New Commercial Realities Paper Pt 3 – The changing landscape for pharmaceutical commercial operations – roles and organisational scale

pharmafile | September 29, 2010 | Feature | Sales and Marketing |  Kinapse, White paper 

Faced with a changing healthcare environment and the prospect of diminishing commercial returns, the industry’s traditional commercial models based on the sales force arms race are no longer viable.

In order to adapt to new commercial realities that require more complex decision-making processes and involve a greater number of stakeholders influencing at a range different levels, pharmaceutical companies must undertake a fundamental and systemic rethink of their commercial operations.

This article is part 3 of a 4-part series. Part 1 described the key drivers of the evolving pharmaceutical commercial landscape and part 2 considered how key stakeholders in the changing healthcare environment are evolving. In this third article of the series we discuss in detail the key implications of the changing industry landscape for pharmaceutical commercial operations – with a particular emphasis on roles and organisational scale.

The changing healthcare environment demands new organisational realities

Recognising the need for future commercial capabilities and understanding how specifically they will support different selling models across different therapy areas and product lifecycles is in itself a challenging task. However, taking the next steps towards establishing an organisational structure that effectively delivers these capabilities is even more demanding. Organisational (re)design initiatives typically involve significant change and are best managed using a structured approach that considers in turn:

• Roles required to accommodate future capabilities along with enabling skills and tools
• Organisational scale: what is the appropriate size for each of the different functions?
• Governance mechanisms to ensure efficient effective commercial operations, including:

i)    Local governance: what is the reporting structure and interfaces and what are the synergies to be had across functions, therapy areas?

ii)    Geographical alignment: are national, regional and local structures all necessary?

iii)   Global governance: how should responsibilities be divided between the global/regional and local organisations?

Whilst there is clearly no single optimal solution in respect of each of these considerations, in our experience there are a number of common elements.

Roles, skills & tools

For an industry which has built huge success on mass marketing and transactional selling, implementing these new capabilities will without doubt require new roles and significant re-tooling. A cursory glance at the recruitment sections of the specialist press, indicates just how many new roles are being hired, including: Healthcare Policy Product Expert (Germany), Market Access & Patient Group Manager (Holland), Tendering Manager (Germany), Regional Medical Liaison Manager (UK), Strategic Funding Manager (Spain), Field-based Market Access Team (Spain), Head of Key Account Management Payers (Spain) Healthcare Development Manager (UK), Market Access Solutions Manager (UK), Public Affairs Manager (France).

It is notable that most of these new roles relate to some extent to handling relationships with payers, health authorities and patients – the new breed of customers. Such relationships will require new skills and tools, with a major focus on developing and delivering value propositions (combining content development with a key role for health economics and relationship-based selling), influencing, managing networks and team-work. This represents a fundamental change in mindset for the industry and it is conceivable that many organisations will find it difficult – or even impossible – to adapt. However, this also creates an opportunity for organisations to review the existing talent pool and if necessary, bring in new blood – perhaps from other industries with greater experience of relationship-based selling models.

We believe that four key roles are required in any future commercial organisation:

• Health Managers (applicable to both Primary and Secondary Care) typically responsible for maintaining relationships with payers and national government and health officials. Health Managers will be involved in lobbying and negotiating for market access and reimbursement, and maintaining close relationships across national healthcare systems. These should be relatively senior roles in order to establish the trusted peer-to-peer relationships at the appropriate level of influence.

Most payers are keen to work with pharma companies to provide guidance on how companies can better meet payer needs. Engaging payers in qualitative research and through payer advisory boards are two common approaches to securing such input. However, there remains scope for pharmas to significantly strengthen these interactions by improving the quality of communication, seeking a better understanding of payer needs and providing more relevant data and information.

• Key Account Managers (predominantly Secondary Care) typically responsible for key accounts (in the case of specialist products) and the local implementation of market access strategy with regional and local payers and health authorities. Key Account Managers will be involved in managing and coordinating a complex network of stakeholders and influencers both within and outside of the account, likely to include healthcare professionals, financiers, patient groups, disease network, local HTAs and managed care units.

Key Account Managers require competences across a wide range of non-scientific skills and will be expected to maintain detailed knowledge of all aspects of individual accounts. This represents a significant challenge since very few traditional sales reps currently have the required skill set, nor is there a significant pool of suitable expertise outside of the industry. Therefore there is likely to be a heavy emphasis on training and re-training involved in developing the new Key Account Manager roles.

• Sales Specialists (applicable to both Primary and Secondary care) have perhaps the closest similarity to the traditional sales rep model. Sales Specialists will be responsible for direct product selling, and will also be expected to provide detailed product information as well as ongoing service and support to providers in caring for patients. Depending on the specialist nature of the product, this may involve a strong educational component. Delivery of Continual Medical Education (CME) is a contentious topic, both in terms of how it is funded and how it addresses the real needs of physicians. Meanwhile codes of practices have been tightened in order to remove possible bias from promotional activities and to introduce greater objectivity.

As well as detailed product knowledge of their own and competitors’ brands, Sales Specialists will also be expected to provide expertise in pathways of care, their outcomes and economics. The current remit of MSLs (Medical Sales Liaisons) falls in this category. Furthermore, in view of the overall trend in Europe towards regionalisation of care, Sales Specialists will increasingly be expected to support practice physicians with local budgeting and commissioning, as well as playing an important role in supporting epidemiology studies. These latter activities will be especially important in Primary Care products, where the educational element is far less important.

• Patient Liaisons (predominantly Secondary Care) is a relatively new requirement that has emerged in recognition of the growing importance of patients as a key customer group. The industry is also witnessing transformational change in the channels being used to engage patients, as Web 2.0 technologies – and social media in particular – look set to replace the classic push strategies via magazines, websites and DTC approaches, and enable real dialogue to be established. However, as with payer relationships trust is a critical parameter for engaging with patients, and therefore the industry must rid itself of the baggage associated with decades of bad press in this regard.

There are clear actions that the industry can take to improve the situation, such as ensuring ‘relevant’ information is included in every communication; customising engagement to the specific needs of patients according to their position on the treatment pathway; adopting transparency with regard to ‘negatives’ such as potential side-effects; and extending the focus of communication beyond the medication to recognise the whole condition. And perhaps most importantly of all, genuine engagement will mean listening before ‘selling’.

2009 was something of a trial year for the industry in terms of use of technologies such as Twitter, Facebook, YouTube and blogs. Through their online community, Children with Diabetes, J&J are promoting understanding of the care and treatment of diabetes, especially in children, and supporting families living with the disease. Similarly, Novartis has established CML Earth – a social network that connects Chronic Myeloid Leukemia patients. The site welcomes patients, patient groups and healthcare professionals from around the world. Boehringer Ingelheim is generally recognised as making the smartest use of Twitter, ‘tweeting’ not just company information but also recommending health-related articles and information. They have also pioneered the use of this channel to broadcast real time trial data, posting results from the RELY trial (the largest atrial fibrillation (AF) outcomes trial ever conducted).

Patients are also increasingly becoming involved during product development, providing input relating to their conditions. As mentioned earlier, discussions are currently taking place at EMEA level to define a more structured process for early patient involvement. Some companies are already ahead of the curve in this regard. For example Novo Nordisk has partnered with the International Diabetes Federation and an international expert advisory board for their ‘Be the Face of Change’ diabetes educational campaign and DAWN programme (Diabetes Attitudes, Wishes and Needs).

Beyond engaging patients directly, Patient Liaisons should also work through physicians, pharmacists and nurses to provide patient support. Physician endorsement significantly increases the likelihood that a patient will read – and trust – medical information. Pharmacists and nurses are also an important target audience in this regard, since their endorsement of materials and information can help to build and reinforce credibility.

Alongside the key customer-facing roles for Health Managers, Key Account Managers, Sales Specialists and Patient Liaisons, there is a strong requirement for integration and direct collaboration with two supporting functions: Health Economics and Outcomes Research (HEOR) and Clinical Development. HEOR provides necessary data, information and input to guide development of the value proposition and the factual argumentation to support ongoing dialogue with payers, authorities, providers and, to a lesser extent, patients. Meanwhile, close interaction with Clinical Development will ensure that trial protocols are designed with a commercial endpoint in mind, possibly in collaboration with healthcare authorities (as with the GSK and Novartis examples mentioned above).

In the case of ’Real world’ methodologies these dialogues would be expected to take place even earlier in anticipation of conditional approval at the end of a lean Phase IIIa clinical trial. Such methodologies would allow further confidence in clinical efficacy, value and benefits to be built over time as real world data are generated.

Organisation scale

The current trend of downsizing across the industry is having perhaps the greatest impact in commercial organisations, as companies dismantle arsenals amassed during the arms races of the 1990s and early 2000s. According to Fierce Pharma’s third annual list of the industry’s top layoffs, 58,696 pharmaceutical and jobs were cut through the end of October 2009 – an increase of 15,000 more jobs than were lost in 2008.

Though much of this has been driven by the three recent mega-mergers, with Pfizer and Merck accounting for more than half of these losses, a significant number of losses have arisen as a consequence of restructuring driven by the changing customer landscape. It is becoming clear that the new commercial models will require far less people. In a recent report, Deloitte calculated the decline of US sales reps at an average of 8.3% per year since a peak in 2005. This figure was as high as 18.4% for those sales reps with principal responsibility for interacting with physicians.

Whist recognising that sizing decisions are driven in a large part by the specifics of each company’s business and portfolio, the remainder of this section focuses specifically on the key roles and supporting functions previously discussed in this paper, and provides evidence and guidance for their sizing.

• Health Managers and Key Account Managers

Customers for Health Managers and Key Account Managers are payers, authorities and key accounts and therefore relatively few in number. In contrast to the classic coverage & frequency models used in the past, future sizing decisions should be based on two things:

i)    Ensuring full coverage of these institutions.

ii)     Deciding on the appropriate span of control based on bottom-up activity plans and workload required to service all of these customers. The level of activity will be highly dependent on the breadth of the portfolio and the number of therapy areas in which companies are involved.

The ultimate requirement will vary by country, depending upon the number of accounts and current position with respect to decentralisation of care. However, to provide an indicative scale, country-level representation would be expected to number a few tens rather than hundreds.

• Sales Specialists

As the area currently housing the largest number of sales people, this organisational component is most likely to suffer the greatest impact  The current trend of sales force reductions shows no sign of slowing; if anything we predict a sharper decline, especially in the Primary Care setting. Going forward, the key role of sales specialists will be to provide service and support to providers, which for more specialised products will increasingly involve provision of educational and deep scientific content to physicians and accounts.

In terms of Secondary Care, the existing target base is already relatively small therefore we do not anticipate large changes in scale, although further reduction may arise as a consequence of an increasing focus in rare or orphan diseases. The move towards developing closer relationships with customers will necessitate more frequent interactions – even if coverage may decrease slightly – therefore in terms of indicative scale we would anticipate Secondary Care representation to remain unchanged, typically numbering a few tens at country-level. To illustrate this with an example, Shire’s gastrointestinal division has 120 reps in the U.S., whilst the orphan drug division manages with just 10 reps.

In contrast, Primary Care is likely to endure further and deeper cuts. At their peak, sales forces in Primary Care indications used to number up to 1,000 in the largest countries, however they have been the major casualties of recent layoff waves. GSK have slashed their UK sales force from 800 to just over 530 as they create more payer-focused medical advisers and health outcomes consultants.

We believe that these numbers are still too high. Whereas previously large sales forces were needed to achieve the high frequency on target required for high share of voice, the move away from this model towards a new focus on supporting and servicing physician practices will require a far lesser scale.

Whereas under the previous model a frequency of six visits a year to a high value physician was common, a reasonable expectation under the new model is around two visits per year, organised around the practice planning cycle: an initial visit might focus on budget and expenditure plans with the aim of understanding how the company’s products and services fit in, including the need for ongoing support; the follow-up visit could then be used to review progress. Between visits, the sales specialist would allocate ‘resources’ such as third party nurses and patient management programmes to help practices manage patients This model exists and has already been successfully implemented in the industry. For example, Lilly is currently shifting its sales model from pushing messages to customers to spending more time listening than talking. Assuming this reduction in frequency of two-thirds, large Primary Care sales forces such as GSK’s could conceivably be reduced even further, from 530 to around 250.

Much has been written on the potential for outsourcing sales forces using the CSO (Contract Sales Organisation) model as a means of delivering savings and gaining flexibility. Whilst the idea is worthy of consideration for Primary Care, we believe the specialist nature of Secondary Care would make it difficult to implement in this context. Even in the former case, services and support to practices will need to be tailored to specific sets of patients and diseases, which will require some element of control from pharmaceutical companies to ensure quality.

Some lessons may be drawn from recent CME experiences in the US, where a number of companies have withdrawn funding of externally administrated education via third parties because of poor results delivered.

• Patient Liaisons

Patient liaison activities are currently typically managed by marketing in conjunction with the communication department.

As an integral part of the marketing mix, we foresee marketing – with overall accountability for the commercial plan – taking a much stronger lead in patient liaison with specialist input from communications and legal functions. Legal input is particularly important with respect to engagement via social media. The FDA organised a two day hearing on this specific topic in November 2009, and guidelines are expected during 2010. The EMEA appears to lagging behind in this regard.

In terms of scale, Patients Liaison roles are likely to be small in number, with dedicated individuals within each therapy area being responsible for developing intimate knowledge of patients and their needs for specific diseases. At present, activities around the use of social media for developing patient communities are very much lone efforts.

• Supporting functions

Irrespective of how supporting functions are organised – direct or dotted line reporting to business units; central or regional/field based – their numbers will be dictated by the structure of the organisation/function they are working with, possibly with a single interface per business unit or therapy area (if there are no synergies or similarities across units).

As such the overall team sizes will be much smaller than their customer facing equivalents, and will typically number single digits.

As discussed above, there is also a strong argument for centralising supporting functions at regional or global level, leaving only local point of contact in countries.

This article – part 3 of a 4-part series – has discussed in detail the key implications of the changing industry landscape for pharmaceutical commercial operations – with a particular emphasis on roles and organisational scale. In the fourth and final article in the series we go on to further discuss in detail the implications of the changing landscape for pharmaceutical commercial operations – this time, with an emphasis on governance. We also go on to describe an actionable approach for implementation of new commercial models.

We have written this series of articles from a practical as well as a conceptual perspective, and would welcome comments, feedback and ongoing dialogue with all stakeholders to develop further thinking and pragmatic insights into the industry’s evolving commercial realities. The full series of articles is available as a complete White Paper or can be accessed via our website at www.kinapse.com.

About the Authors

Jean-Francois Delas is a Vice President at Kinapse Ltd. and leads the Marketing & Sales Consulting Practice.

E: jean-francois.delas@kinapse.com

Stephen Mayhew is a Manager in the Consulting Practice at Kinapse Ltd. He consults to the life sciences industry in valuation, deal-making and asset and portfolio management.

About Kinapse

Kinapse provides consulting and outsourcing services to the life sciences industries, globally.

Our mission statement is: ‘Collaborating with our clients to innovate for exceptional results’. Kinapse clients include many of the world’s leading pharmaceutical, biotechnology, medical device and specialty pharmaceutical companies, government organisations and life sciences service providers.

For more information please visit www.kinapse.com.