not be achieved if it were formulated as an immediate-release solid dosage form, a simple solution, suspension, cream, or ointment. For this reason, the term “drug delivery” has been traditionally associated with the use of formulation technologies to enhance or enable delivery of therapeutic molecules and, in particular, the use of polymers, lipids, or specialized excipients such as cyclodextrins and permeation enhancers. Therefore, the term has been associated with dosage forms, such as sustained-release tablets, implants, nanoparticles, liposomes, and technologies which enhance the solubility or permeability of drugs. Similarly specialized formulation and device combinations such as dry powder inhalers, iontophoretic patches, and ocular inserts would typically be classed as drug delivery products.

However, differences in the type of product included in the analyses are not the only reason for varying estimates (Market Size 2014). Market research is not an exact science, especially on a global basis. Variations in market estimates can occur due to factors such as difficulties sourcing certain data, differences in market research methodology, the exact time period evaluated, and the need to make assumptions. Despite this, all of the recent data point to the global drug delivery market being worth at least $182 billion and having a growth rate similar to that of the total market for prescription pharmaceuticals.

The drug delivery market is typically segmented by therapeutic area, geography, and/or route of administration. With respect to therapeutic area, drug delivery products are commonly used for relief of pain (sustained and breakthrough pain relief—multiple formulation types), in the central nervous system (sustained-release, orodispersible formulations, and depot injections), for type 2 diabetes (sustained-release depot injections [Bydureon^®]) and fatty acid-peptide conjugate [Victoza^®]), for prostate cancer (sustained-release depot injections), and in cardiovascular segments (sustained-release oral dosage forms). The treatment of asthma and other respiratory diseases is almost totally reliant on the use of inhaler technology, while drug delivery devices such as pens and autoinjectors have simplified the lives of type 1 diabetes sufferers.

Drug delivery products meet market needs in a number of ways. These needs can be viewed from the standpoint of the main stakeholders involved in health care. Patients, doctors, and other healthcare professionals want products that are more efficacious, safer, and more convenient to use than those already on the market. Doctors in particular desire a broad palette of therapeutic options so that they can tailor therapy to the needs of individual patents. In addition, patients want products with a pleasant taste, which are nongritty and are easy to swallow. Reductions in dosing frequency and improved ease of administration or taste are often accompanied by an improvement in adherence to the medication regimen, which, in turn, has a knock-on effect on therapeutic effectiveness. The same can be said for medicines with an improved side-effect profile either over the original product or others in the same therapeutic class. The price of the new therapy is also important for OTC and POM products in cases where patients have to make a large copayment, or a contribution, which is a percentage of the total price.

Payers want therapies with greater effectiveness and safety or that aid adherence to therapy, as this should reduce the total time of treatment and reduce the likelihood of adverse effects. Nonadherence with chronic medication is currently thought to be around 50% and this costs the U.S. health-care system alone between $100 billion and $289 billion annually (Viswanathan et al. 2012). Unsurprisingly, the issue of nonadherence is of importance to payers, and although the reasons for it are multifactorial, it has been repeatedly shown that simplifying the dosage regimen facilitates compliance with therapy (Laliberté et al. 2013; Medic et al. 2013). Payers also want medications that can be self-administered or administered in an out-patient setting, to reduce the need to treat patients in hospital, which is very expensive. Often drug delivery approaches are required to develop such formulations.

The overriding goal of early development is to initiate animal, toxicology, and later clinical testing as soon as possible, in order to get an initial readout on a new therapeutic entity’s safety and pharmacokinetics. Typically, pharmaceutical scientists employ as simple formulations as possible (solutions, suspensions) in order to achieve sufficient drug exposure during early development. Even in later clinical stages, companies tend to develop simple immediate-release formulations (tablets/capsules or injections) in order not to add complexity to the development process. More sophisticated formulations and drug delivery approaches are often only used for these “first-generation” formulations if necessary, e.g., to achieve adequate bioavailability and/or stability of the compound.