Private Equity Enters Medical Communications

For much of its history, medical advertising was largely built on a foundation of private ownership and management. This created an entrepreneurial culture that enabled established agencies to develop and thrive while opening the way for countless newer agencies to be formed. 

From the late 1980s through the 2000s, the dominant trend was for independent agencies to be acquired by emerging global communications networks. 

In the wake of the 2008 financial meltdown, as the world economy recovered and investment capital was seeking new avenues to growth, the private equity business began aggressively expanding into new business sectors, which included biopharma, pharma services, and pharma advertising. 

With the coming of age of targeted therapies, biologics, personalized medicine, and novel rare disease treatments, pharma companies generated demand for a wider range of marketing services.  Much of this marketing was now delivered through omnichannel media as opposed to traditional print and broadcast. For the agencies that had successfully incorporated digital and omnichannel capabilities, these were times of significant growth. And private equity took notice.

Private equity was drawn to the impressive growth of pharmaceutical agencies. Yet they were also interested in creating broader marketing services platforms that were aligned to the rapidly evolving needs of the market. These platforms frequently had traditional agencies at their core but added in high-value services like medical education, scientific communications, public relations, patient engagement, market access, data/analytics, and AI. The “buy and build” model took hold.

The PE model has been highly successful at empowering independent agencies to ascend to the next stages of growth by providing critical investment into talent and resources while fueling the engine of diversification–growing or acquiring new types of services necessary for meeting rapidly evolving client needs. As markets have become more sophisticated and globalized, private equity has been a vital catalyst enabling agencies to transform themselves in order to compete more effectively.

What does the future hold? Given the highly dynamic nature of the healthcare marketplace, agencies will need to respond with unprecedented agility to the rapidly shifting needs of their clients. And private equity will continue to be a significant force powering that change.

Over the past decade, and especially over the past five to seven years, private equity has been the engine of an unprecedented surge of interest and investment in the pharmaceutical commercialization segment.

This surge has been driven by a multitude of factors, but among the most significant has been the emergence of increasingly sophisticated solution providers that play a critical role in the commercialization of complex drugs and therapeutics. Given this criticality, it’s not surprising that the value of these firms has grown substantially over this period.

The COVID-19 pandemic–which undermined pharma’s traditional physical sales force model–also spurred the proliferation of digital and data-driven channels of engagement. Without face-to-face interactions, commercialization providers developed a wide array of virtual tools to connect them with HCPs and patients. Private equity firms recognized the long-term potential of these innovations and invested accordingly. 

Broadly speaking, private equity investors have entered the segment via various access points, ranging from market access, pricing, and consulting to HCP communications, data-driven patient engagement, and more. In general, commercialization firms have migrated from occupying discreet supply chain roles as niche service providers to becoming true strategic partners that assist pharmaceutical companies in fostering innovation, improving outcomes, and shaping the future of healthcare. 

Across the medical communications, medical affairs, and HCP/DTC marketing subsegments, PE firms have been attracted to both the access to large budget pools and the increasing technological sophistication of healthcare providers. Over the past few years in particular, technological innovation has transformed the healthcare communications landscape, enabling deeper customer insight, greater targeting precision, and improved marketing efficiency. 

In fact, data-producing technology solutions have emerged as a critical differentiator in identifying agencies with more-defensible long-term HCP and DTC solutions. Examples of these solutions include digital tools designed to overcome information saturation and customer access constraints; deliver true engagement automation; enable segment-specific customized messaging; and that utilize AI to enhance creativity and customer engagement. 

Ultimately, private equity investors, in recognizing the importance of effective communications in driving drug adoption and long-term market penetration, will continue to seek technologically differentiated platforms to partner with.

On the patient engagement side, we have seen the emergence of platforms aimed at enhancing education, adherence, and outcomes, particularly for specialty and rare disease treatments. This focus on patient engagement aligns with PE firms’ interest in supporting companies that improve patient outcomes and satisfaction. When combined with the plethora of available pre-launch and post-market analytics, these firms help ensure seamless patient identification and connectivity, especially for therapies targeting specific patient populations.

Market access is another capability that continues to be a focal point for private equity investment, given its paramount role in a shifting regulatory and legislative environment as manufacturers work to balance the cost of innovation with the need to make therapies available and accessible to the patients who need them. We expect this demand dynamic to continue, as further changes in healthcare legislation will underscore the need for expertise in payer negotiations and global pricing strategies to secure reimbursement during the launch of novel therapeutics. 

Overall, the increasing sophistication of commercialization providers amidst a rapidly evolving therapeutic backdrop, as well as the transformative power of technology, have all contributed to the sector’s growing importance.  We can expect private equity demand to remain strong across the pharma commercialization and communications segments, given their ongoing criticality to the success of increasingly complex drugs and therapeutics and to improvement of health worldwide.