The High Value, “No Brainer” Investment Some Pharma Executives Haven’t Made Yet
I’ve met with dozens of pharma executives since founding Medisafe six years ago. These meetings inevitably lead to a discussion on the potential return on the investment in medication management solutions like Medisafe.
If a typical investment in such a deal that promises, say, $20M in increased Top Line for a particular drug as a result of adherence and persistence improvement, it is sometimes perceived as not having enough of an impact on a $1B drug sales.
But in one recent meeting I had a real aha moment:
Because the commercial costs of promoting a medication – marketing, sales, KAMs, and so forth – are SO high, often gobbling up 90% of the revenues, the $20M should be seen in a whole different light. In order to achieve this increase in $20M in revenue, the company has to spend a lot less than 90%…
Let’s take as an example a high cost of implementing a solution to support a drug – including the marketing and promotion costs and license – all in costs aren’t higher than $4M. Not only that, but since we’ve recently introduced a risk-sharing model, in which Medisafe’s compensation is performance based, pharma partners will see an upside, or both companies don’t make profits.
So what are we saying? We’re saying that if the typical profit to a pharma company from a drug with $1B in revenue is, let’s say, $100M, then adding a solution like Medisafe to the mix generates an additional contribution of $20M, minus $4M of directly associated expenses. $16M goes directly to the BOTTOM LINE.
That’s an increase of a full 16% to the bottom line, bringing profit from $100M to $116M. 16% increase.
Do you know a Pharma executive or a CFO who’d say “no” to a 16% increase in profit, at very limited risk?
Right, neither do I.