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The marketplace requirements for sales force structures are changing faster than the industry is evolving
With slowing growth and more resistance from payers, global pharmaceutical companies are under pressure to streamline expenses and accelerate development of products with demonstrable therapeutic value that will produce sustainable revenue growth and margins. Companies that want doctors to continue to prescribe branded drugs, and have payers cover them, must prove value to justify a higher price or preferred position in a managed care formulary.
This emphasis on value adds a new dimension to the sales process that has typically only included safety and efficacy as barriers to entry, along with a managed care contracting process that too often focused solely on “buying access.” The growing concentration of payers into a few large buyers and/or government systems, and the related leverage they will exert on physician drug choices, will force traditional sales processes to undergo a dramatic shift. This shift is already occurring and will accelerate rapidly in the next two years given greater emphasis on cost control in the healthcare industry.
Industry is not keeping up with change
Many pharmaceutical companies have begun adopting this evolved approach to sales; as a result, we predict traditional go-to-market strategies will be nearly unrecognizable within the next few years. Many organizations are exploring and even piloting a “sales force of the future,” however, few are prepared to implement this model as fast as the market is predicted to change.
Whether healthcare reform in the U.S. produces a government-run system or takes another course, it’s clear that by 2010 the payer environment will be more similar to the rest of the world, where a few large agencies control access and price for the majority of prescription drug activity. Contract negotiations with these entities will take on a far greater role in the annual company business plan. Manufacturers will need to demonstrate advantages for their brands and look for tactics other than pricing discounts to develop win-win deals that preserve margins. Such negotiations will migrate from a single managed-care sales function to a more holistic approach that integrates all the assets of the manufacturer to create value with the purchaser.
These changes will require companies to re-think traditional “feet on the street” methods and pushing in-person meetings with doctors to drive usage. Instead, doctors will put more emphasis on knowledge sharing and will increasingly work in conjunction with large payers. Reps must take on a greater consultative role where they are adding more value to the sales process and also help doctors articulate the value of premium priced brands to patients.
From relationship building to
As physicians experience increasing costs pressures there are enormous time restraints put on their ability to meet with reps during normal business hours. As a result, physicians are seeking more efficient and informative ways to get information like call centers, e-detailing and live video detailing sessions. Pharmaceutical sales reps will be building greater “business to business” relationships with these physicians. They will have to be laser-focused on the value they add to the interaction with a physician, discussing topics such as cost-effective economics and therapeutic value. An important role for the field sales rep will also be linked to managed care programs, to “pull through” negotiated contracts and ensure that physicians are aware of the dynamics of the major payers that cover the bulk of patients in their practice.
To accomplish this, the process will need to be more information-centric and coordinated. Field sales objectives will need to be closely linked with the managed care contract process to disseminate the cost effective position of their products and assure pull-through at the retail level.
The role of technology
With sales force reductions and higher expectations of reps’ consultative capabilities, pharmaceutical companies will need to re-examine their CRM and information management systems. Currently, a large volume of information is collected and a large number of reports are distributed but the value derived from such a large investment of resources and time is minimal. It is common rubric in most companies that the vast amount of information is for reps to argue about quota and bonuses.
In the changing healthcare world, information is far more important in the selling process. The challenge is to migrate from today’s world of reporting on activities to a world where information drives actions. In the field of sales it’s about identifying what actions drive sales and managing plans that change sales rep activity to focus on efforts that will produce measurable improvement in results. Reporting will be focused more on what causes results and offer both the rep and managers specific actions that can improve performance. Extensive effort needs to be applied to make these reports easy and intuitive to use while not losing the essential underlying value.
And it goes without saying that the contracting with managed care will need to become far more information-based. Pharmaceutical companies need to demonstrate their value to managed care relying on a wealth of clinical and outcomes data to substantiate their pricing and formulary status. Equally important, companies need to better understand their current contracts and look to improve the profitability of the contract, not simply pay for “access.”
Evolving the information
Current information environments are large, cumbersome and expensive yet rarely meet the needs of current users, let alone support the changes that need to come. At its core, this is a result of the number of large sources of information that are needed to operate a sales organization:
program activities and the like.
In the traditional IT environment adopted by most large companies, managing such large data sets is costly and resource-intensive. New programs take a minimum of nine months and often far longer to construct, as IT needs to specify and construct appropriate data marts to support that application. Far too often the business conditions change during this process, frustrating both the business side that now doesn’t have what it needs and the IT side that feels the target has changed.
Relying on current approaches is insufficient for organizations that need to implement the rapid changes necessary to shift to new information-based selling strategies. New technologies and methodologies are emerging that can accelerate the time to build the new applications required by the sales forces of the future. What will be required is a partnership between the business side and the IT groups, overseen and supported by senior management. Too often today IT is looked at largely as a cost reduction center, which is a barrier to the development of more effective selling environments. Similarly, IT tends to default to proven solutions in order to protect their reputation (e.g. “no one ever gets fired for recommending Siebel”); they will need to become more risk assumptive which can only happen in collaboration with the business side.
The coming consolidation
In the late 1980’s consumer goods companies had thousands of sales representatives calling on grocery stores. Then Wal-Mart and other large buyers began to emerge and flex their market muscle; within two years all those sales representatives were gone, replaced by dozens of contract negotiators. The companies that fared best during that transition were the ones that added dozens of business analysts and supporting information systems to create value for their customers while also preserving a sustainable profit margin.
The pharmaceutical industry is facing many of the same parallels today. While it’s clear that the outcome may not exactly match the CPG experience, like a Category Five hurricane, you can either prepare for the coming storm or risk significant devastation. PC
Bob Merold is General Manager at Symphony Metreo (Palo Alto, CA; www.symphonymetreo.com), a part of the Symphony Technology Group, a $2.1-billion strategic holding company. Symphony Metreo helps organizations meet their revenue and margin financial goals with innovative IT solutions in enterprise pricing, operations management and performance management.