Fixing the Sales Model - Pharmaceutical Executive

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Fixing the Sales Model
Pharma's new commercialization strategy is, uh, in the works. But what did you expect? Getting it right takes time.


Pharmaceutical Executive


Pharma already swung toward regionalization of its sales model back in the 1990s in response to an increased power of managed care. Of the first wave of companies moving to more regional control, most agree that it was a bad experience. But can companies adopt and learn from past mistakes? "If you look back to the 1990s, there was a fairly significant devolution of responsibilities by the marketing team and not much of a national marketing approach," says Lurker. "We're certainly not looking at going all the way—and I don't know that most companies are going to the extent they did."

But some companies are moving forward—for example, Takeda. In 2004, it created a regional-account-director model to better service the 140 primary trusts in Britain that control the health budget—which, according to PWC's Jones, had previously been ignored by the industry. "They got rid of a several-hundred-size sales force and replaced them with about 50 regional account directors," says Jones. "These individuals were responsible for their own regions and ran the budget. This has been extremely successful, and they have really moved up the charts with their statin."

Compliance, in Check

Much of the recent damage to the pharmaceutical industry's reputation has revolved around its sales and marketing practices. Off-label promotion of drugs that raise serious safety issues have been especially bruising. But rather than creating a new compliance paradigm for the sales model, companies are busy executing what has been, for the most part, mandated for them.

"A number of companies are under corporate integrity agreements (CIAs) that drive every aspect of compliance," says Dan Kracov, partner and co-head of the pharmaceutical and medical-device group for the law firm Arnold & Porter. "Over time, there is a standard of care being set and a body of history and guidance from the cases that other companies are dealing with. They are going to converge around an approach that involves heavy procedures in terms of training, auditing, and a fairly significant [enforcement] structure within companies."

Because Medicare takes such a huge bite out of the federal budget, says Nicholas Theodorou, a partner at Foley Hoag's business-crimes and government-investigations practice group, it may become necessary for all companies to maintain federal compliance programs. "The defense contractors have been doing that for years because they are dependent on government contracts, and a conviction for fraud in government contracting can lead to debarment," he says. "Similarly, a conviction related to Medicare can lead to a debarment from the program."

Certainly, as the recent spate of high-profile cases like the one against Purdue Pharma shows, federal regulators are stepping up scrutiny into prosecuting pharmaceutical companies for fraudulent marketing—and for holding individuals liable. In the case against Purdue, three high-level execs pleaded guilty to misdemeanor charges about the mismarketing of OxyContin, and together they paid a $34.5 million fine. And although the negative headlines may keep coming for a time, Kracov says that the larger companies have become more sensitized to the issue and are shoring up their compliance programs. "The larger companies are in a fairly good place—or heading toward it," he says. "But the smaller and midsize companies are a mixed bag. Some are in good shape, either voluntarily or because of CIA agreements."

While the specific activities of big compliance programs seem to be set in stone, more fluid is how compliance fits into the rest of the organization—and the degree to which it can be effective without slowing down or otherwise penalizing the marketing effort. In addressing the off-label issue, in particular, companies need a well-honed system that allows easy and quick interaction with medical affairs. This will empower reps to refer physicians along, so they can get the information they need. "The role of medical affairs is only going to grow," says Kracov. "Given how many products are formulary-driven, I think sales is focusing more on an evidence-based model than an in-your-face-with-samples model."


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