Big Change at Big Pharma
Oh, those people in white coats with stethoscopes hanging around their necks. They’re so busy it’s enough to give even the most determined pharma rep a headache. Well, let’s look on the bright side: Merger and acquisition activity combined with a reduction in blockbuster drug launches and a retooling of sales-force deployment strategies has led to a 25 percent reduction in the US pharmaceutical sales force since 2005. Bright side, you say? Well, yes. It means one rep can make more sales.
Today the pharmaceutical sales environment may be a pressure cooker, where a stringent regulatory environment means reps must watch every word they say – and a single slip can result in multimillion-dollar fines. Doctors may be more tightly scheduled than ever before, leaving reps only minutes to share information with providers. And whereas once doctors pulled all the strings when it came to prescribing, now they are just one piece of a puzzle that also includes insurance providers and healthcare policy makers.
But wait, there’s more – or perhaps we should say there’s less, as in fewer field reps to handle the workload. Pfizer took over King Pharmaceuticals in February of this year, a move which could lead to further shrinkage in the numbers. Still, although these realities aren’t lost on those in the profession, several of whom told Selling Power they feel they are always just a conference call away from being out of work, we say there is a positive side. Chris Morgan, a London-based principal with ZS Associates, summed things up in his report, “Finding the Focus: Designing the Pharmaceutical Selling Organisation for the 21st Century”: “Today’s sales environment only faintly resembles the environment of just a few years ago,” he observed. “The pharmaceutical industry has new customers with new agendas, increased pricing and prescribing pressures, and maturing product portfolios. The linear, high-frequency sales approach that worked extremely well for years is becoming obsolescent amid the massive changes in the healthcare environment.”
In other words, pharma sales, like everything else in the business world, has changed. If you don’t manage the change, you’ll be out in the cold. So the positive news is that you have the power to manage the change.
From High Frequency to High Value
That “linear, high-frequency sales approach” is often referred to by industry insiders as the “arms race” of the late 1990s and early 2000s. Fueled by a multiyear wave of blockbuster product launches, pharma was then undergoing a period of massive growth, and the sales strategy of the day was all about getting more reps into the field than your competitors. Back then, it was common practice for a single high-value doctor to be called on by five or more reps from one company, each responsible for selling just a few products. An-alysis showed that this practice actually worked: Pharmaceutical companies could draw a direct correlation between share of market and share of voice. So they kept turning up the volume.
Fast forward to today. With far fewer blockbuster launches, regulatory guidelines severely restricting interactions between doctors and drug companies, and doctors’ prescribing choices now heavily influenced by the insurance industry, sales reps no longer wield the same influence over prescribing practices as they once did. As a result, the share-of-voice model is starting to look awfully bloated and inefficient.
“We are in an interesting place today,” observes George Schmidt, senior vice president and practice area leader for the sales practice at Campbell Alliance, a specialized management consulting firm serving the pharmaceutical and biotech industries. “We have entered a period in which companies are customizing their promotional efforts depending on customer types and the needs of physicians.”
In other words, pharmaceutical companies have come to understand that not all calls are created equal, says Schmidt. Today they are trying to figure out which calls are, as 1984 author George Orwell put it, “more equal than others.” They are finding that the answer lies in a combination of changing the way they deploy their field force and implementing new technologies that make calls on physicians more efficient, more effective, and more precisely targeted than ever before.
Leading pharma firms seeking a more efficient sales model than share of voice understand it’s not enough to do a simple blanket reduction in their field force. Instead, they have begun employing a “differentially resourced” deployment model that aligns reps’ responsibilities with the specific needs of customers in their territories, says Chris Wright, managing principal and leader of the global pharmaceutical practice at global management consulting firm ZS Associates.
What this means is that a rep in Boston might be responsible for selling a different mix of products than a rep in Miami, even though both are calling on the same customer segment type. That’s because the factors driving prescribing behavior in one city may be very different in another.
In the differentially resourced model, rep deployment is driven by local conditions, not by a one-size-fits-all decree from headquarters. Sound like common sense? Perhaps in other industries, but the model is new to the pharmaceutical sales industry, which began implementing it just three or four years ago. Even today, of the top 40 pharmaceutical organizations, Wright says only 25 have either made or are in the process of making the switch to this customized approach.
We’re likely to see more of it, however, as the return on investment is already very compelling. Wright says companies that have made the switch report as much as a 20 percent reduction in their sales-force-related costs. “There are huge efficiencies in this model,” he says, “because you can get the work done with fewer salespeople.” He attributes about 10 points of the 25 percent reduction in US sales force numbers since 2005 to the drive for efficiency through models such as differential resourcing.
In addition to making changes in field-force size and responsibilities, pharmaceutical companies are also experimenting with various technologies in their search to boost efficiency and lower today’s cost of sales. Most of these efforts are in the early stages, and as yet no one has found the magic bullet, but some initiatives gaining traction include eDetailing, closed-loop marketing, and smart-phone alerts.
Veterans of the industry might argue that eDetailing, the practice of pitching doctors via online presentations, isn’t anything new and, in fact, fell flat on its face when it first emerged several years back. And that’s certainly true. But David Richardson, research team leader at business-intelligence firm Cutting Edge Information, says the practice is starting to make a comeback.
“The time is ripe for eDetailing,” asserts Richardson. “Younger doctors coming into the profession have been around computers their whole lives, and veteran doctors are comfortable with them, and studies show that almost 100 percent of physicians now seek out prescribing information online.” Add to that the fact that pharma companies are seeking to reach the same number of doctors with far fewer reps and at far less cost, and it’s quickly apparent why this once-left-for-dead method of reaching doctors is experiencing a resurgence.
At least 70 percent of companies surveyed by Cutting Edge in a recent report on the pharmaceutical industry said they were using some form of eDetailing – the highest percentage Richardson has seen in the eight years he has tracked it. For the first time, companies also reported the use of dedicated eDetailing teams or virtual reps to complement the efforts of reps in the field. This is a new development; only two of the 50 pharmaceutical companies participating in the study said they owned these dedicated teams. But it’s a shift that Richardson expects will gain speed going forward in light of current industry trends.
“We are in a transition period,” says Richardson. “The vast majority of sales VPs still believe on-the-ground reps should be the lead, but they are now more open to supplementing those reps with eDetailing and other technology.”
A few forward-thinking organizations are starting to leverage their field force to engage the electronic channel, presenting the two as being complementary and mutually supportive. For instance, if a doctor’s body language indicates he really doesn’t have time for the rep at the moment, rather than lose the opportunity, the rep might hand that doctor a business card with a URL on it and invite him or her to attend a presentation by a leader in the doctor’s specialty, attend an online discussion, or participate in a live video-detailing with a colleague at the physician’s convenience.
“It’s about time shifting,” says ZS Associates’s Chris Wright. “Most of the digital media being used today is about moving the message to a time when the doctor is available.”
An App a Day
While growth is certainly beginning to happen in the e-channel, the crux of the pharmaceutical sale remains the moment of interaction between a rep and physician. New applications for smart phones and tablet PCs are enabling reps to manage this better and more effectively than ever before.
For instance, smart-phone apps now enable reps to find important information about doctors they are waiting to see. While fewer than 10 of the top 40 pharmaceutical companies are pilot testing these capabilities, according to Wright, he says the rest are considering it. And no wonder: With a few taps on a smart phone, a rep can now use his or her time in the waiting room to see whether a physician has had a change in his patient population, a change in the way he or she is prescribing, any engagements with digital media, and other relevant information. Alternatively, reps can cross reference the neighborhoods they plan to visit on a certain day with new alerts on doctors in those areas. This kind of customized business intelligence is enabling reps to react to changes within their territory quickly and in a highly targeted way.
Brad Sullivan, marketing manager for the National Association of Pharmaceutical Representatives (NAPRx), sees these kinds of emerging technologies as one of the major trends shaping the profession today. “In the old days, you could just bring in samples, and you’d get five minutes with a doctor. Today, doctors don’t have five minutes anymore; they’ve got about twenty seconds,” says Sullivan, whose 51,000-member organization is the largest US trade association representing those who work in pharmaceutical sales. Leveraging technology, he adds, is the best way to make those seconds count.
“If a physician asks a question and a rep reaches down into his or her bag to dig out the answer, that moment is gone and you might not get it back for another six months,” agrees Jennifer Randall, president of Maestro eLearning and a former rep for Johnson & Johnson. That’s why companies like Randall’s are creating apps for tablet PCs that allow sales professionals to instantly engage doctors in compelling ways.
For instance, Maestro has created iPad apps that let doctors and reps interact with compelling visuals. Users can click, rotate, and delve several layers into images on the screen to better understand, say, how a drug works in the body. If doctors show real interest, reps can invite them to an upcoming conference, signing them up on the spot with a couple of clicks in the app.
“What might have taken six to nine months via email is now happening immediately,” says Randall. “Whether using 3-D animation or an interactive brochure, iPads are putting information at reps’ fingertips.”
Closing the Loop
Several companies are starting to put all these pieces together to create a fuller, more accurate picture of individual physicians in a process-and-technology initiative called closed-loop marketing. Essentially, this means gathering all the data collected by the sales group, marketing group, and other sources and combining it all to get a detailed picture of customers.
“As a large amount of data is gathered from many targets, the data can help us understand the promotional materials that work best for each segment we’ve defined as targets in the system,” one pharmaceutical company explained in the Cutting Edge study. “With this information in hand, reps are able to improve on their interactions with physicians because they are armed with the kinds of materials and presentation styles generally preferred by each segment type.”
Another major pharmaceutical company said it was using its closed-loop system to “attempt to identify the ideal combination of messages and delivery vehicles for particular subsets of target physicians.” This holistic approach to sales is just gaining traction in pharmaceutical sales, where less than 18 percent of participants in the Cutting Edge study reported having a closed-loop marketing system in place, and only 25 percent of the remainder are even considering such a program. But Richardson says early adopters report that they are getting increased time with doctors, since their promotional materials are better aimed at their preferences. And sales reps are happier because the system tells them the best route to success for each physician they visit.
Again, it’s all about moving away from a one-size-fits-all approach to a scientific matchup of messages to individual physicians. And by all indications so far, this kind of customization – in both field force deployment and interactions with doctors – is a prescription for long-term success. •
The Incredible Shrinking Sales Force
After ramping up their US sales forces to more than 100,000 reps in the middle part of the decade, pharmaceutical companies have been retracting them ever since. Today, the numbers are down 25 percent from their 2005 peak, and several organizations anticipate further decline to about 70,000 within the next few years.
The data below refers to the 40 largest pharmaceutical companies as measured by the total number of annual sales calls.
Number of US Pharmaceutical Sales Reps
Pharma Investment in ePromotions
“Technology is playing a small but growing role in pharmaceutical sales,” says Kelly Sborlini, vice president of syndicated analytics and media innovations at SDI, a healthcare analytics organization that tracks key metrics relative to pharmaceutical sales. EPromotions, including online details, online events, and other electronic means of engaging with doctors, make up only 3 percent of total pharmaceutical promotion spending in the United States today; however, that’s triple the amount spent six years ago, when it made up just 1 percent of total spending.
| YEAR ||ePromotion Spend (US)||ePromo % of Total Promo Spend (US)|
– Heather Baldwin
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