As a frequent flyer, I often have a few hours in the sky to ponder about big questions, such as: how can we make our clients pharmaceutical products more accessible? How can we save more patients’ lives and grow the business of our clients? Then it dawned on me that the answer may be closer than I thought: we simply need to take a page from the book of airlines.
The airline industry is well-known for its wide variety in pricing. The person next to you may fly the same route yet pay significantly less for an identical service. But therein lies the complexities of dynamic pricing, which gives airlines the ability to charge customers differently according to numerous factors. By making flights affordable for each segment of potential fliers, airlines create far greater accessibility for their services, and re able to tap a wider stream of revenues.
There are parallels to draw between pharmaceutical and the airline industries, particularly their high fixed and low marginal cost structures. For both, once the initial investment is complete (development of airplane/flight route or new medication), the additional cost of selling another unit is relatively low. This is how my fellow traveller was able to save so much money on that flight, the airline knew his propensity to pay and charged accordingly.
By using a differential pricing structure and segmenting consumer groups, pharmaceutical companies could drastically increase access to products by selectively lowering prices. In a report published by the National Center for Biotechnology Information assessing decades of research on patient treatment adherence, when healthcare expenditure becomes a financial burden there is a high risk to patient compliance. Expenditure is even more concerning for those patients treating chronic diseases, and the problem is compounded when that patient lives in a developing region like Laos, Cambodia, or Myanmar.
South East Asia is increasingly diverse, consisting of countries like Singapore and Hong Kong with their strong healthcare infrastructure and tax base as well as developing nations like Myanmar or Cambodia with minimal networks and consumer information. Of course discerning these key factors and using new, innovative strategies to determine the consumer propensity to pay over the entire region will not be easy, or without risks: Data availability of course, but also risks of parallel trade, difficulties with reference pricing, and supply chain concerns; all alongside national and international pharmaceutical regulations governing patient privacy, product transport, and more. And while valid, these can be overcome with hard work and the support of a partner with centuries of experience in Asia like my team at DKSH.
Another similarity of both these industries is their customer bases are split in their price elasticity. For whatever reason, sometimes price-inelastic pharmaceutical customers simply do not comply with their treatment. That means even when patients can afford their medication, they may not adhere for other reasons. How do we reach out to these patients to address their needs? Airlines accomplish this through a variety of customer reward programs and other types of engagement.
We all are familiar with the typical airline frequent flier program and associated perks, because they work. These programs create customer loyalty through special perks, a feeling of community, and price incentives, ensuring that the customer keeps coming back. Modelling some of these elements, DKSH saw great success implementing a hair loss product loyalty program and accompanying app in Taiwan. Patients were also issued program passports, which tracked their progress and lead to price incentives. It resulted in an 80% adherence rate, increased program enrolment, and less product switching. These types of programs are effective methods to increase customer loyalty, which in the pharmaceutical industry translates to adherence.
Creating community and frequent communication are cornerstones of typical frequent flyer programs, not unlike a recent pilot program in Taiwan aimed at increasing diabetes education and self-management of care. DKSH-supported nurses worked in hospitals, attempting to clear any and all obstacles to affordability and adherence. The team provided education and hands-on support for drug intake, medical reimbursement, insurance claim filing, and patient follow-up. Educating both patients and hospital staff, these nurses worked in a hospital for 12-40 months to empower others. A call center also supported this efforts, reminding patients about re-visits and answering questions. Again, the program is a success. Adherence rates more than quadrupled, along with sales. DKSH will continue to replicate this program and its success in other markets.
The pharmaceutical industry can learn a lot from airlines, and we have just begun. Loyalty programs can be a strong tool for adherence, leading to higher sales and healthier patients. Using differential pricing can dramatically increase affordability, and thus accessibility. I am passionate about changing the access to care in Asia and beyond. I strongly believe that differential pricing could become a leading solution.
For the past two years, Bijay Singh has successfully been leading the Business Development function, a substantial growth driver of Business Unit Healthcare at DKSH. As of July 1, 2017, he will be heading Business Unit Healthcare.