No Margin for Error - Pharmaceutical Executive


No Margin for Error
Companies that will be forced to cut back on sales and marketing spending must focus on value, not volume. Here's how to reduce your spend where it matters the least.

Pharmaceutical Executive

The PMI provides a way of looking past sales volume to value. "Reducing Sales Effort Based on Margin" gives an example. Here, territory-level PMI has been plotted against potential sales volume. Most territories are in the upper-right quadrant: They combine higher PMIs that fall above the US average with high volume. But about 15 percent fall in the upper-left quadrant (low volume, high PMI) and about 15 percent fall in the lower-right quadrant (high volume, low PMI). If you want to reduce the cost of promotion while maintaining sales, which territories would you eliminate? It's pretty obvious that low-PMI territories need to go first. They may be generating sales, but they are not generating profit.

That is, of course, opposite of what most companies would do today. Without territory-level data on profitability, they focus on volume. Most eliminate low-volume territories and continue to detail their least-profitable customers.

Without reconfiguring the entire sales force, executives can gain an understanding of what territories contribute the least profit at the margin. In applying this practice, companies should look at geographic clusters of low-margin territories and determine if they should consolidate two or three low-value territories into one or two. In addition, PMI should be combined with other volume, potential, or workload information to identify outlier territories that contribute significantly greater or significantly less profit than average.

Guiding Physician Targeting
Territory-level analysis is particularly useful in allocating resources for a sales force. But the same analysis can be used at the prescriber level as well. By incorporating a measure of margin into the physician-profiling exercise, companies can prioritize reach and frequency to those healthcare providers who create the most value to the company.

Through this strategy, industry will find that many top-decile physicians are worth substantially less in profit contribution than many of the targets in the next decile. Therefore, this approach can help companies plan for a more effective allocation of field resources. Aggregating these physicians to higher levels of geography—metropolitan statistical areas (MSA) or states—will also provide insight on opportunities to reallocate other promotional spending to the highest-margin markets.

Is the Opportunity There?

Companies can also take a more comprehensive approach to sales and marketing resource allocation by identifying where managed care rebates trump direct selling. Companies that have products that are currently in the crosshairs of managed care—proton-pump inhibitors, angiotensin-receptor blockers, statins, and antidepressants—will see the greatest return from exploring this opportunity-based approach.

Many companies already adjust territory quotas or performance targets to reflect access to a drug in that market. However, few differentiate selling strategy or sales effort where their products are at a significant competitive disadvantage or advantage.

This approach is based on a methodology that combines several data sources at a state or regional level, including longitudinal-patient and dispensed-prescription data sources like NDC or Verispan, and real-time competitive detailing and prescription information captured in the physician's office from ImpactRx.

By matching physicians in both data sets, companies can aggregate de-identified patients by physician to connect promotional detail efforts to what medication is dispensed by the pharmacy. It also enables companies to understand:

  • What was the relative detailing effort of each competitor?
  • What products did the physician write for patients as a result of that detailing effort?
  • Of the written new-patient starts and switches, how many did the pharmacy actually dispense?

By combining these two data sources, and possibly adding their own information from rebate claims submissions from MCOs, companies can finally quantify the relative importance of formulary status and pull-through from detailing efforts. In so doing, they can now identify geographies where detailing efforts make the most impact—and the areas where that effort is neutralized by relative formulary position. It is in these markets that companies can drastically reduce selling effort without affecting sales.


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