Bottom-up or Top-down Forecasting – Which Model Best Fits Your Needs?
Understanding HCPs’ prescribing behavior Vs. analyzing market trends.
Demand forecast is key for sales and operations planning in the pharmaceutical industry. Naturally, a lot of time, money, and effort are invested in developing forecast models for the valuation of internal pipeline assets, external opportunities, and lifecycle programs such as brand launch, phasing out of a drug, and evolving payer access.
The two main approaches to forecasting are Top-down, which usually encompasses a vast universe of macro variables, and Bottom-up, which is more narrowly focused.
Top-down analysis, the common method in the pharmaceutical industry, refers to using comprehensive factors such as LRx, market figures, and promotional data to predict market trends and nationwide performance and derive a sales forecasts and a sales action plan.
Bottom-up analysis takes a completely different approach, focusing its analysis on specific characteristics and micro attributes of individual constituents. In the pharma market, bottom-up analysis concentrates on HCP-by-HCP or account-by-account fundamentals. This analysis seeks to identify engagement opportunities through the idiosyncrasies of an HCP’s attributes and its consequences on the brand’s strategic actions. A forecast based on personalized understanding of HCPs’ prescribing behavior is likely to be more realistic, providing brand managers a solid basis to understand the true potential and define attainable, yet challenging goals for their brand.
Cutting-edge AI-based bottom-up forecasting goes as fine grain as the patient level, aggregating anonymized patient data and calculating attributes of connected HCPs accordingly. This bottom-up approach takes into consideration the characteristics of lower level clusters and builds up to a consistent forecast throughout the organization. Applying domain specific business rules on aggregated APLD, allows for laser-focused predictive analytics resulting in a highly accurate forecast, and subsequently, more accurate planning
If your need is a global view of your business, top-down is still a great tool. If you need a forecast for strategic planning for your brand, bottom-up would be a better, more accurate fit that will best translate into attainable tactics. In some cases, you might want to use a hybrid of both methods; in volatile cases like launch of a new brand or brands where the competitive landscape may change dramatically with new competitors, or when management’s top-down forecast is very ambitious, adding a brand-level bottom-up forecast can help adjust your planning.
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