What's Worrying Sales? - Pharmaceutical Executive

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What's Worrying Sales?
Better to ask, What isn't? A new survey of leading executives in commercial operations forecasts 2008 as a year of tough choices and big changes.


Pharmaceutical Executive


The overall benchmark for confidence in the industry was 62 (all scales are 1 to 100). But we found that executives at top-tier firms (more than $6 billion in annual US sales) and mid-tier firms ($1 to $6 billion in annual US sales) had widely divergent opinions about their own company. Top-tier execs ranked their firms, on average, four points below that benchmark (58 vs. 62), while mid-tier execs were far more hopeful, ranking their company, on average, 17 points above benchmark (79 vs. 62).

We can only speculate about this gap between top- and mid-tier outlooks, but it may be due to the mid-tiers' sense of greater control over making changes and agility in responding to market forces, compared with that of the large multinationals; it may also derive from the built-in optimism required to compete effectively. Top-tier execs, on the other hand, may be warier of the difficult choices ahead and, thus, more cautious in their outlook.

Asked if they would advise people to join the industry, the overall average response was 73. Top-tier executives again were more cautious, weighing in with a 60 average, while mid-tiers' enthusiasm topped out at a 76 aveage.

When it comes to the managed markets, sales, and marketing sectors, top- and mid-tier company executives both expressed great urgency for change and the need for higher-level skills. They also voiced dissatisfaction with the level of integration among these three areas. They feel the areas most in need of change are managed markets (all companies) and sales-force models (particularly top-tier). Increased competencies are needed in a number of areas, especially analytical and business skills. No execs identified areas where competencies or spending could be decreased. While executives place a high value on innovation in commercial operations, our benchmark data show that few have established departments dedicated to this function and its evaluation. The area most in need of increased resources was medical/regulatory/legal review.

How to Manage the Managed Markets?

Managed markets are emerging as a key area for support because of the growing impact of Medicare Part D and specialty-markets reimbursement issues. Despite its importance, the managed markets function in many companies remains fragmented across several departments. On average, only 40 percent of support operations actually reside in the managed markets group, according to information from our own benchmark database.

The commercial-operations benchmark took the pulse of executives regarding the degree of urgency for change. Managed markets ranked highest, at 73, with top-tier at 71 and mid-tier 74.

When evaluating skill sets, mid-tier executives voiced a particular need for contracting, negotiating, and reimbursement skills at both the provider and the payer level (see "Managed Markets Skill Sets"). Top-tiers emphasized the importance of increasing capabilities in pull-through, contract analysis, and proposal development, but seemed satisfied with other skill levels.

The increasing complexity in managed markets, occasioned by MMA and the growth of government's purchasing power, widens the competitive gap between top-tier and mid-tier companies. Big Pharma, with a greater array of product and service options suitable for bundling, appears relatively confident in its ability to compete in managed markets. Smaller companies, on the other hand, see the need to ramp up the skill sets necessary for this new environment.

Desperately Seeking a New Sales Model

While managed markets showed the strongest impetus for change overall, top-tier execs clocked in at a striking 85 average in seeing a need to change the sales force model, while mid-tier execs were considerably more sanguine, averaging 60; the overall industry average was 65. And if the Big Pharma sales force model—large field force, one-on-one personal selling to docs—needs to change, it naturally follows that perceived gaps in operations support for sales would also rank high across the industry, averaging 80, with top-tier execs coming in at 83 and the less pessimisitic mid-tier execs at 79.

These two indices are interrelated; taken together, they reflect the underlying changes now driving pharma. As managed markets and payer purchasing power grow in influence, and as one-on-one physician contact declines in effectiveness, current sales models must shift radically. Operations executives, accustomed to focusing on how best to support field reps with collateral, samples, giveaways, and other staples of traditional selling, are rethinking what's needed to compete.


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