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Stepping out: the contract salesforce

Published on 10/05/05 at 04:50pm

Sales forces in the pharmaceutical industry account for around 75% of marketing budgets, and are coming under increasing pressure to prove their return on investment.

Flexibility is the key to proving ROI, in responding to changes in headcount (the annual turnover of reps industry-wide is estimated at 19%), changes in sales offerings and market need, and the major changes in the NHS.

Contract sales organisations offer a range of services to support in-house teams, providing a dedicated salesforce to support an existing product or to maximise exposure at the launch of a new product.

The contract salesforce began in the late 1970s and early 1980s, in a very different economic climate to the one that faces drug companies today. Big pharma was seeing the first blockbusters coming through to the market, which meant a need for companies to bolster their salesforces with trained reps at a faster rate than they could deliver themselves.

These extra resources were needed when reps moved on, when a new product was launched or to support existing products when rival drugs were launched. By quickly adding contract sales resource, a company could sustain or increase exposure, supporting or boosting sales.

Today, the flexibility that CSOs offer pharma is still their strongest selling point, but major recent developments in the NHS have given contract sales a new impetus.

New level of prescribing decision-making

Regulatory bodies, in particular the National Institute for Clinical Excellence (NICE) add to the complexity of the sales issue. Uncertainties surrounding NICE recommendations mean that companies don't know how much sales resource they need until a product gets recommended or not.

New decision-makers have emerged, in the shape of Strategic Health Authorities and Primary Care Organisations.

This has created another level of decision-making, leading to an extra tier in the sales process, with big implications for staffing and training.

Like supertankers, giant salesforces can't change direction quickly, and new reps can't be recruited and trained instantly, so outsourcing is becoming a key component in many strategies - a number of companies in the UK now outsource 30-40% of their representatives.

The key impact of PCOs has been to complicate the decision-making process over purchasing and prescribing. Technically, GPs can still prescribe what they want, but peer pressure and the collective decision-making process within the PCOs make it easier for them to toe the line.

As PCOs now control 75% of NHS budgets in England, the response has been to focus on them, but getting a drug into a PCO formulary is far from straightforward. The individuals responsible for the prescribing formulary are known and heavily targeted, so your competitors are trying to talk to them too, putting pressure on their time and making them less receptive to sales approaches. The upshot is that bigger decisions are now being made by smaller groups of people and pharma has to ensure they target and access them.

Chris Corbin, managing director of Ashfield Healthcare, the second largest CSO, says: "Providing a flexible resource is central to our success. The market for pharmaceutical sales is changing. Changes in the NHS have meant that CSOs, as well as pharmaceutical companies,  must adapt their offerings. Although the prescribing decision no longer rests simply with individual GPs, the industry is still  looking for the most effective ways of influencing them and we must therefore ensure that we build sales solutions that meet the changing needs of our clients.

A strategic resource

Gradually, therefore, the status of contract sales has shifted from 'nice to have' where CSOs were only used to plug vacant territories, or to give an extra boost to launch a new product to increasingly being an essential element of pharma company strategies to implement successful marketing programmes.

In two simultaneous moves last summer, the full range of the industry response was demonstrated. At one extreme, Takeda has replaced its in-house sales team with outsourced resources, laying off most of its 168 staff, scrapping its entire field salesforce and using Ashfield to manage a new breed of sales and marketing executives called regional account directors who will be free to tailor sales and marketing strategies to their customers.

At the other extreme, Pfizer has remodelled its in-house sales team to take account of these changes by aligning its huge resources with PCO boundaries and customer needs. Pfizer's restructure retains the traditional primary care and hospital sales representatives, but these have now been realigned from older regional NHS bodies and now correspond with PCO boundaries.  

Pfizer has also introduced a new type of sales executive - primary care account managers - who will have responsibility across the entire product portfolio within a small cluster of neighbouring PCOs. They will develop relationships with key customers in these PCOs, meeting the need for the more strategic collaboration that health service managers have been demanding.

Whether the changes come about through restructuring or outsourcing, there is little doubt that a response to change, in the shape of collaboration, is what the customer - PCTs and GPs - definitely wants.

In March 2005, Takeda UK released market research indicating that  PCT leads believe the industry has made efforts to adapt to the changing NHS, but more than half of those questioned believe most companies are operating as they did five to ten years ago.

On the core question of whether sales representatives were still a viable proposition in today's NHS, the signals were inconclusive - only half the PCT leads and one third of GPs thinking they did not have a future. However, only 27% of GPs named sales reps as their preferred source of information and 45% of PCT leads and 40% of GPs believed their knowledge of new products would be unaffected if they never saw a sales rep again.

Other survey results showed that 80% of PCT leads and GPs felt pharma companies should work in partnership with PCOs to develop local strategies to meet local needs and 74% of PCTs thought that they should be able to commission their own support services from the pharma industry.

In addition, 60% of PCT leads and 69% of GPs felt that the industry could play a greater role in helping general practices reach their GMS contract targets.

The CSO product offering has gradually evolved from a pure recruitment function, through sales and project management, to include consulting and strategy services. CSOs are now involved in pipeline strategy and new product development programmes, brand awareness and usage and protecting brands nearing patent expiry.

 

John Hosken is principal consultant at Information Advisers and also a qualified business coach. For more information visit: www.john-hosken.com.

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