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The arms race is over, and it's time to reinvent pharma sales. Here's what forward-looking companies are experimenting with-and how it's working
It used to be so easy. If you grew the sales force, sales went up. It wasn't an elegant business strategy, it wasn't complicated, in fact to a lot of folks it sounded dumb—but it worked. And so the US pharma sales force burgeoned, growing from about 35,000 in 1995 to some 100,000 in 2005—about one rep for every eight physicians. They took up space in waiting rooms, chatted up receptionists, delivered samples, and got precious little face time with doctors...and the sales rolled in.
Performance on Overall Sales Experience
Then the world changed. Doctors, feeling hounded, began cutting off reps' access. Congress fumed about the nation's drug bill. Managed care got ugly. And pharma, with too many mouths to feed and not enough new products to detail, started laying off employees by the thousands. It became obvious that the next generation of drugs, when it finally arrives, isn't going to be dominated by the kind of mass-market products that made the primary care sales force such a useful tool.
Pharma needs a new selling model. The past 12 to 18 months have seen major shifts on the part of virtually every large drug company, with a good bit of experimentation over new ways of promoting pharmaceutical drugs. It's too soon to know which is the right model. But consensus is starting to emerge on some of the themes that will be part of tomorrow's approach. From reorganization to use of alternative sales channels to outsourcing, these new ideas help redefine the relationships between pharma, physicians, patients, and payers.
Most effective pharma sales forces
Product portfolios are changing, patents for a bevy of blockbuster drugs are expiring, and many companies are trending toward small, specialty drugs rather than the mass-market blockbusters of the past. Sales force reorganizations are inevitable. The job loss for so many companies is difficult to stomach. But these reorganizations are also disruptive to customer relationships; the simple act of "re-drawing" territory boundaries can often lead to the loss of quality sales personnel—the top-performing reps who drive much of the value and whom companies can't afford to lose.
Traditionally, sales execs just dealt with that issue as a necessary side effect whenever they found a way to optimize the field force. But Solvay Pharmaceuticals, when faced with its changing product portfolio, took a different tact. The company implemented a new sales force structure it refers to as the Customer-Centric Alignment model. It's based on maintaining a fixed number of geographical territories, and provides for flexibility instead by optimizing promotion and allocating resources within each territory. Mark Hastings, director of sales operations for Solvay, says that by keeping a constant number of sales teams and territories, they can ensure that, above all else, customer service remain constant. At the same time, he adds, the model still provides for flexibility because the company can adjust how each brand is resourced in each territory. You can see how this works by looking at Solvay's cardiometabolic business, which it supports with 645 reps. All cardiometabolic specialty reps carry three products, but promotional optimization yields individualized call plans that result in a differential weighting of each product for every rep.
Important criteria for assessing the value of a meeting with a pharma sales rep
Of course, no model is perfect. And Hastings says one of the biggest challenges of the Customer-Centric Alignment model relates to the district manager's role. District managers are typically expected to be product specialists. But as the number of drugs promoted expands within the territories they manage, it will be difficult to maintain that high standard of drug knowledge. However, adds Hastings, district managers will still be critical for coaching, and maintaining the in-call effectiveness of the rep.
AstraZeneca is another company changing the way it details doctors. Faced with significant patent expirations, the company has responded with large layoffs—and expects the number of reps to continue to decrease as generics eat into the sales of mature brands. But AstraZeneca redefined the way it organized its field force—and began framing its future—when it launched a new selling model in 2007.
AZ's sales model focuses on the total office call with the goal of developing deeper relationships with the entire physician's practice, improving access, and delivering greater selling impact, says Mark Mallon, vice president of marketing and sales operations. To do that, AZ gives its pharmaceutical sales specialists (PSSs) fewer accounts to call on. This allows for the time and focus it takes to build stronger relationships with the office's prescribers and non-prescribers—to whom reps provide education about patient assistance programs, reimbursement, and patient education, including the messages about the importance patient adherence to prescribed therapies.
"We will continue to rely on our model because it flexes enough to evolve and optimize our current portfolio," says Mallon. "It also prepares for our future products in response to our customers' needs and the needs of their patients." Already, this change may be showing results: According to a recent Verispan Company Image Report, AstraZeneca now ranks fourth—up from seventh place in 2002.
It's the type of model that's familiar to some of the smaller pharma companies, with a stronger heritage in detailing specialty drugs. For example, Shire Pharmaceuticals has long focused on disease areas where it can maintain small sales forces focused on serving specialists. It's gastrointestinal (GI) division, which houses the Lialda and Pentasa brands, employs specialty reps to call almost exclusively on gastroenterologists—and these reps know they provide value by going far beyond just a product pitch. "We expect our representatives to go in there and identify the needs of the GI doctor, understand the local marketplace, the drivers, the payers in that marketplace," says Todd Lambert, vice president and national sales director, GI. "They should understand the referral network they have within the healthcare systems in which they operate—and fundamentally understand the business drivers."
"For other opportunities, we would bring in a partner if we think that there's significant value to be realized for both companies," says Roger Adsett, senior vice president and business unit lead, GI. For example, Shire has a co-promotion deal with Takeda on Lialda. "[Takeda is] able to not only expand our reach to doctors that Shire's can't reach, but also increase the frequency to see some of the GI doctors," Adsett says. "That's part of what Shire is striving to build as part of the business model—you bring in talent for your core competencies, and then you partner with best-of-breed organizations for things that are potentially not core to your strategy to give your organization the flexibility to adjust as conditions change."
Let's face it—pharma couldn't ignore the dropping ROI on face-to-face detailing forever. Increasing patient and administrative loads for physicians, hospitals and group practices restricting sales visits, and the new PhRMA guidelines adopted in 2009 have put the face-to-face detailing model under even more pressure than ever before.
Many companies have decided to cope by turning to alternative sales channel strategies—and yes, it even seems that some doctors are waiting for them. According to a 2008 September market study by Manhattan Research, about 45,000 US physicians meet with sales reps via online video, while more than 300,000 others show interest in interacting with sales or other company reps online. Of the physicians already participating in live video detailing sessions, they do so with an average of seven reps per month. "Incorporating live video details in the physician-sales rep relationship can be a win-win for both," says Meredith Abreu Ressi, vice president of research at Manhattan Research. "It can be a cost-effective strategy for sales forces looking to reach physicians spread out over a wide territory, and physicians enjoy the flexibility and interactive features the sessions offer."
Ortho-McNeil Neurologics, a division of Ortho-McNeil-Janssen Pharmaceuticals, added a technology-based alternative sales channel to the cornerstone of their sales strategy in September 2007. The incorporation of Aptilon's AxcelRxSM live video detailing service links sales reps with key physicians. "We place a high priority on meeting the informational needs of our customers," says Denice Torres, vice president, marketing, for Ortho-McNeil Neurologics. "The dynamic healthcare market and growth of technology present us with both a need and an opportunity to develop better customer solutions. Our goal is to lead the industry in delivering meaningful information to customers when, where, and how it is most convenient."
Merck, which states that its new commercial model is designed to be more cost-effective and responsive to customers' needs, also uses Aptilon to enable large numbers of rep-physician interactions. At the physician's convenience, a live sales rep can be reached with the click of a mouse. Says Aptilon President Denis Martineau, "Merck's expanded commitment to the AxcelRx alternative sales channel is a validation of its effectiveness and a demonstration of our 'Sales Force of the Future' strategic approach that enhances sales force access and addresses productivity."
Still, electronic detailing only works if it's executed well. Mike Luby, CEO of TargetRx, underscores the opportunity for pharma in the digital space, but cautions companies that it comes down to execution. "I see a lot of companies throwing things at the wall to see what sticks," says Luby. "Efforts should be integrated and coordinated so that physicians get a consistent theme and message."
According to TGaS Advisors' annual state of commercial operations benchmark survey, large-tier pharmas rated digital detailing high on their list of priorities to evolving sales forces, with the most significant change pointing to the addition of closed-loop marketing initiatives. "When we conducted this annual benchmark in 2007, there were not many firms that were even experimenting with closed-loop marketing," says John Carro, vice president, management advisor, of TGaS Advisors. "But in 2008, a significant number were either piloting or planning to implement it." Carro believes that the closed-loop marketing permits better data capture on customers and can, for example, integrate electronic sampling with presentation content.
Across AstraZeneca's sales force, tablet PCs supplemented, rather then replaced, paper core visual aids in 2007. "Based on our data, we are confident that e-detailing differentiates our pharmaceutical sales specialists, and provides a competitive advantage. It's effective across the board because of AstraZeneca's continuous loop promotion initiative," says Mallon. "This process ensures that our PSSs are delivering detailed information that is customized to the healthcare provider."
For flexibility and efficiency, pharma has traditionally called on contract sales organizations—for temporary help, a particular region, or even an entire brand—but companies are now looking to take outsourcing to the next step. One of the most interesting developments in outsourcing is the emergence of "embedded" contract sales forces—hired and trained by the outsource company, but actually working within the client pharma company. "Two years ago, nobody was talking about [embedded] outsourcing, and now we're having weekly conversations with clients," says Sandy Jennings, executive vice president for Innovative Selling Solutions, an inVentiv Health Company. "Most companies utilizing the embedded model are working within a more regionalized approach. For example, if a vacancy occurs, a decision may be made at the regional level to add a flexible resource due to changing local market conditions. This provides continual flexibility in the field force."
Through its database of approximately 400,000 candidates, inVentiv screens and profiles candidates. When working with a pharma partner, the company can develop a profile catered to the client's needs. For example, in an embedded model, a company can request 50 percent B2B people who have never sold a pharma product, 30 percent who have less than two years' experience selling pharmaceuticals, and 20 percent nontraditional sales individuals such as recent graduates. (Jennings notes that whatever the team, typically there is a percentage population involved for each profile.)
A study in the journal Health Affairs found that in 2007, US healthcare spending grew the least it had in a decade. The reason for the slowdown, reported lead author Micah Hartman, was traced back to drug spend, which slowed because of several factors: more generic use, less overall use due to safety concerns over some products, and less-harsh price increases—just 1.4 percent in 2007, compared with 3.5 percent growth the preceding year.
Indeed, the industry understands just how important payers are in this environment, with decreasing margins and tight battles for formulary placement, given the formidable competition generics pose. Bob Merold, general manager of Symphony Metreo's pharma division, says, when it comes to the rising tide of generics, "Right now it's at a trickle, but in mid-2009 that trickle will turn into a steady gush."
To survive, each pharma needs to figure out how to broker an equation with managed care companies and the government to present the meaningful advantages of its medicines and solidify placement on key formularies.
Certainly, there's a lot of work being done. Novartis' pharma CEO, Joe Jimenez, stated late last year that the company had been conducting what turned out to be very successful pilots in already highly restrictive markets. In places like Massachusetts, Novartis significantly reduced the number of sales reps but built up cross-functional teams—with a managing director and finance, sales, health economics, marketing, some medical—to call on payers and healthcare providers. "We're interacting now with those customers at a different level than before," said Jimenez.
Particularly for manufacturers with high-priced therapeutics, companies must work "incredibly close" with payers, says Andrew Komjathy, vice president and general manager, North American and Asia Pacific commercial operations for Shire Human Genetic Therapies, a division that specializes in very rare genetic diseases. He cites three reasons why: to point out that there's a patient in the system that needs treatment, to justify why patients with an unmet need deserve access to their products, and to include a third stakeholder—the patients and their families. "These diseases are devastating," says Komjathy. "So it's incredibly important that we not only have a good working relationship with the physicians, but that we make sure we can get access from a payer perspective and maintain a very close relationship with the families."
But it takes different skills and ways of working to approach payers. Shire's Adsett believes companies, in turn, are going to place a heavier emphasis on training reps to understand the payer landscape. "As we think about the expertise we need for our sales people in understanding the role of the payer, the role of either the government as an insurer or some of the private insurers or cash-paying patients," he says, "it requires a deeper understanding of ultimately who is reaching into their pocket and reimbursing for this product."
Ironically, for many pharma companies, the best way to preserve the sort of access they've traditionally had with physicians may be to turn away from the sales model and make more use of medical science liaisons. MSLs can't promote drugs, but they can engage in scientific discussion with physicians on a level that most reps would be unable to sustain, even if they were permitted to try. And in the new world of complex specialty drugs and biologics, that trade-off looks increasingly attractive.
Cisco's 2008 "Unifying the Prescriber Influence Network" report notes that physicians want to control when, where, and how they get information. Furthermore, says Jan Malek, director of IBSG and co-leader of life sciences for Cisco, physicians want to connect with experts. For example, an MSL would be appropriate for a first contact level with a physician followed by a key opinion leader on second contact.
There is a debate about whether a rep has the ability to deliver value beyond the basic presentation of information. For example, what happens when the physician has a specific medical question? "A rep has to call a doctor once per month or so. What will they tell him or her after month six, seven, or eight? I don't think reps have learned anything new at those points," says Malek. "They can keep pushing the drug, but if the doctor has a specific question, that is where the MSL comes in. They speak the same language."
There are also difficulties associated with leveraging MSLs—chiefly the price tag and travel issues. However, the average sales rep spends so much time traveling and sitting in waiting rooms that key interaction with doctors is lost. "MSLs who are actually interacting with physicians via phone calls, chats, or online are spending a greater proportion of their time talking to doctors than the sales rep. Even though they're more expensive, you get more return on that money," says Malek.
The Medical Affairs Company observed a trend in the growth of specialty MSLs in 2008. Company President Evan Demestihas, MD, believes the best way to a physician is through an MSL. "You have to find a model that makes everyone happy, beginning with the physician," he says. "Times are changing. The companies that jump on the bandwagon first will be miles ahead of the pack."
Training will be crucial. In an effort to provide their reps with advanced training in the cardiometabolic area, Solvay sends its field force to a special academy. "When we spoke to customers in market research, all of them indicated that they want a rep with a higher level of training—one who can fill in the ranks of a nurse practitioner or practiced medicine with a level of understanding that goes beyond a typical sales rep," says Hastings.
Pharma is currently facing some challenging times. Between looming patent expirations, the recession, and a dearth of new drugs in the pipeline, companies are forced to come up with new and innovative ways to sell drugs.
Drug firms that have taken the initiative and begun restructuring their sales force models are ahead of the game. Which sales model will be the right fit or the best solution might not be an easy answer, but the paradigm shifts underway are proof that pharma is willing to adapt to market trends.