Case Study: Competitive Advantage at All Costs - An Inside Look at Five Pharmaceutical Industry Practices Which Undermined Customer Relationships

Abstract

This study attempts to answer the question: Over the past 35 years, what competitive business practices instituted by the pharmaceutical industry intended to drive increased competitiveness and business efficiencies had the unintended results of increasing the publics’ general distrust and dissatisfaction with the industry? This paper takes a unique perspective by analyzing five apparently disparate business practices designed to improve business performance but which also increased customer distrust and dissatisfaction of the industry. Specifically the five business practices were:

1. Reliance on pharmaceutical marketers with MBAs but limited or no practical pharmaceutical selling experience.
2. The loss of independent pharmacies and pharmacists as customers due to the rise in national pharmacy chains.
3. Purchase and use of physician-specific prescribing data
4. Use of direct to consumer advertising for prescription drugs
5. Delaying generic competition and providing industry support for the Affordable Healthcare Act in exchange for U. S. government prohibition against the importation of low cost prescription drugs into the U.S. and prohibiting negotiated Medicare drug prices.

The paper uses a case study methodology. The results section details the practices reviewed in this case study and suggests they did improve competitiveness and efficiencies, but also contributed to erosion in customer confidence which includes key customer groups: physicians, pharmacists, patients and payers. Consumer groups such as American Association of Retired Persons (AARP) are focusing both financial resources and membership efforts to advocate for changes in pharmaceutical industry pricing and marketing practices. To see if this phenomenon has occurred in other industries, it was observed that the airlines, fast food and information technology industries also pursued greater business efficiencies. The discussion section suggests they too experienced and continue to experience significant customer relationship issues resulting from the drive for greater efficiencies, including government intervention to address customer concerns. The conclusions review some of the limitations of this study and suggest areas for additional research.