Pharma gets smart & lean

pharmafile | October 22, 2003 | Feature | Research and Development |  pharma, strategy 

Pharmaceutical companies need to transform themselves into more flexible and connected entities and  given the financial pressures on the sector – they need to become much fitter in the way they operate. These were the conclusions suggested by this year's Vision & Reality survey conducted by Cap Gemini Ernst & Young and INSEAD – 'Prescriptions for the Smart & Lean Pharmaceutical Company'.

Participants in the survey – which included physicians, patients and payers as well as pharma executives  agreed that pharmaceutical companies need to develop and apply a more thorough knowledge of their customers' needs to deliver additional value through tailored packages of products and services. Interaction with these networked customers should reflect individual preferences, communicating to each stakeholder through multiple appropriate channels. Success depends upon having the flexibility to react rapidly in a constantly evolving market and providing a coherent message to networked customers across multiple channels.

Looking first at the economic, scientific, political and social environment that the industry is operating within, three major forces were identified as seriously threatening the industry's margins and growth, and contributing to a general feeling of uncertainty. Firstly, pipelines are suffering from an innovation crisis that is likely to affect most pharma companies until at least the end of the decade. Secondly, there exists an increasing pressure on drug revenues from pricing and reimbursement legislation, generic competition, patent challenges, and regulatory constraints. Finally, the key customer groups in the healthcare market are changing their roles, their influence on prescribing and their attitudes toward the pharmaceutical industry.

While most companies participating in our research recognised the severe challenges the industry faces  and many of them have started to adjust the way they operate – few have instigated fundamental changes to their current strategies or operating models. "When the future scenario occurs, a radically different business model will be required – but right now we don't feel ready to move. In today's market, increasing the number of sales reps still makes a difference," says a Sales & Marketing Director in Germany.

The survey found that companies are making incremental changes and trying to further optimise the current model. Some have invested significantly in customer relationship management systems, but to date these have been predominantly focused on automating and supporting existing marketing and sales practices rather than redefining and reinventing them.

There is growing interest in moving beyond the current focus of operational CRM and developing new tools to better segment market and target key customer prospects. Predictive customer modelling is also a hot topic. However, very few companies have embarked on the wholesale changes required to adjust to the new market environment. A significant barrier to an industry move towards a new, customer-driven model is the perceived risk of lost sales through reduced sales-force muscle. Nobody wants to be the first mover. However, with sales access to physicians contracting, pharma companies will soon have little choice.

Networked healthcare

The reality of networked healthcare is forcing pharmaceutical companies to review the fundamentals of their relationships with new and existing customer groups and map against their own objectives in the healthcare network. Pharmaceutical customers want more from the industry – objective information instead of marketing materials, value instead of hard-nosed selling, and an honest partnership with the industry.

Physicians – traditionally among the most important decision-makers and therefore the main target of the industrys commercial efforts – are losing influence over drug choice. Private and public payers, supported by regulation, are exerting more control over prescribing through formulary lists based on cost/benefit and pricing/discount considerations. At the same time, a growing number of proactive, informed patients  paying a higher share of their healthcare costs and armed with readily available health information – are demanding medicines and specific treatments from their doctors.

Not only have the roles of these individual stakeholder groups evolved, they are also becoming more connected with one another. As a result, prescribing decisions are influenced by more than one stakeholder group. In this networked environment, none of the players can act in isolation. Priorities may be in conflict: patient groups push for unrestricted access to innovative medicines while payers limit their choice of treatment, or pharmaceutical companies encourage physicians to prescribe certain drugs while payers are trying to get them to adhere to formulary lists. Collaboration between all stakeholders is critical.

The best pharmaceutical companies will understand and define their role within this new ecosystem. In looking at the results of the survey, we can further identify what the status of these stakeholder relationships is, and how best to strengthen them in the future.

Information-hungry Physicians

Let us look at the responses of the physicians. Pharma companies have traditionally enjoyed a close relationship with physicians and 44% of surveyed physicians say they generally trust pharmaceutical companies, with only 19% explicitly expressing distrust. The majority of physicians (74%) find the scientific information the pharmaceutical companies provide helpful in their day-to-day practice. Yet the relationship between pharmaceutical companies and physicians is showing signs of strain, particularly in three areas: communication biases, messages to patients, and sales reps.

"More factual data, less marketing! Tell us the truth," says a Physician from the US. Physicians commented sharply about the marketing bias in the information presented to them by sales representatives. What they want most of all is unbiased, evidence-based, scientific information about products – including head-to-head comparisons as well as risks and side effects. A staggering 65% of surveyed physicians expressed concern about pharmaceutical companies not keeping them informed about the messages they send to patients  a finding consistent across the US and Europe. Most worrying for the pharma companies, over the past 2 years 38% have decided to make less time for sales representatives.

US, and increasingly European, markets are saturated with sales representatives and access to physicians has become one of the top issues for pharmaceutical marketing and sales executives. So why has the trust eroded from this essential relationship? The answer might lie in networked healthcare and the changing roles of physicians, pharmaceutical companies and payers. Physicians are under enormous pressures in todays healthcare world as cost control is leading to severe resource shortages, while formularies and informed patients are challenging physicians' autonomy over prescribing decisions.

The survey highlighted a number of ways in which pharmaceutical companies can re-build the kind of relationships that will yield the best outcome for all stakeholders in the equation. The first point is that while human contact is valued, when approaching physicians, less is most certainly more. They told us that they want to choose how they were contacted, that they want contact with one or two representatives per company only – and that these reps should be more responsive to doctors needs. Equally, relationships should be deeper – based on a clear exchange of objective and neutral scientific information, unbiased by commercial arguments.

Importantly, 57% of physicians added that they would make more time for sales representatives if they provided a value proposition or a value-added service, such as educational materials for patients, unbiased scientific information, continuing medical education/funding and practice management support. Long-lasting and value rich physician relationships are seen as the key factors in creating strong sales.

Patient Relations

Our research with over four thousand consumers and patients in four countries indicates that the patient population is in transition – a large core of traditional, passive patients co-exists with a significant minority of well-informed, proactive patients who cannot be ignored. In the informed group, 26% say they do not receive enough health information from physicians, 66% (almost 80% in the US) seek research information on illnesses and medicines to ensure they get the best treatment, and 35% have approached their doctor with a branded medicine in mind. A majority of people still rely on their doctor/healthcare provider as a core source of information and medical knowledge (78%) but many are interested in additional sources of information (68%) and want to find out about new medicines and treatments (58%). One in three respondents say that they would like more direct interaction with the industry.

It is clear that consumers/patients are an increasingly important constituency to address within pharmaceutical marketing and sales strategies; companies really need a two-pronged approach – direct contact with the proactive group in a personalised, interactive way and indirect contact with the more traditional group – through doctors and pharmacists. Companies should aim for a high-quality relationship with consumers and patients – the proactive group, in particular, is accustomed to high-quality treatment from other industries and is likely to be less brand-loyal. Inaccuracies, mistakes or an obvious marketing bias will not easily be forgiven, especially in an area as serious as healthcare. Any information provided must, therefore be accurate, clear, unbiased, and relevant to patients' needs.

Misunderstood Payers

The relationship between payers and pharmaceutical companies is generally not very satisfactory and in most cases there is a marked absence of collaboration; payers feel poorly understood by the pharmaceutical industry. Those interviewed were concerned with the lack of appropriate persons within the pharmaceutical companies to answer their specific needs, particularly around cost-benefit ratios and Evidence Based Medicine. The focus of the payer relationship has traditionally been on overcoming the barriers to obtaining reimbursement approval, but the physician made the prescribing decision. Yet several issues have now become concerns for payer communities and are contributing to a changing payer role: drug pricing and pressure for cost containment; growing number of chronically ill patients and changing patient demographics; increasing cost of the pharmacy – particularly speciality products – and assignment of value to drugs.

Pharmaceutical companies need to develop a better understanding of payers' requirements and their specific goals within the healthcare value chain, and then build credibility by working together toward common goals. The survey illustrated that payers have a very clear idea on what an efficient and effective working relationship with pharmaceutical companies could look like. They told us that they are ready to work with the industry to develop innovative approaches to reach the common goal of improved health outcomes  and it will be through partnership relationships that this can be achieved.

The way forward

The distinct message from our research with all three customer groups is a call for a new healthcare vision  a more collaborative, transparent healthcare system in which the stakeholders work with, instead of against, each other.

From our research with pharmaceutical executives, we see evidence that three shifts in the relationship between pharmaceutical companies and their customers are starting to happen. Firstly, the transition from a focus on physicians to a focus on customer networks. The majority of respondents saw that this change is well underway in their company. Secondly, the move from mass marketing to targeted marketing  companies are at various stages of this shift, with about a third each seeing themselves at the base, initiated and developing level. And thirdly, the move from product push to customer pull, whereby companies will move from detailing product messages towards creating product and service portfolios based on customer needs, thereby offering more value to those customers. Again, the industry believes that it has already started on this journey, but it certainly still has a way to go.

Smart & Lean

To deliver the customer relationships our research identifies the requirements of pharmaceutical companies which are important for sustained growth, which are to be connected, flexible and fit. 'Connected' means both co-ordinating customer information to operate seamlessly within the organisation and establishing the means to obtain customer intelligence to determine the optimal combination of products and services to offer the market. 'Flexible' translates as being able to change both staff deployment and product/service offerings when necessary to act quickly on customer feedback or unexpected market changes. It also means having an adaptive approach to technology to prevent infrastructure becoming a barrier to serving changing customer needs. 'Fit' describes the act of optimising resources to provide high-value products and services most cost-effectively.

Those that transform themselves around customers' needs are likely to achieve long-term tangible and intangible benefits, ranging from improved internal processes and greater sales productivity to higher customer loyalty. Future smart and lean pharmaceutical companies will differentiate themselves by using deep knowledge of all customer groups to provide tailored product and service packages. They will interact with customers in ways that cater to their preferences and will have the flexibility to react appropriately and quickly in a constantly evolving market.

The rules of the game in the healthcare market are changing, and pharmaceutical companies need to respond to this. Gradual improvements are not enough. New models and a leap in performance are required. It is only by pursuing a holistic customer driven transformation that companies can become capable of meeting the current and future needs of their customers in the networked healthcare environment.

Alasdair Mackintosh is Head of Life Sciences Global CRM Service Offering at Cap Gemini Ernst & Young.

For more information on Prescriptions for the Smart & Lean Pharmaceutical Company, please visit: www.cgey.com