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New sales and marketing models

Published on 21/01/09 at 10:30am

These are challenging times for pharma as regulatory reform, intense financial pressures and an increasingly complex network of stakeholders are driving the need for change within the industry.

A recent poll backed this up, finding that 72% of senior managers expected their company to be using a new business model in the next 1-2 years.

These findings were included in Pharma at the Crossroads, a new international study by Roland Berger Strategy Consultants, which collates and analyses the opinions of senior decision-makers in leading pharmaceutical firms, providing a unique snapshot of the industry thinking.

This article explores two key issues facing the industry at present - market access and increasing cost pressures - before examining how sales and marketing organisations can succeed in the new environment.

The challenges ahead

Market access and reimbursement have emerged as top management issues in recent years. Some of the prime factors behind this are increasingly difficult regulatory approvals in the wake of the Vioxx withdrawal, as well as the tougher reimbursement and pricing environment in many countries.

Access to the market varies significantly by country, although there is a general trend towards increasing cost-benefit control. The US is dominated by very strong pricing pressure, with net pricing being the dominant issue. In many European countries reimbursement is the prevalent issue, and is becoming increasingly linked to cost-benefit analysis, eg through organisations such as NICE (UK) and IQWiG (Germany).

Tougher pricing and reimbursement environments on top of increasing costs are putting the industry profit pool at risk. The profit pool in the US market is considered most at risk, mainly due to the intense pricing pressures within the market. This price pressure should not be underestimated. As one respondent comments: "The net prices in Thailand, South Korea and the US are the same for our products."

The stagnant European market is also considered relatively high risk, due to the increasing use of cost-containment measures. However, industry executives are optimistic about opportunities in the emerging BRIC countries. Nearly a quarter (22%) of managers expect strong growth from these regions due to improving public healthcare provision and the growing prosperity of the middle class. Although lower risk than the US or Europe, these regions do still present some challenges for the industry. For example, liberalisation in Russia and a need for better patent protection in some countries, eg India, are identified as concerns.

Focus on Europe

In Europe, cost-effectiveness has become a key hurdle to market access. Since the 1990s, national agencies have been established to perform cost-benefit assessments on pharmaceutical products. The agencies typically have either a regulatory or advisory role on reimbursement, pricing and sometimes therapy choice; however, the approach used to compare drugs and to decide which treatments to assess varies by country.

NICE, in the UK, is typically thought of as a trendsetter in this area. Until recently, without positive guidance from NICE, new drugs were unlikely to be a success in the UK market. However, recent high-profile cases have led the UK to review its position with regard to top-up fees for patients, resulting in patients being able to pay for drugs not provided on the NHS directly whilst still receiving NHS care.

Priorities vary between agencies too. In the UK, oncology is a key priority for NICE, a mature agency. In contrast, IQWiG in Germany is a younger agency and is focused on common diseases such as asthma, diabetes and cardiovascular disease.

Whilst a favourable reimbursement decision is often key to a product's success, it is not the only step in securing market access. Increasingly pharma companies are recognising that generating demand amongst physicians is not enough, since the power of physicians is declining in line with the rise of new customers, such as payors and regional health organisations. As one executive comments: "Marginally better but marketed like hell does not provide a security net anymore."

In Spain, Italy and the UK, these new key customers are regional health organisations, which are creating local healthcare economies. These local healthcare economies build an inhomogeneous situation within a country based on local priorities and opinions, resulting in local formularies and care pathways. Regional organisations have been delegated significant financial responsibilities.

For example, in the UK, PCTs hold local healthcare budgets for all patients within their catchment area and commission services and healthcare to suit the needs of the local population. However, each region assesses its needs independently. In Spain, for example, some regions such as Andalusia consider only costs, forcing pharmaceutical companies to remove services valued in other regions.

On a positive note, not all senior executives see cost containment as a bad thing due to the associated trend for evidence-based medicine: "Provided you have the right data, you can virtually guarantee the market," comments one manager.

The new market access situation emerging across Europe poses significant challenges for pharma companies. How best can they work with these new customer groups? What steps must they take to ensure favourable reimbursement?

Response from the market

Pharma companies have already started to respond to the increasingly difficult market access situation. The senior executives interviewed in the Roland Berger report identify two key opportunities in the market for the future: expansion into services and novel industry cooperation.

Managers identify expansion through services as the most important future opportunity in the industry. However, there are mixed views as to the likely success of this approach. One executive comments: "If services try to compensate for lack of product differentiation, it will not work." Others point out that services must either provide leverage to the core business, or become profitable themselves.

Many companies are already offering customers services as well as products. For some years now in the UK, big pharma has tried to develop relationships with local payor organisations, such as PCTs, by offering to provide additional services that the PCT may not be able to fund. This funding typically takes the form of educational training for medical professionals, or sponsorship of additional specialist nurses for key conditions such as asthma and diabetes.

Some firms, such as Fresenius Medical Care (FMC), have gone even further, having already successfully transformed themselves into service providers. FMC now offers dialysis services in some markets as well as products and disposables.

The potential for novel forms of cooperation across the value chain is confirmed by all interviewees and is identified as relevant for all organisations, from small biotechs to traditional big pharma and suppliers alike. Some instances of novel cooperation already exist. For example, Philips, the insurance company Achmea and the academic hospital Erasmus MC Rotterdam developed a new telemedicine service for patients with chronic heart failure. Philips provided its expertise in electronics, Achmea added its knowledge of patients and healthcare issues, and Erasmus MC contributed its medical expertise.

Pharma companies have also been introducing key account managers (KAMs) to serve the new customer groups such as payors. In Italy, regional account managers have been introduced to work with the increasingly autonomous regions. In some German firms, KAMs are now in place to work directly with payors. These payor organisations typically require a different 'sell' than a physician, and companies have started to improve their health economics sales skills in order to appropriately target this market.

Forge partnerships with your customers

Three core competencies are required for market access excellence in the new world: strong internal processes to monitor political changes, good handling of new customers (eg payors), and favourable reimbursement decisions. Pharma companies will have to move away from being mass producers of products and begin to partner with the best institutions, organisations and individuals for the long term.

What does this mean for sales and marketing organisations? Sales has traditionally been a 'share of voice' game, where companies look to drive product market share gain in the short term. Now it is becoming increasingly important to prioritise strategic considerations and look for long-term partnerships with local healthcare providers and organisations such as hospitals. To do this, key account management skills will become critical. As has already happened in some countries (mentioned previously), KAMs will be introduced to manage key customers (eg hospital groups and regional healthcare organisations). These KAMs should have responsibility for managing important relationships, as well as defining the strategic approach and identifying opportunities to partner with and support these new customer groups through service offerings.

The regionalisation of healthcare in many countries (eg Italy, Spain and the UK) will require pharma companies to be decentralised in their sales and marketing organisation, resulting in the empowerment of local leaders. KAMs will be required to manage the regional health economies with the power to tailor the sales and marketing approach (including resource levels), based on the needs of the local health economy and the position of the pharma company within it. As costs rise in the industry, return on investment will become increasingly important to sales and marketing organisations. This may result in the more progressive organisations reducing investment into some 'unfavourable' areas. On top of this, outsourcing is likely to grow as the need for flexibility increases.

There are two other market trends strongly linked to market access - evidence-based medicine and medical information - both of which have the potential to change the industry dramatically. As successful outcomes become increasingly important for good market access, medical information will develop into an essential part of the marketing and sales mix.

In the future, the call for evidence-based medicine will force the industry to learn continuously about a product. This will make it a more attractive partner for authorities, payors and patients alike, and will assist in the new 'pay for performance' collaborations that have started to emerge. For example, Janssen-Cilag recently introduced a pay-back for non-responders to bartezomib in the UK.

In addition, this demand for information will promote new forms of communication. As one executive comments: "We have to learn from the transformation of web 2.0 in the 21st century; patients will gain access to unfiltered information." As patients become more willing to pay for drugs directly, these new forms of communication may emerge as the most effective way of targeting this new customer group.

These new realities in the industry will require new commercial models. Whilst fine-tuning traditional strategies may have worked in the past, this is no longer an option. Instead, business innovation and clear clinical differentiation will determine the most successful companies in the future.


Sales and marketing organisations must recognise that this is now a long-term, strategic game; there are no quick wins any more.

Pharma companies must be seen to be willing to collaborate for better healthcare and not to push individual products at the expense of local healthcare providers' budgets.

To do this, companies must:

* Understand the influence network within a local health economy.

* Tailor the sales and marketing approach to a regional level (e.g. vary the sales channels, services and marketing messages by region).

* Develop long-term relationships with new customer groups, eg private healthcare providers, at the national - or even international - level.

David Stern is managing partner and Sophie Lamle is a senior consultant in Roland Berger's London office. Aleksandar Ruzicic is a principal at the Zurich office of Roland Berger Strategy Consultants. For more information visit:

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