CSOs broaden their palette of service offerings

Pharmaceutical CommercePharmaceutical Commerce - November/December 2013

While riding the same downturn as overall pharma sales-rep headcount, contract sales organizations (CSOs) have invested in IT competency and marketing services to meet client needs

A PDI study shows that the count of patients on product, per physician, increases when the synergistic effect of combined rep calls and e-detailing occurs. Credit: PDI

In the past couple years, the contraction of field sales forces appears to have stopped, and a jump in FDA-approved products during calendar-year 2012 might signal a thawing in sales force recruitment. Along the way, contract sales organizations (CSOs) have both suffered the same lowered emphasis on face-to-face selling, and benefited from companies looking to lower costs by replacing in-house sales with outsourced teams. Now, CSOs are looking at brighter prospects.

“Three years ago, about 8% of the US sales force was outsourced, but there were also about 100,000 representatives out there. We’ve seen that grow to about 11%, but there are only about 60,000 to 65,000 representatives out there today,” says Paul Mignon, president of inVentiv Selling Solutions (Somerset, NJ, www.inventiv.com). “I think we’re near the bottom of [downsizing], but I do anticipate the outsourcing to increase,” he adds, due to the ability of CSOs to ramp-up and provide a flexible resource to brands, and to do so in an efficient manner to lighten in-house IT loads.

What caused an end to the so-called “arms race” of the last decade? A rethinking of reach and frequency, says Frank Arena, SVP sales and client services for PDI, Inc. (Parsippany, NJ, www.pdi-inc.com). He maintains that sales strategies are smarter and more effective than they were when personal calls per healthcare provider (HCP) reached 36 times a year or as high as 80 for some of the blockbuster brands. “Those days are part of pharma history as we now move to better integration and different channels to reach physicians,” he says. “Rather than just bombarding physicians with personal calls,” frequency can be reduced while personal calls can gain greater reach, or impact, “by integrating voice/teleservices, e-marketing tools and mobile apps to keep the dialog going with the HCP in between the personal visits of the sales professionals.”

Asia rises; Europe lumbers

Globally, pharma CSO revenues grew at a compound annual rate of 12% to 17% for most of the last decade, per IMS Management Consulting, which in 2010 projected present-day growth to be in the area of 16%. The most recent research from Visiongain (London, www.visiongain.com) pegs the global growth rate at 8% from 2011—2017 in its latest study, “World Pharmaceutical Contract Sales Market 2013–2023,” released in November. The firm’s figures are more conservative, showing CSO market growth from $3.2 billion in 2010 to an expected $3.9 billion this year.

That may be due to research methodology, or something else. Reports put European pharma outsourcing at close to one-third of the sales force, however, the current US level of outsourcing, about one-tenth, is set to grow due “not only to increasing pressure on manufacturer pricing but also increasing drug sales volumes and ensuing compliance requirements,” James Vane-Tempest, equity analyst at Jefferies & Company observed in late 2011. At that time, PDI CEO Nancy Lurker told the financial community that the CSO market had “shrunk over the last, let’s say, three to four quarters” as downsizing and patent losses took their toll on the industry.

The US will remain the largest market for the next decade, but while more than 75% of CSO revenues came from the US and Europe in 2011, the BRIC nations (Brazil, Russia, India and China) and other emerging markets appear to be driving global growth. Asia is a high-growth market for some, including inVentiv, particularly Japan, where since 2010, the company put 60,000 reps on the street to become the No. 2 CSO.

Visiongain’s Richard Lang, pharma industry analyst, cites global leaders inVentiv Health, Quintiles (Research Triangle Park, NC, www.quintiles.com) and United Drug (Dublin, Ireland, www.united-drug.com) as key beneficiaries, and reported: “Outsourcing will provide local expertise in market access and sales models. Fast growth is forecast for all four of the BRIC nations, in terms of contract sales, to 2023.” Other findings through 2021:

  • Contract field sales teams will continue to be the most in-demand service, accounting for over 70% of the market.
  • China will overtake all leading European markets to become the third largest national pharmaceutical contract sales market, behind the US and Japan.
  • Key pharma trends affecting CSOs include greater development of specialty medicines, blockbuster patent expiries and biosimilar development.
  • Technology will play an increasingly important role, leading to more efficient face-to-face detailing, customer relationship management and new approaches to therapy promotion.

What’s changed?

Over the past few years, greater capabilities in specialty medicine capabilities, broader services, greater integration with personnel in multiple channels or departments, and greater contract flexibility have marked the evolution of the CSO business. The very term “CSO” can only be used as a catch-all in light of the range of outsource solutions offered.

Most if not all Big Pharma firms are active at least in some way with CSOs, often more than one at a time due to their diverse brand portfolios. Off-record sources summarize some of the action thusly: Merck, a pioneer in outsourcing, is promoting established products in a way that makes it one of the top two in the industry in terms of how they’re maximizing their CSO value. AstraZeneca is paving the way with outsourced cross-channel promotion across various assets in the field as well as non-personal, digital assets, while Pfizer has multiple initiatives underway including some specialty medicine outsourcing.

CSOs at their core still recruit, train and track sales and marketing operations, performance and compliance of sales teams to meet specific goals for products and markets. Pharma companies tend to outsource less strategic assets marketed to primary caregivers so, for instance, the CSO can wring the last few years of profitability from a mature product approaching patent expiry, but there are exceptions that hint at a growing role for outsourcing.

“We firmly and truly believe that one size doesn’t fit all,” says Rick Keefer, president of Publicis Touchpoint Solutions (Yardley, PA, www.touchpointsolutions.com). “Every one of our solutions is custom built to meet the client’s objectives.” Reps aren’t interchangeable; once a team is in place, they aren’t “flipped,” he adds, and “more times than not in today’s times, it is a multichannel or cross-channel solution.”

Today, pharma companies do outsource some specialty work. “Pharmas still want to own their true specialty reps—infectious disease, transplant reps, high-end oncology reps—and it probably makes sense for them to continue to own those,” Keefer says. “But I think in the not-too-distant future they’re going to look at their outsourcing partners as a virtual company.”

“More and more clients are coming to us to launch major new brands,” PDI’s Arena adds, citing two 2012 contracts; one a Top Three global pharma company and another an emerging pharma client launching a product in a category in which there had not been a new entry in over a decade. Likewise, inVentiv reports that of the about-100 teams it mobilized in the last five years, 31 were for launches.

As CSO expertise grows so do their areas of expertise, from physician calls to hospitals and managed care including buying groups as well as private and public payers.

CSO differentiation

The diverse menu of services threatens to have pharma execs glazing over with pitches to win their contracts. In response, CSOs have been working to differentiate themselves. They have restructured, acquired (or been acquired); they have partnered with others to expand their services or market reach; they have upgraded their IT capabilities; and they have continued to differentiate themselves.

While contract sales may be “the heart and soul of who we are and what we’ve done for the last 25 years,” PDI’s Arena says the company will “very often up-skill” in-person calls with services from across its various business units, including inbound and outbound voice/teleservices to support vacancy management and white space coverage; leveraging state-of-the-art digital communications; clinical and nurse educators; and medical science liaisons (MSLs). Among leading firms, these are joined by a range of add-on services such as delivering samples; marketing communications; market research; and analysis.

Compensation models vary as greatly as levels of service, from a pharma company buying a syndicated, or essentially a part-time slice of a team that may be representing multiple products on one end of the contract services spectrum, to giving a CSO full responsibility for sales and marketing from pricing strategy to management to ongoing pharmacovigilance.

More at-risk compensation

The simplest contracts for the simplest rep services are based on a fee-for-service structure, with compensation tied to easily discernible actions. Basing compensation on the number of physician details completed is a bit simplistic these days; instead, CSOs will negotiate a fixed fee based on the cost of running a sales force, and this management fee can be adjusted periodically, even monthly. The trend, however, is for the CSO’s compensation to be at least partly “at risk,” or tied to performance results such as growth in sales revenue, market share, increases in filled scripts or other goals that can be measured against established benchmarks. Generally, the more control a CSO has over product sales, marketing and related services, the more of its management fee it will be willing to put at risk.

“I fundamentally believe that outcomes are becoming a huge driver of this business in the future,” says inVentiv’s Mignon. Diversifying and offering the right menu of integrated services is key to brands and CSOs alike in spending sales investments wisely and achieving the desired result. Not pleading modesty, he adds that his company’s vision is to provide pharma clients with “everything except for coming up with new molecules, owning the NDA and manufacturing.”

“On the face of it, a CSO would seem to prefer a fixed fee-for-service contract, but in the last couple of years, we’ve been getting a lot more requests for risk-share deals, where we share a significant portion of the cost of commercializing the product, and share the royalties on the back end—and not just from small or emerging firms, but large pharma companies,” says Publicis’ Keefer. But for a CSO to risk it all, it needs to consider factors it hasn’t traditionally been able to control, from the number of samples, the marketing budget and more.

An all-encompassing outsourcing contract can, however, include giving the CSO full control. For instance, a small firm may have in-house R&D, and gotten as far as FDA-approval for a given drug, but lack the infrastructure for the rest; leading CSOs now offer the ability to handle full commercialization using their own resources, or partnering with others to get the job done.

PDI, for instance, has its own third-party logistics service. Quintiles, with 27,000 employees in 100 countries, offers CSO services in its diversified therapeutic, scientific and analytics portfolio. So does inVentiv, which is also known for its integrated healthcare communications business...as is Publicis Touchpoint Solutions, whose global ad-agency parent in July announced a $35-billion merger to create an even bigger marketing confab, Publicis Omnicom.

“If a pharma company is looking for a combination of detail reps and telesales, and there’s a lot of uncertainty about what capacity they need, then they go for CSO,” says Dharmendra Sahay, managing principal at ZS Associates (Evanston, IL, www.zsassociates.com). “But if they’re looking for key account managers, and they don’t know how many, I would advise them to continue to do their due diligence, because traditionally, CSOs don’t have that kind of capability.” Is this capability emerging? he asks. “If you read the press, then for sure it is, but companies need to look very closely at what’s really happening on the street.”

IT, iPads and integration

Information technology plays a role in quick start-ups as well as long-term efficiency. While in-person selling remains a primary revenue generator, non-personal selling, increasingly driven by IT solutions, is faster growing as multi- or cross-channel teamwork becomes a requirement for reps, nurses, MSLs and others to gain instant access to changes on the brand, CSO and physician side of the selling equation can be updated immediately, “as opposed to waiting for a monthly report. It’s very timely and important to know this information immediately,” says ZS Associates’ Sahay.

“Everybody’s doing something they call e-detailing. If you ask 10 people, you’re going to get 10 different definitions of what e-detailing is. But it’s become pretty common now,” says Publicis’ Keefer. Early efforts start with computer or mobile apps that provide self-guided detailing and consumer education presentations and questionaires via web and/or mobile apps, in addition to live chats, calls and web video conferences.

“In the IT industry, it’s more or less winner takes all,” he said, citing SAP’s status as the 800-pound gorilla in the enterprise software space and, in turn, the dominance of Veeva Systems (Pleasanton, CA, www.veeva.com). The software firm gained traction over leader Siebel Systems, acquired in 2005 by Oracle, in large part for its Software as a Service (SAAS) or cloud-based platform for life sciences-targeted customer relationship management (CRM) and easier roll-out and scalability for small to large sales forces. There are others, with general and pharma-specific areas of focus.

Oracle is in the game as are Cegedim Relationship Management (www.crm.cegedim.com), Synergistix (www.syncrm.com), StayInFront (www.stayinfront.com), Update CRM (www.update.com), Microsoft’s Dynamics CRM (www.crm.ms) and startup Interactive Medica (www.interactivemedica.com). There’s one more 800-pound gorilla in life sciences CRM, Salesforce.com...from whom Veeva has licensed its platform.

It’s not just the tablet—primarily iPad—that gives e-detailing its promise, but the mobility of the information itself that’s gathered in the HCP’s office. E-detailing makes it easy to track every detail of a physician’s preferences, including how often they want a personal visit; their digital/online and multimedia preferences (along with e-mail click-through rates); whether they accept teleservice calls; what kind of information they want to receive, e-mail and so on. “This kind of information and much more is what we are collecting during our HCP interactions, and that’s what makes us smarter,” says PDI’s Arena.

Teledetailing, or online e-detailing, can guide a physician through inputting data in just a few minutes to let the rep organization rank the importance of attributes (efficacy, onset of action, drug interactions, etc.); share patient data; report the volume of prescriptions filled for a drug and more. Apps can also guide the HCP to automatically configure custom literature based on those preferences, and provide for sample shipments, clinical reprints, speaker slides and more. (PDI has posted a demo of one such app at www.groupdca.com/demo/flexergesic).

Tied to back-end management systems that can aggregate and deploy computer, iPad, voice and other data in a meaningful way, applications are now available to perform high-end analytics and deliver dashboard views for better management at all levels.

Implementation challenges remain. The main challenge today is moving from legacy presentations, such as one-way laptop presentations, and turning them into two-way exchanges. ZS Associates’ Sahay says these range from rep training to tagging data properly behind the scenes so that digital content can proliferate throughout the system. “Because of these early issues,” he says, “the data is not always as useful as it can be. But the promise is there, and the technology is very feasible.” The first phase for mobile technology has been to get it into reps’ hands.

The next step, underway for some, is for companies creating apps that take advantage of the ability to place video calls to immediately answer questions in the physician’s office and collect much more information. While startup brands may quickly adopt new systems, Big Pharma companies and their CSOs face the challenge of integrating historical data in legacy systems and departmental silos to allow true cross-channel integration.

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