US and European pharmaceutical sales and marketing executives believe that the current business model is ‘broken’, according to a new survey.

More than two thirds (68%) believe that pharma’s current sales model needs to be rejuvenated to face current industry challenges.

Danielle Rollmann, a partner in Booz & Company’s global health practice, says industry is in the “eye of a hurricane of change” and companies need to “identify and focus” new capabilities needed to succeed.

The survey, conducted jointly by Booz & Company and National Analysts Worldwide, asked 156 sales and marketing leaders, most with global responsibilities, how the industry can adapt to face a changing healthcare environment.

If found that respondents noted that growing healthcare prices along with the need to highlight value and outcomes were the greatest challenge faced by sales representatives.

More than half of respondents now expect to invest heavily in marketing to key accounts and payers to counter these challenges. New pricing approaches, new service models and new partnerships with clients were also highlighted as being important.

“Those of us who work with pharma companies to develop and implement commercialisation strategies know very well the challenges of maximising asset value in this new environment, where both key customers and customer expectations are being redefined,” said Susan McDonald, CEO of National Analysts Worldwide. “We’re not surprised to hear people acknowledge that they can’t count on doing ‘business as usual’ and that they’re looking for new ways to gain traction.”

Respondents said the strategies which they believe will be the most important moving forward include:

• Organising sales and marketing activities around diverse stakeholders
• Taking a more creative approach to customer relations and partnerships
• Effectively demonstrating value through outcomes to clients
• Innovatively using digital media channels.

“Virtually everything is changing in the model and the market,” commented Rolf Fricker, a Munich-based partner at Booz & Company. “In response, most respondents say they plan to spend more on all their target marketing activities. Yet this is not aligned with what pharma is doing and needs to do at a company level. The companies that focus, prioritize, and follow a coherent strategy will be the winners.”

There has been a lot written about the industry’s apparent move to Key Account Management and its impact on call rates and targeting. David Round provides a welcome break from the rhetoric and concentrates instead on the facts.

Mark Twain famously said that people often use statistics as a drunk uses a lamppost: for support rather than illumination. But when used properly, data can be incredibly illuminating – not least for the UK pharmaceutical industry. And analysis of pharma’s ongoing modification of its sales and marketing model is well worth putting under the spotlight.

In the past few years, experienced pharma commentators have looked in vain for evidence to support an inexorable, yet often anecdotal, march towards Key Account Management (KAM). The rhetoric said that pharma was taking a more sophisticated approach to sales and marketing activity and, in the process, delivering a more efficient and effective commercial model using a targeted KAM methodology. But the reality, and indeed the numbers, seemed to suggest otherwise.

The UK pharmaceutical industry may have taken the surgeon’s knife to its collective sales force and cut back on the volume of field-based staff. It may also have rebranded its sales representatives as ‘Account Managers’ and encouraged them to take a more measured approach to targeting key customers. But, until very recently, the number of GPs being seen by medical sales professionals across the year remained as high as ever – belying the claim that companies were moving away from the apparently inefficient ‘share of voice’ model that had served them so well in the past. Critics claimed that the traditional sales rep had simply been issued an Account Manager’s business card and given the accountability and autonomy to be more selective in targeting key customers – as well as a call rate target that was directly at odds with the KAM philosophy. And the statistics did little to quell the debate.

Data from Synmetrics, Cegedim Relationship Management’s activity benchmarking tool, shows that between December 2009 and December 2010 – and in the thick of widespread opinion preaching the gospel according to KAM – 92.7% of UK GPs had a face-to-face call or meeting with a representative from a pharmaceutical company. This indicates that, far from adopting a more considered approach to targeting its customers, the industry was still carrying out almost blanket coverage of GPs. What’s more, the 2010 data merely continued a similar trend from the years that preceded it – with annual industry coverage in the past decade consistently reaching over 90% of the total prescriber population.

But the past 18 months seem to represent a watershed for pharma sales operations in the UK. Something, it would appear, is happening. In the 12 months from July 2010 to June 2011, Synmetrics data show that the number of GPs who have had a face-to-face call or meeting with an industry representative has dropped to 85% – a fall of some 7%. Alongside this, in the first six months of 2011 the total number of GPs who have had a similar contact has slumped to 73%.

Whilst the half-year figure may not be wholly indicative, the July 2010 to June 2011 full-year data appear to represent a trend. And upon closer scrutiny, it’s a trend that’s been developing incrementally over the course of the past decade. Figure 1 shows that the total number of contacts on GPs has, apart from an uncharacteristic spike in 2008, been gradually declining since 2001.

Contact is classified as either a traditional face-to-face call or a meeting, and analysis of the contact rates for each of these methodologies is equally revealing. The number of face-to-face calls (per rep, per day) has been steadily falling year-on-year. Conversely, the number of meetings (per rep, per day) has gradually risen – and in fact grew disproportionately between 2007 and 2008. The Synmetrics data show that there are more meetings taking place today than at any point in the past ten years; and that, crucially, in 2010 the number of meetings per day overtook the number of face-to-face calls for the first time.

Significantly, the number of face-to-face calls being made each day has halved over the course of a decade. That’s a pretty spectacular statement. So spectacular that it’s worth repeating just to reflect on it: the number of face-to-face GP calls, per rep, per day, has halved since 2001. This has nothing to do with field force size and the fall in the number of representatives – it’s literally the number of calls per rep.

Moreover, data shows that 17,000 GPs – around 35% of the total population – have not received a face-to-face call in the past twelve months. In truth, this is another staggering revelation: the bread-and-butter, conventional pharma approach of face-to-face engagement between GP and representative has reached a point where more than a third of GPs have not received a call in the last year.

And so the ‘real world’ data are piling up. There are now fewer representatives, who are collectively making fewer calls. There’s an increase in the number of meetings, but a significant drop in activity, with daily call rates halved and over a third of pharma’s traditional customer population not receiving a single face-to-face call. It is a breathtaking decline, but it has not just happened overnight.

The implications
So what does all this mean? Does the 7% drop in GP coverage over the last 12 months provide the first conclusive evidence that Key Account Management is beginning to take hold in the UK? Or does the incremental decline in contact activity over the course of the past decade merely confirm that customer access, for reasons that are well documented, has shrunk considerably? Have GPs increasingly decided to close their doors to industry representatives, or have pharmaceutical companies taken a more measured approach and chosen not to target them? Drawing a distinction between the two is difficult. It’s most likely to be a combination of both factors.

What we do know, of course, is that the industry’s customer-base has broadened extensively in the past few years with the emergence of a new breed of decision-makers – loosely classified as payers. As a
result, pharmaceutical companies have been forced to balance activity between traditional customers and more influential stakeholders in medicines management and commissioning functions. With GP call rates
falling by half it would be easy to assume that sales professionals are spending up to half of their time refocusing on payer engagement. But this may be too simplistic a conclusion. The payer population has rapidly earned a reputation for being difficult to access, and building relationships with the new stakeholders is widely accepted to be a long-term process that will take time and effort.

However, it would be disingenuous to conclude that half a sales professional’s day is being spent calling upon payers, and to use this presumption as the ultimate proof that Key Account Management has finally
established itself is probably a leap too far – it would perhaps be more realistic to assume that the effort and preparation required to see these payers is what is taking up a greater part of the sales professional’s day.

Yes we KAM?
It’s still too early to make definitive claims that the KAM model is firmly embedded in UK pharma. The indications are that the approach is beginning to take shape, but there is perhaps still some way to go before companies finally feel confident enough to entirely let go of the traditional share of voice model. But while that transition continues, the need for a more sophisticated approach to targeting customers remains as strong as ever. Pharma companies need to use all of the available data to drive their promotional plans, and use every available channel to reach their customers.

The industry needs to be as targeted as it can be, and sales professionals must be as smart as possible in their approach. Quantity is being replaced by quality. As the number of daily contacts being made continues to decrease, it’s vital to make sure that every face-to-face call or meeting actually counts. As
Account Managers are encouraged to develop their own call plans and become more accountable for their
own business, the need for robust and effective data to help make informed targeting decisions in the process is paramount.

Statistics can, of course, be used to provide reassurance and justification for a decision; but when considered more carefully, robust data can stimulate much greater illumination. For UK medical sales professionals, gaining access to information that enables you to shine a light on all of your customers and establish which ones provide the greatest potential, could make the difference between staggering around in the dark and giving your sales figures that extra spark. Don’t allow yourself to become the drunk at the lamppost – it only ever leads to a headache the following day.

David Round is UK General Manager, Cegedim Relationship Management.

The switch to Key Account Management is one more companies are introducing to tackle current challenges. Apodi’s Tony Swift highlights the principles of effective execution and making a strategy work for a smooth transition.

More and more companies are now addressing the changing healthcare market by transitioning the sales process from one which primarily involves representatives engaging with healthcare practitioners on a ‘one-to-one’ basis, to the establishment of Key Account Management (KAM) teams.

The rationale for this change is irrefutable. Access to GPs is increasingly difficult and the ‘customer’ now represents a series of more complex accounts with numerous stakeholders and influencers. Furthermore, decision making is both at a national and regional level and there is now a greater need than ever to focus on local healthcare economy needs and requirements.

As a result, pharmaceutical companies have established, or are in the process of doing so, KAM teams in which individuals have increasing responsibility and autonomy in addressing the needs of their customers at a local level. Some pharmaceutical companies have even taken the model further and given team members, or a small collection of them in a specific locality, P&L responsibility – essentially establishing micro business units within the team itself.

 

A different approach

Some years ago it could have been argued that any company transitioning to the KAM model was differentiating itself from the competition. This argument is much more difficult today because most pharmaceutical companies have moved, or are moving this way – in short, almost everybody’s doing it.

However, there is still a key source of competitive advantage in this environment – and that is to actually make the new model succeed.

Our research, and the feedback we have received from companies trying to adopt the new model, is that the execution process is much more difficult than originally anticipated. The type of feedback we receive often includes the following observations:

• Account managers do not appear to be acting in any materially different way than the sales representatives of the past
• They are adopting the new model at vastly different rates with a small number leading the way and the rest struggling to come to terms with the new strategy
• The move to more local autonomy is creating confusion about the role of the centre and its interaction with the decentralised function.

 

Difficulty of execution

So why is it that so many companies are finding the execution process more difficult than anticipated? The primary reason is that there is often an underestimation of the scale of the organisational change required.

For instance, many sales functions in pharmaceutical companies have historically been based on a traditional command and control structure. Here, the sales management instructed sales representatives on which HCPs to target, how many times they should be called on and exactly what to say during any meeting with them.

Within the new model however, many of these individuals are now faced with adapting to a new environment where decentralisation, decision making, autonomy and P&L accountability are now among the order of the day. Given the above, managements’ task of transitioning the organisation from the old to the new model requires considerable skill, focus and expertise.

 

A decentralised approach

Many management commentators argue that decentralisation is a panacea for all ills. If executed effectively, in an appropriate environment, this structure can deliver enormous benefits to an organisation. However, the move towards decentralisation often creates a number of serious problems which, if not addressed directly and quickly, will significantly impact on performance.

These problems are as follows:

A lack of expertise: a decentralised structure almost always requires an increase in expertise in the key roles within the structure. For example, increased knowledge will be required by employees AND management to solve problems, address more complex customers and, in effect, run businesses – particularly if P&L account responsibility is part of the role.

Inertia: many employees enjoy going to work in an environment where they understand exactly what the day will bring; the common challenges they always face and, in exceptional circumstances, being able to refer any unusual problems to their line manager. In a new environment where their decision making authority is increased, many employees will be reluctant to do things differently and may continue behaving much as before.

Lack of responsibility: the new environment is a scary prospect for some people. The last thing they want is more responsibility and a fear of failure and an inability to work in the new way paralyses them – again leading to ineffective execution.

At Apodi we have looked at specific pharmaceutical companies that are struggling with the implementation of KAM teams and researched the reasons for their difficulties. In every single example, one or more of the problems outlined above was prevalent – and in most cases all three problems coexisted together.

In fact, some of our own executives have reported their own first-hand experiences of working with companies in which the almost evangelical zeal and enthusiasm of top management continued unabated whilst chaos reigned and they failed to achieve an effective transition.

 

The way forward

As we have seen, the execution process can be difficult. And because of this, it is critical that a clear procedure for managing an effective transition is implemented. This process needs to address the following:

1. Identify clearly the strategic intent of the company, including the projected benefits of changing the model and how these are to be measured

2. Given the strategy noted above, clearly identify the role of the centre and the role of the decentralised units and how these might evolve over time. In our view, companies are often too ambitious in managing the transfer of responsibilities from the centre to the divisions or KAMs. Clear standard operating procedures need to be driven from the centre in the early stages and KAMs need to understand the rules that they are expected to work to. Think carefully about giving newly formed KAM teams P&L account responsibility. It may be better to transition to this over time, and in some cases, not even to go this far

3. Identify very clearly the roles and responsibilities of management and KAMs at all stages in the change process

4. Given the roles identified in the new structure, carefully recruit the appropriate personnel. Implement a training and development programme focussed on areas such as the role of Key Account Management, the implementation of a complex sale, general business disciplines and other skills

5. Management need to quickly identify any KAM team member who cannot make the leap to the new world of working and deal with this appropriately

6. Instil best practices across the whole KAM team by establishing effective coordination and information sharing processes

7. Establish effective incentives to drive the performance required

8. Put in place appropriate controls, feedback, learning and corrective action processes to improve performance. Key to this is the management team that drives KAM performance. This team needs to be highly experienced and knowledgeable about the requirements of KAM teams and how to manage a change process.

 

Leading the way

As ever, the role of the leader is absolutely critical in driving through the changes to address the needs of the new healthcare economy. Whilst the development of a sound strategy is critical, it is also the relatively easy part of the process. In every pharma magazine, nearly all consultants and most competitors will support the notion of moving towards a KAM driven business.

However, it is the effective execution of this transition that the leader should focus on. They will also invariably experience many of the challenges that are common to such change programmes, such as internal politics, resistance to the new way of operating, lack of appropriate skills within the team and so forth.

It is because of this that a leader needs to draw on commonsense business disciplines to be successful. It is also crucial that the immediate management team are able to do the same. Therefore, before embarking on the process, it is important to make sure that the management team is capable and ready to execute change.

As I noted at the beginning of this article, many companies are implementing similar strategies. It is therefore logical to assume that, everything else being equal, it is the company that has the management capabilities to execute these changes most effectively that will gain a competitive advantage over its competitors.

 

Tony Swift is the Managing Director of Apodi. He may be reached on tony.swift@apodi.co.uk.