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Eli Lilly and Company Versus Pfizer: Miscalculations Analysis
Introduction
Eli Lilly and Company was one of the biggest pharmaceutical firms across the world in the 1980s and the early 1990s (Christensen, 2004). It controlled the largest market share in the sale of diabetes medication (insulin), supplying over 50% of the global insulin needs. Another company to be considered in this paper is Pfizer, which came up with the concept of replacing injectable insulin with an inhalable version (Christensen, 2004).
It predicted that as soon as the product was launched, it would attract high demand, and the market would be flooded with copycats as competing firms struggled to get a footing. Surprisingly, patients seemed content to use the injectable insulin. It was likely because the needles on the pens had been made so small, painless and inconspicuous. In addition, they were less bulky. What had been projected to be a 2 billion per year project collapsed and the firm registered a 2.8 billion dollar loss. Finally, the business establishment took its product out of the market (Christensen, 2004).
Analysis
From a critical point of view, it is easy to make out why the two good ideas turned out to have negative impacts. In 1995, Lilly Company launched insulin pens designed to inject the drug into the body in a more compatible and less cumbersome way than traditional hypodermic needles. In addition, it also introduced a specific type of anti-diabetic drug named match and a humulin product, which contained 80% insulin (Selam, 2010).
It is, however, worth noting that the three products came at premium prices in comparison with the former medications that the firm was trying to phase out. Surprisingly, despite its revolutionary ideas, the products failed. Consequently, the market share reduced considerably, resulting in massive losses that drove the firm from its market leadership position about insulin production and sales.
Lilly undoubtedly came up with a revolutionary concept, which is evinced by the fact that the use of pens is the most common method of delivering insulin to human beings (Molife, Lee, Shi, Sawhney & Lenox, 2009). Lillys errors could be because it invested significantly in products that consumers perceived simply as non-beneficial. Typically, when customers are satisfied with products, they become price sensitive if they are offered alternatives. Unless they feel that there is a substantial increase in satisfaction, they may be unwilling to invest more money in particular products (Hult, Craighead & Ketchen Jr, 2010).
Moreover, the first thing the company should have worked on before launching the product (insulin) was information and education campaigns since many patients determined their therapies. For them to utilize the new technology, they would have to monitor their schedules around the required multiple shots daily. Understandably, many were unwilling to make such a radical change (Hult et al., 2010).
Pfizer, on the other hand, made a gross miscalculation by assuming that diabetic patients would rather inhale a drug than inject themselves. However, it turned out that compared with injection, with the aforementioned thinner needles, an inhaled drug proved more cumbersome and did not appeal to many consumers. In addition, given that the inhaled version was more expensive, although it was never proved more effective than the injected one, many customers rejected it. Insurance companies, on the other hand, followed Medicares classification of the drug in its expensive tier, further contributing to negative public perception, which ultimately resulted in the flop (Christensen, 2004).
Recommendations and conclusion
Drug companies withdraw products from the market either during clinical studies or after reports of negative side effects after launching them. However, that Pfizer had to withdraw its product even though it had not been found to have negative side effects was an unprecedented occurrence in the industry. The missing ingredient in the companys marketing mix was sufficient market research (Hult et al., 2010). The management assumed they had a good product, and selling it would be automatic. The business establishment should, however, have carried out extensive studies, not on the safety or effectiveness, but also the attractiveness of the product to potential users (Hult et al., 2010).
Lilly, on the other hand, should have avoided bringing into the market the three different products, which were priced higher than the existing one. In future endeavours, it should also carry out research studies to ensure that a product is both effective and appealing. As long as a company is selling a product that is intended to replace an already existing and effective one, it should invest in marketing and informing potential buyers about its advantages.
In conclusion, the lesson learned from these two corporate firms that were nearly toppled by bad decision making and strategies that is irrespective of how good a product concept is, there is never an excuse to ignore due diligence. Both firms could have saved themselves billions of dollars if they had been open to the idea that the products could not be good enough, or the market could not yet be ready for them. However, blinded by the perceived brilliance of their concepts, they rushed without sufficient field research and ended up with failed products that severely negated their previous successes.
References
Christensen, C. M. (2004). Eli Lilly and Co: Innovation in Diabetes Care. Boston, MA: Harvard Business School Pub.
Hult, G. T. M., Craighead, C. W., & Ketchen Jr, D. J. (2010). Risk uncertainty and supply chain decisions: a real options perspective. Decision Sciences, 41(3), 435-458.
Molife, C., Lee, L. J., Shi, L., Sawhney, M., & Lenox, S. M. (2009). Assessment of patient-reported outcomes of insulin pen devices versus conventional vial and syringe. Diabetes technology & therapeutics, 11(8), 529-538.
Selam, J. L. (2010). Evolution of diabetes insulin delivery devices. Journal of diabetes science and technology, 4(3), 505-513.
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