By Martin Parkinson, Principal Consultant, PA Consulting Group
and Magnus Franzen, Head Analyst, eyeforpharma
Pharma has been talking about changing its customer engagement model for years, yet only now are companies starting to slowly cast away the shackles of their successful past. These firms are showing a clear ambition to not be prisoners anymore.
When we looked specifically at what drives the changes in their customer engagement model, we find dramatic shifts in pharma’s internal business, as well as ever more rapidly evolving markets. The result is an increasing importance of key-customers and, therefore, a decreasing relevance of a pure share-of-voice commercial model.
Health systems are increasingly taking the decision-making power away from the clinician and centralizing it higher up in the organizations
In the external environment, there have been a number of changes and challenges. Healthcare budgets are under pressure, especially in Europe and the U.S. as mature markets continue to feel the effects of the economic slowdown. Pharma is a high risk business, but it also enjoys bigger margins on its products than almost any other industry, and has therefore become an easy target for government cuts.
As a result, health systems are increasingly taking the decision-making power away from the clinician and centralizing it higher up in the organizations. Physicians are also seeing less and less value in their interaction with the pharmaceutical sales representative. A clear trend has been identified in decreasing access for representatives to physicians in the U.S.: from nearly 80% of physicians in 2008 to 47% today.
The way healthcare is being conducted is also changing in many markets, with a greater emphasis on the patient with new clinical pathways as a result. This further impacts the individual physician’s power over treatment decisions.
Changes are also afoot in pharma’s internal environment. The industry’s drug portfolios are changing as focus shifts more to speciality drugs that are high cost and low volume.
However, while there is recognition of the importance of pre-competitive and R&D collaboration, competition has never been so fierce.
If we look to the Gaucher’s disease market, we can see a good example of this. This rare genetic condition only affects around 10,000 people in the world, and yet in the past four years there have been four approved treatments in the U.S.: two from Sanofi, one from Pfizer and one from Shire.
All three companies have now begun a price war for their medicines, with Pfizer offering to sell its drug at a cost that is 25% lower than the medicines available from Sanofi. This is a microcosm of the broader change happening across the industry.
Because of this, sales are becoming increasingly complex and there is no “one size fits all” approach to selling these new medicines across all markets.
The value proposition is also becoming more complex where the traditional “three benefits of the product” sales pitch is highly inadequate for the increasing number of stakeholders and their individual perception of what constitutes value.
The drivers of change across markets
The drivers described above are trends that can be seen all over the world. However, different drivers play a more or less important role in each market.
In the U.S., change is driven predominantly by a rapid acceleration of external market changes, which are being fuelled by the Patient Protection and Affordable Care Act.
The debate has been polarized between the sales rep-driven model and the Key Account Management (KAM) model. The industry needs to look beyond these.
In Europe, change is driven by external market variations as well as internal business challenges. This includes a tough stance on drug pricing from the biggest EU countries – namely the UK, Germany and France, which all have health technology assessors designed to reduce the cost of the medicines budget.
Therefore, the payer influence continues to grow, with payers at both national and local levels having greater input on what money is spent and where.
At the same time, there is a shift in pharma’s drug portfolio – away from more simple medicines, such as statins, blood pressure pills, and towards specialty biologic products for rare and inherited disorders, as well as specific cancers, which treat fewer patients, but are meeting unmet medical needs. This new portfolio is, however, bringing the individual physician in Europe further away from the decision-making process. In both the U.S. and Europe, there is an increasing focus on the patient as a new stakeholder, with digital technologies and smaller patient populations driving a need for greater interaction between the industry and its endpoint user, rather than just the healthcare professional.
In what we call pharmerging markets, the situation is slightly different again. The traditional focus on the huge out-of-pocket market is losing ground as the portfolio shifts to higher priced drugs where the only way of achieving volume is through public and private health systems.
The need for a flexible approach
If pharma is not to be a prisoner of the past, what can the industry do to unshackle its chains of past customer engagement models and look to the future?
Our research shows that the answer lies beyond the traditional one-size-fits-all and to not see the sales model as one rigid solution. Rather, companies need to adopt a more flexible and pragmatic approach that takes the evolution of its internal business and each healthcare market into consideration.
The debate has always been highly polarized between the existing, traditional share-of-voice, sales rep-driven model on the one side, and Key or Strategic Account Management (KAM/SAM) on the other.
But we have found that the industry needs to look beyond just these two options. We suggest these two approaches should be seen as two ends of a continuum with a myriad of engagement options in between. This framework allows the right approach to be built for both customers and the healthcare environment, as well as the pharma company and its new drug portfolio.
(See Fig. 1: THE GO-TO MARKET OPTIONS)
THE GO-TO MARKET OPTIONS Fig. 1
For example, integration of account management (AM) and KAM within existing share of voice (SoV) approach is key to success in many therapy areas and markets. In few situations, a pure AM or KAM approach will be able to “pull through” decisions taken by account level stakeholders into prescribing change.
Therefore, it is likely that AM and KAM will be utilized to influence key decision making within the account, then to coordinate and manage the conversion of these into sales opportunities.
The customer environment is becoming more varied and complex to navigate, demanding (sometimes simultaneously) a variety of engagement approaches, ranging from traditional pharma selling through to dedicated cross-functional strategic account management teams.
Over the last two decades, the traditional sales model has developed on the premise that companies with newly priced and approved potential blockbusters can simply power them to peak sales by maintaining a heavy SoV and detailing force.
Now, the challenge for pharma companies launching a new product is far more complex, not just in terms of gaining uptake by prescribers, but by the protracted intricacies of launch and market access.
Complexity arises from the fact that there is no single “new model” solution; the right sales model has to be selected to fit each organisation’s situation.
We have defined a framework to successfully develop an engagement model for the key customers. First of all, it all starts with a solid foundation of a clear business case for change. Leadership buy-in is central, and perhaps more importantly, leadership support over time. The journey to a KAMoriented engagement model may take two, three years or even more. Too often, a brave senior leader is taking a project on only to change positions within the company and the project is left without sponsorship.
As part of building this solid foundation, the program needs to take its starting point in the customer’s reality.
Then there are several considerations that need to be addressed: timing of change; mapping and prioritization of customers; defining the actual approach; developing the competencies and capabilities to handle more complex value propositions; structure and positional power; what talent and skills are needed; how to address training.
It is important to understand that the deployment of a program of this magnitude impacts many parts of the business beyond the sales department. And the tensions that follow need to be addressed, preferably proactively.
Some of the tensions we have identified are:
• Balancing the time and effort required to fully brief and engage a wide range of staff across different departments
• Balancing short-term sales imperatives with likely longer-term results
• Investing in the development of a range of differentiated value propositions and offerings for key accounts compared with the majority of other accounts.
• Deciding whether to allocate a single central budget for account development activities versus allocating resources to each key account for local decision-making.
• Managing the shift in local sales leadership from first-line sales managers to account and key account managers.
Removing the chains
Pharma must keep continually moving with the times if it is to have the most effective sales model. The industry does not need to live in the past, but can use learnings from its historic successes to help mould a new roadmap for the future.
The industry has the opportunity to break the mould of an aging, rigid sales model and evolve alongside internal and external changes to maximise the effectiveness of its business model and create better engagement with key customers and stakeholders.
Leadership conviction, organizational focus and building a robust case for change are absolutely essential to breaking away from the past. The companies that are getting it right are already seeing positive, tangible results both to their customer relations and their bottom-line.
Our research shows the companies advancing in their Account Manager (AM) and KAM model are seeing positive results, with 77% saying they have had substantial commercial success with their customer engagement model.
(See Fig. 2: Impact Of KAM On The Business)
IMPACT OF KAM ON THE BUSINESS Fig. 2
A quarter of respondents have seen a strong increase in sales with their program, while 94% of respondents have seen an increase (strong or moderate) in sales.
(See Fig 3. Customer Engagement)
CUSTOMER ENGAGEMENT Fig. 3
Thus, the evidence is now clear across different companies, countries, and therapy areas: evolving the approach to key customer engagement leads to improved business results, and your competition is already moving ahead. Now is the time for action across the industry. •
Martin Parkinson, Principal Consultant, PA Consulting Group. Martin is a specialist in key account management, healthcare marketing and go-to-market model design in the pharmaceutical and life sciences industries within the Global Life Sciences practice at PA Consulting. He is a pharmacist who spent his early career in the UK National Health Service (NHS) before moving on to conducting medicines evaluations for the NHS and then to various payer organizations heading up the management and use of medicines within the community and hospitals. Martin then moved to Pfizer, where he held various positions in health economics, healthcare marketing and market access. Most recently, as a member of the Customer Model Effectiveness team, he was responsible for driving forward initiatives to develop and optimize account and key account management across Europe and other Pfizer regions including working closely with teams in North America. PA is a consulting, technology and innovation firm focused on achieving exceptional results that have a lasting impact on businesses, communities and individuals worldwide. Its 2,500 people are experts in a wide range of industries. Their specific expertise is in life sciences, energy and utilities, financial services, health, consumer and manufacturing, government, defense and security, transport and logistics. They operate globally from their principal offices in the Americas, Europe, the Nordics, the Gulf and wider Middle East and North Africa region (MENA) and Asia Pacific. email@example.com
Magnus Franzen, Head Analyst, eyeforpharma. Magnus is dedicated to understanding how the life sciences industry can occupy a more important role in healthcare systems and patient outcomes and lives. Currently leading eyeforpharma´s effort to provide business intelligence, his core function is to lead and project-manage the production of the company´s pharma market reports. This means continuous research and working closely with key opinion leaders (KOLs) in the pharma industry, key government officials, healthcare providers and other stakeholders, to identify industry trends, market developments, and changes in the regulatory landscape and translate these into easily digestible reports and other relevant content. As a conference chairman, columnist, report author, and analyst, Magnus synthesizes the collective knowledge of a great ecosystem of KOLs. He has previously researched and authored reports on beyond the pill and value added services, customer experience, and market access. eyeforpharma is a leading global media company specializing in business intelligence that helps pharmaceutical companies become more relevant for their customers. eyeforpharma exists to help pharmaceutical companies stay clearly focused on the core reasons they exist, give them the strategic tools they need to be successful in truly serving patients and customers with ingenuity and real value, and to continue to innovate to meet changing healthcare realities. firstname.lastname@example.org