Marketing in the pharma industry can be very tricky and complex at times. The competitive company spends millions on launching a drug.
Merck: Vioxx | From its most popular drugs are the most vulnerable to criticism, intense regulatory measures and lawsuits partly because of being used on a large scale. These drugs although generate major portions of revenue for the company but they can also cause major harm to the company’s reputation, revenue, and credibility. So, an efficient marketing strategy is very essential for marketing their drug.
Marketing a Drug can involve a lot of aspects like the advertisement campaign for doctors and Patients, Side effects, potential risks clarity, market value, and consideration of the possible consequences associated with its use. Overlooking one factor can cause a major marketing disaster for the company and land it in endless lawsuits and government litigations. Analysis of the Vioxx marketing strategy, a blockbuster drug introduced by Merck would help understand the importance of the marketing strategy used by the company.
Merck and Vioxx case study
Merck being a leading pharmaceutical company was dedicated to run the market with blockbuster drugs with the presence of phenomenal Research and Development Branch for innovation. Its Labs had introduced blockbuster drugs for conditions like osteoporosis, AIDS, hypertension and High Cholesterol.
The Research and development wing was a hallmark of Merk and Edward M Scolnick, the president of the Merck Research labs and Lead researcher helped launch 15 blockbuster drugs in the market, with a couple hundred scientific publications to his credit grew a considerable reputation with Food and Drug Administration (FDA) and approval Applications for Merck’s drugs went very smoothly as the company produced excellent Research-backed Documentation and one of those approvals was of Vioxx that lead the company to a period of Phenomenal Growth and later, its downfall.
Vioxx was an arthritis drug that earned the company its major revenue piece being a blockbuster medicine in the market for its popular use among arthritis patients. Initially discovered in Merck Labs, the drug was said to reduce pain and inflammation without the side effects of ulcers or gastrointestinal bleeding because it belonged to the class of cox-2 inhibitors. After Being approved by FDA over smooth trials the drug did exceptionally well in the market by being the fastest and biggest drug of that time.
Merck resorted to Direct-to-consumer marketing strategy commercials that cost the company $500 million and in return got an annual sale of $2.5 billion but little did the company know that the strategy was going to turn into the biggest disaster. Because after several years of being a popular Arthritis medicine, the drug’s credibility dropped as it started to report cases of causing cardiovascular diseases in patients.
It was a major hit to the company’s reputation especially with all the commercials showing Vioxx to be a promising drug. The case was a major wakeup call for the Pharma industry to devise a carefully designed marketing strategy considering Vioxx’s phenomenal growth, Rapid fall and Public health factors related to it for the pharmaceutical drug industry.
Well. It would be wise to say that there were a few warning signs that predicted this marketing fiasco and could’ve been managed if addressed timely. The first indication was upon the early research into Cox-2 inhibitors(which Vioxx is made of). It was discovered and conveyed all over the marketing and academic fields that using Cox-2 Inhibitors may cause cardiovascular dysfunctions. However, disregarded by Merck, the second warning sign was quite evident.
The company’s extensive study showed three times more cardiovascular problems in patients taking Vioxx as compared to other drugs studied. Minimizing the results of that study, Merck pacified the situation by stating that the comparison was not balanced and hence continued with the drug supply in the market. There were also around a couple of hundred lawsuits filed for the adverse side effects of the drug that could have given an indication.
But, the last nail in the coffin was the study that the company did to specifically check the cardiovascular risk of Vioxx compared to a placebo and after the results showed high risk of heart attack and strokes among patients, the company finally pulled out Vioxx from the Market starting a plethora of controversies. The company suffered greatly on financial as well as reputational fronts and started a debate for the credibility of marketing strategies used by other Pharma companies.
The case was high profile and a controversial one as the drug provided the $2.5 billion annual sales by 2003 and there was a lot of hue and cry over keeping or recalling it from the market. The first argument suggested it should have been updated with the FDA and not recalled from the market as it was efficient since the drug was successful with the majority of patients in relieving pain. The other argument suggested that the recalling of the drug was based more on a company’s Ethical Responsibility than the effectiveness of the drug.
This case also received a lot of criticism over the deliberate negligence of Merck and the lenience of the FDA by ignoring the warnings that predicted cardiovascular risk among patients. Eric Topol, Chairman of the Cardiology at Cleveland clinic went so far as to state that Merck valued sales over the public health otherwise it would have recalled the drug from the market-based on three earlier studies that showed heart disease risk in their results.
As if these findings were not enough, Merck should have been alert by the 400 lawsuits it got from the Vioxx patients before the recall. Critics argued that all these warnings were ignored resulting in this public health Disaster.
The arguments were presented in the defense of the product as the excessive lawsuits and litigation was carried after the recall of the Drug to destabilize the industry. Firstly, it is a known fact that every drug used for a longer interval by patients in the pharma industry has some side effects and Vioxx was no different. The relative risk of benefits and dangers of the drug was analyzed as only 1.5% of people were at risk of Heart disease and it was wrong for the majority of patients who benefitted from it as they were no longer able to use the drug for their benefit.
As the 2007 settlement of the Vioxx issue resulted in a $4.85 billion payment by the company over litigation and lawsuits filed against it. It also paid an additional $950 million to the US government over pleading guilty for the illegal promotion of the Drug and for deceiving the US government over its safety without ever taking responsibility for the Disaster. This, unfortunately, wasn’t enough for bringing Merck its lost glory back.
Merck’s marketing strategy
Pharma drug industry is very competitive, the cost of making a drug is only recovered with profits by the company if the drug stands blockbuster or next to blockbuster in the pharmaceutical market. With increasing regulations on drugs, patent expirations and decline in revenues, the trends for innovation or drug discovery in the Pharma industry have gone slow-paced. Merck, a Pharma giant, faced these problems but in sort, time was able to tackle them.
For example, One way it used was to merge innovative smaller organization, like Merck has benefitted a great deal by a merger to buy Schering-plough that helped the company to reaffirm its research endeavors, diversify its market and helped it to reach to 140 countries of the world having second largest market shares in Pharma industry.
The Second Problem is of Patent expirations of drugs, as expected by 2026 all of Merck patented Drugs are to expire and the company is already facing 3100 lawsuits for its famous Osteoporosis drug, Fosamax. As its strategy to stay ahead and regain its reputation in research-based drugs, Merck is ever more focused on the research-oriented patenting to increase its number of patents in diseases like Osteoporosis, Insomnia, and cancer-causing virus vaccination.
All of these efforts are done by Merck to regain its glory and also expand the market by partnering with smaller innovative organizations and license compounds that are both market and research-based.
The Mistakes of Merck in the Vioxx Recall Case
Firstly, Merck should have paid more heed to the early signs of Vioxx’s Cardiovascular effects and the initial lawsuits by patients. Moreover, it should have resorted to extensive research for side effects and collaborated with top researchers and taken the FDA in confidence for devising liable solutions.
Secondly, the delay for the recall was not irresponsible and understood completely since the benefits of the Drug outweighed the minor risks (1.5%) for Heart disease and it was indeed the blockbuster medicine for the company and they wanted to give it a chance as it takes considerable funding to launch one in the market.
One possible mistake was that the recall decision was a little early and unilateral. The decision should have had considerable FDA involvement whether to recall the drug. The Drug pulls out should also have been based on the utility of the drug by Benefit vs Risk analysis with patients. The drug could have continued in the market if resorting to the strategies of full Risk disclosure, close monitoring of patients and toning down of the marketing campaign instead of recalling it completely from the market.
The marketing campaign should also have involved full disclosure of the current situation of the drug instead of suddenly pulling out the drug from the market. Like Merck did with Fosamax, an osteoporosis drug for women, that $2.7 billion in 2003, partly because of its marketing strategy of Public-awareness campaign suggested by the lead researcher at Merck Laboratories but it eventually faced a lot of lawsuits for its side effects and under the leadership of Scolnick and his timely effort of contacting doctors and providing supportive data to the FDA, the drug was saved to continue in the market with a warning label.
Way forward for Merck
The higher the company is on the Industrial scale, the severity of the crisis increases along with its consequences. It should be managed by the administration in a way that instead of being reactive, the company should have a proactive approach towards devising a strategy to adopt in times of crisis instead of waiting to find one in times of chaos.
This also highlights the importance of the Leadership decision making, understudies to be trained to take over key jobs in times of absence of Higherups and react appropriately in panic situations are very important for the effective functioning of higher firms as Scolnick helped saved Fosamax for Merck by timely efficient decision.
Merck should be efficient enough to take early signs of drugs seriously in its early stage to avoid leading it to further deteriorations. Although approved by the FDA and backed by research, Vioxx’s side effects could have been researched extensively before launching its aggressive $500million marketing campaign which made it even more difficult for the later amendments.
The risk of litigation is becoming more common for Pharmaceutical firms and hence every company including Merck should have some financial and insurance reserves in consideration for crisis. The effective and timely decision making would have saved the firm billions of dollars of lawsuits. The rapid recall of Vioxx and disregarding of the early signs of the Side effects was a thoughtful decision as its substitute, Celebrex, is still suffering a great loss in hopes of staying in the market.
The other important thing for Merck to consider is to foster trust in the market by maintaining a positive image of the company. With the loose lobbying in the Regulatory authorities and business rivalries over the cost ineffectiveness, the Pharma industry has lost its image and is considered to be profit-mongering and uncaring of its patients. Merck is expected to raise its trust by reverting to its Research-based strategy to have trust in the market.
Although Merck received a lot of criticism to introduce the drug ignoring its potential risks and delaying to recall it from the market even after the initial warning signs. But it is also praised for its High ethical standards to pull out its blockbuster revenue-generating drug from the market where the competitor, Celebrex, is still in the market. The Vioxx fiasco leaves a roadmap for other pharmaceuticals to proactively design their marketing strategies to avoid such problems by paying attention to every stage of the Drug development and built trust among the pharma industry.