Unifying the prescriber influence network (part I)
Paul Jones, Jan Malek, R.A. Bavasso and Leo Herbette
Cisco and Exploria SPS
Introduction
The pharmaceutical marketplace has changed dramatically over the past decade, yet the industry’s sales model remains much the same. Most pharmaceutical companies still rely on an army of sales representatives to promote their products to physicians - and, faced with more difficult conditions, they have until recently steadily increased the number of people they send into the field.
But pharma cannot keep operating in this fashion. Regional shifts in the pattern of demand, changing product portfolios, intense competition from generics, and new influences on the prescribing decision have all reduced the effectiveness of the existing approach. Many of the physicians who constitute the industry’s traditional customer base have also become cynical about the information they receive from sales representatives, and some even refuse to accept sales calls.
Pharmaceutical executives are well aware of these issues, and a number of companies are now trying various improvements, including consolidating their sales teams along regional lines. This does not, however, address the real limitations of the current model - namely, that it is no longer reaching the right people in the right ways. In an increasingly connected world, physicians want to control when, where, and how they get information, and they want to talk to their peers.
"In an increasingly connected world, physicians want to control when, where, and how they get information."
The integration of two technological advances - intelligent content management systems and unified communications - can help the industry meet these needs. The first empowers doctors by giving them more control over the direction of the detailing session. The second enables sales representatives to resolve any queries immediately by calling on a panel of trusted local and global experts during the sales call. Together, these technologies can transform the sales representative’s role from that of unappreciated visitor to valued conduit for medical knowledge pertinent to physicians’ day-to-day practices. They can also be used to supplement live detailing with digital channels and to capitalize on the trend toward social networking.
Pharma in Flux
The context in which pharma operates is changing. In 2006, the global pharmaceutical market reached US$643 billion - a year-on-year increase of just 7 percent (in constant U.S. dollars), compared with 14.5 percent in 1999.1 The United States still accounts for by far the largest share of sales, but the emerging markets are rapidly expanding. Indeed, PricewaterhouseCoopers predicts that the E7 economies (Brazil, China, India, Indonesia, Mexico, Russia, and Turkey) alone could account for some 19 percent of global sales by 2020, more than double the 8 percent they generated in 2004.2
The pattern of regional demand is, therefore, shifting. So, too, is the direction of the industry’s R&,D. In the 1990s and early 2000s, pharma generated most of its revenues from primary-care products. But in 2006, nearly half the 105 “blockbusters” on the market (products with annual sales exceeding US$1 billion) were complex medicines for specialty care.3 This balance is likely to alter even more over the next few years. The Blue Cross and Blue Shield Association reports that between 325 and 400 new specialty therapies could reach the market by 2010.4
As healthcare costs soar, however, healthcare payers everywhere are actively promoting the use of generics - and, with the patents on some $77.4 billion worth of branded products due to expire by 2012, the potential for further generic erosion is huge.5 They are also imposing new clinical and financial constraints on the adoption of novel medicines (see sidebar “New Influences on the Prescribing Decision”).6
The market for branded pharmaceuticals is thus becoming much more competitive, the product range is becoming much more complicated, and the factors that influence how medicines are prescribed are becoming much more varied. Yet pharma continues to rely on a sales model it developed several decades ago, despite the growing body of evidence that the cost effectiveness of this model is decreasing significantly. As the network of prescribing influences expands, the challenge is how to connect them all to achieve the best outcome. In other words, what role can pharma play in helping to unify the prescriber influence network?
The Declining Power of the Current Sales Model
Between 1996 and 2005, pharma’s total real expenditure on detailing in the United States rose from $3.7 billion to $6.8 billion - an increase of more than 80 percent,7 in marked contrast to the decline in revenue growth over the same period. Much of this surge in spending is attributable to the expansion of the salesforce. The U.S. marketplace has become crowded, and the situation is comparable in some parts of Europe.
But far from winning new friends, this marketing blitz has alienated many doctors, some 20 percent of U.S. and British physicians now refuse to see any sales representatives.8 It has also sparked concern about the industry’s selling tactics and resulted in the introduction of various measures to control the promotion of medicines (see sidebar “The Battle for Share of Voice”). 9,10,11,12,13
Given the increasingly difficult climate in which pharma now operates, it is hardly surprising that returns on detailing have begun to decline. Between 2004 and 2005, there was a 23 percent drop in dollar growth per detail in the United States,14 although detailing still accounts for more than half the market share new brands win during their first year of life (see Figure 1).15
The picture is more varied in Western Europe, but detailing plays a smaller role in stimulating sales in these countries. In the United Kingdom, for example, it generates just 10 percent of the market share new brands command by the end of their first year, reflecting the extent to which pharmacoeconomic and other hurdles have already shaped healthcare provision.
The selling methods on which pharma has relied are becoming less productive, then, as most of the industry giants have now realized. Hence, the record number of layoffs in recent years. Pfizer led the way in late 2006, when it indicated that it would cut 20 percent of its U.S. salesforce.16 Other companies rapidly followed suit. In all, “Big Pharma” has announced plans to shed some 31,000 jobs, many of them in marketing and sales.17
Several drug makers have also tried restructuring their sales teams. Takeda UK was the first to take this route in 2004, when it replaced its sales representatives with a smaller number of “regional account directors,” responsible for building long-term partnerships with primary care trusts and local opinion leaders.18 Other companies, including GlaxoSmithKline, have since introduced modified versions of this approach.19
Figure 1: The impact of detailing varies widely among countries
But reducing the size of the salesforce and substituting account managers for sales representatives will not be enough to solve pharma’s problems, for the deficiencies of the current sales model go much deeper. It is fundamentally unsuited to the needs of modern-day doctors and the industry alike. Seen from the perspective of physicians, the model has at least three major limitations:
• Inconvenience: The demands on physicians are now greater than ever. Many of them do not have time to see sales representatives during office hours.
• Limited immediate value: Even if physicians do make time to see a sales representative, the information they receive is often too general to address their individual needs - especially when it comes to specialty therapies for complex medical conditions. They need instant answers to their queries.
• Bias: Lastly, many physicians believe that the information sales representatives provide is biased.20 Although this is understandable, given that the job of the sales representative is to “sell,” it also reflects the extent to which trust in pharma has been eroded.
The current model is equally inadequate for the industry’s needs, for reasons that extend far beyond the most obvious drawback - that access to its traditional audience is becoming more restricted:
• Lack of control: Most sales representatives spend much of their time on the road, where it is difficult to keep them fully informed, ensure that they are acting in compliance with regulations, and share best practices.
• Inadequate feedback: The reports sales representatives file after a visit are often too generalized to enable companies to identify which promotional messages work, which need to be changed, and how best to change them.
• Failure to reach new audiences: Detailing does not reach pharma’s new “customers” - the pharmacoeconomic agencies and prescribing committees that are shaping prescribing patterns long before patients knock on the doctor’s door.
Part 2 of this article is now live on the site here.
References:
1. IMS Health, IMS Market Prognosis International, February 2007
2. “Pharma 2020: The Vision—Which Path Will You Take?” PricewaterhouseCoopers, June 2007
3. IMS Health MIDAS and IMS Health Consulting, MAT, September 2006
4. “Medical Cost Reference Guide 2006,” Blue Cross and Blue Shield Association
5. “Brand Name Drug Sales Facing Patent Expiry Seen at $77.4B over 5 Years,” Thomson Financial News, December 13, 2007
6. “Statistics,” Generic Pharmaceutical Association ), “EGA Fact Sheet on Generic Medicines,” European Generic Medicines Association http://www.egagenerics.com/doc/ega_factsheet-01.pdf
7. “A Decade of Direct-to-Consumer Advertising of Prescription Drugs,” Julie M. Donohue, Ph.D., Marisa Cevasco, B.A., and Meredith B. Rosenthal, Ph.D., The New England Journal of Medicine, Volume 357:673-681, Number 7, August 16, 2007 http://content.nejm.org/cgi/content/full/357/7/673#T1
8. For further information on the situation in the United States, see “Rep Alert,” Pharmaceutical Executive, January 2008, p.2. For further information on the situation in the United Kingdom, see “Getting the Mix Right: New Roadblocks and New Routes to Market,” Paul Jones and Nic Holladay, Pharmaceutical Executive Europe, September 2006 http://www.pharmexeceurope.com/europharmexecArticles%3A+Sales+%26+Marketing/Getting-the-Mix-Right-Part-1-Roadblocks-and-Routes/ArticleStandard/Article/detail/374316?contextCategoryId=42721&,ref=25
9. “2006 Year in Review,” Verispan, April 11, 2007
10. “Physician Characteristics and Distribution in the U.S., 2006,” American Medical Association, reported by Public Citizen http://www.citizen.org/documents/DrSupplyFactSheet_Final.pdf
11. “Doctors Reeling under Weight of Promo Materials from Reps,” PharmaTimes, July 9, 2007 http://www.pharmatimes.com/search.aspx?s=doctors%20reeling%20under%20weight
12. “Will Pharma Finally Have To Fess Up?” BusinessWeek, October 8, 2007 http://www.businessweek.com/magazine/content/07_41/b4053080.htm
13. “Data Mining Companies Score Legal Win in Maine,” George Koroneos, PharmExecutive.com, January 9, 2008
14. IMS Health,
15. “Sink or Swim,” Becky McCall, PharmaTimes, September 2007
16. “Pfizer to Cut 2,200 U.S. Sales Jobs,” BBC News, November 29, 2006 http://news.bbc.co.uk/1/hi/business/6194362.stm
17. “Big Pharma’s Tough Medicine,” John Simons, CNNMoney.com, December 13, 2007 http://money.cnn.com/2007/12/10/news/companies/pharma_layoffs.fortune/index.htm?postversion=2007121014
18. “NHS Is Behind Us, Says Rep-Free Takeda,” Pharmafocus.com, March 1, 2005 http://www.pharmafocus.com/cda/focusH/1,2109,21-0-0-MAR_2005-focus_news_detail-0-322935,00.html
19. “Is GSK Shaking up Its Sales and Marketing Operations?” PharmaTimes, December 2007, p.8
20. According to a survey conducted by Accel Healthcare Communications, only 6 percent of U.S. physicians believe the information sales representatives provide is as reliable as information from independent sources. The situation is similar in the United Kingdom, where only 7 percent of GPs attach the same credence to detailing sessions as they do to information from other medical sites. For further information, see “The Accel Report: Through Our Customers’ Eyes,” Accel Healthcare Communications, May 2003, and “Doctors Reeling under Weight of Promo Materials from Reps,” op cit.
About the authors:
Paul Jones (based in the UK) and Jan Malek (based in the USA) are directors and co-leaders of the Global Life Sciences Practice in Cisco’s Internet Business Solutions Group. They may be contacted at pauljon2@cisco.com and jamalek@cisco.com respectively.
R. A. Bavasso is President of Exploria SPS and Leo Herbette is CEO of Exploria Inc. They may be contacted at bavasso@exploriasps.com and herbette@exploria.net respectively.
About Cisco IBSG
The Cisco Internet Business Solutions Group (IBSG), the global strategic consulting arm of Cisco, helps CXOs and public sector leaders transform their organizations—first by designing innovative business processes, and then by integrating advanced technologies into visionary roadmaps that address key CXO concerns.
For further information about IBSG, visit http://www.cisco.com/go/ibsg
About Exploria Sales Performance Solutions, LLC
Exploria SPS™ offers sales performance solutions for mobile technologies and web based solutions to the pharmaceutical and medical device industries. Exploria SPS created its second generation tablet PC detailing solution for use in a Continuous Loop Marketing™ environment in direct response to customer dissatisfaction with the first generation offering. Focused on The Science of Detailing™, the Exploria SPS solution enables interactive detailing using native media and algorithmic logic to determine presentation of appropriate content in multiple venues based upon physician response. Exploria SPS now offers a portfolio of sales and marketing channels to accommodate the market need for an optimal channel mix.
Exploria SPS is headquartered in Hartford, CT. For more information and online product demonstration, visit http://www.exploria.net
Copyright 2009 Cisco Systems, Inc. and Exploria SPS, LLC.
