Donna and Akin discuss how a manufacturer’s channel strategies affect product access and commercial success. Click here to download Changing Channels, a complimentary ebook from AmerisourceBergen.
Read on for their insights.
Three Misconceptions about Channel Strategy
By Donna Gilbert and Akin Odutola
It’s important that any brand team speak with channel stakeholders who are experienced in delivering the right product to the right patients. The insights gleaned from these conversations will help a manufacturer evaluate their channel strategy and ultimately understand common distribution and customer channel misconceptions.
To learn more about channel strategy and its impact on product access and commercial success, download our ebook, Changing Channels.
Here are three key misconceptions to consider.
Misconception 1: Availability is the same as access.
We’ve all heard the old adage, “Less is more.” In the case of specialty pharmacy, there’s a myth that a limited network will allow manufacturers greater control over their product’s distribution. These networks can provide greater immediate line of site for manufacturers, but what if you knew that a restricted or closed network could significantly impede access to your product?
Manufacturers should think more deeply about their channel strategy and ensure access at all appropriate channels to minimize complexity for patients and healthcare providers. While availability is an important component of product access, just putting a product on the market isn’t enough anymore. Patients have higher expectations of their treatments, and demand from providers to obtain specialty therapies is growing as a result. Conversely, manufacturers are facing challenges for their distribution strategies as a result of small patient populations, product storage risk and more.
Savvy manufacturers begin evaluating their channel strategies with their distribution partners as far in advance as two years pre-launch. Partners can help anticipate the challenges that can arise and develop a channel strategy that will best mitigate those potential pitfalls in both the short and long-term. Through these partnerships, manufacturers can understand their customers’ experience, which will ultimately help them gain a better understanding of how their channel strategies help or hinder healthcare providers’ ability to bring the full benefit of pharmaceutical innovation to their patients.
Manufacturers should think more deeply about their channel strategy and ensure access at all appropriate channels to minimize complexity for patients and healthcare providers. While availability is an important component of product access, just putting a product on the market isn’t enough anymore. Patients have higher expectations of their treatments, and demand from providers to obtain specialty therapies is growing as a result. Conversely, manufacturers are facing challenges for their distribution strategies as a result of small patient populations, product storage risk and more.
Savvy manufacturers begin evaluating their channel strategies with their distribution partners as far in advance as two years pre-launch. Partners can help anticipate the challenges that can arise and develop a channel strategy that will best mitigate those potential pitfalls in both the short and long-term. Through these partnerships, manufacturers can understand their customers’ experience, which will ultimately help them gain a better understanding of how their channel strategies help or hinder healthcare providers’ ability to bring the full benefit of pharmaceutical innovation to their patients.
Misconception 2: Innovation ensures product success.
When a manufacturer makes a significant investment to develop an innovative product, it seems logical to want to extract as much value as possible while insulating the product from any challenges that could affect the ROI. For this reason, manufacturers are often tempted to disrupt the supply chain and might neglect to consider how much disruption their customer is willing to tolerate. When a patient is forced to move from their preferred site of care—and their provider away from their regular workflows—there can be unintended consequences that make practical care delivery more complicated.
Consider this example: a product, previously on clinical trials at a large, academic health system, moved through the approvals process and was brought to market on a limited distribution network. The network excluded the health system—and its patients—from accessing the product post-launch. So, while the network was—on the surface—easier to manage for the manufacturer, it created additional hurdles for patients.
Though these consequences can be unintended, they should be an important part of product commercialization decisions.
Consider this example: a product, previously on clinical trials at a large, academic health system, moved through the approvals process and was brought to market on a limited distribution network. The network excluded the health system—and its patients—from accessing the product post-launch. So, while the network was—on the surface—easier to manage for the manufacturer, it created additional hurdles for patients.
Though these consequences can be unintended, they should be an important part of product commercialization decisions.
Misconception 3: The distributor is just the middleman.
Distributors—just as manufacturers have—are evolving their services to help advance the growing specialty pipeline. The days of simple pick, pack and ship are gone. In today’s dynamic market, distributors handle financial management, supply chain security, customer experience and data intelligence. As product value increases, so does the value of the distributor and the services they provide.
To contextualize the value of distribution services, consider that both a $5 generic drug and a $20k-per-vial branded product could fit in the same package and incur the same shipping cost based on weight. Should a manufacturer invest more to insure the high-value product? The more expensive the product, the more it logically costs to handle as product loss risk increases. Manufacturers must look beyond a class of drug to additional considerations around access and value.
The distributor’s role has value beyond management of high-cost receivables as well. A distributor can take on financial risk, both in terms of the logistics of a lost or broken product, as well as AR when a customer can’t pay on time. Distributors already are scaled and staffed to handle many other facets of product management, so manufacturers can focus on developing the next life-saving product.
Channel strategy is nuanced and a manufacturer’s decision can have wide-ranging implications for patients and providers. Thus, manufacturers need to consider channel strategy as part of the entire patient journey and begin decision making at the outset of clinical trials—or even before—to ensure access and availability that can influence positive outcomes for patients.
To contextualize the value of distribution services, consider that both a $5 generic drug and a $20k-per-vial branded product could fit in the same package and incur the same shipping cost based on weight. Should a manufacturer invest more to insure the high-value product? The more expensive the product, the more it logically costs to handle as product loss risk increases. Manufacturers must look beyond a class of drug to additional considerations around access and value.
The distributor’s role has value beyond management of high-cost receivables as well. A distributor can take on financial risk, both in terms of the logistics of a lost or broken product, as well as AR when a customer can’t pay on time. Distributors already are scaled and staffed to handle many other facets of product management, so manufacturers can focus on developing the next life-saving product.
Channel strategy is nuanced and a manufacturer’s decision can have wide-ranging implications for patients and providers. Thus, manufacturers need to consider channel strategy as part of the entire patient journey and begin decision making at the outset of clinical trials—or even before—to ensure access and availability that can influence positive outcomes for patients.
If you want to learn more about channel strategy and its impact on product access and commercial success, download our ebook, Changing Channels. Or, visit ItTakesAmerisourceBergen.com.
About the Authors
Donna Gilbert is Vice President Specialty and Branded Strategic Accounts, Global Sourcing and Manufacturer Relations at AmerisourceBergen. Akin Odutola is Senior Vice President, Specialty and Branded Product Access, Global Sourcing and Manufacturing Relations at AmerisourceBergen.
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