The pharma industry’s salesforce will be replaced by a new model over the next ten years as the industry shifts from a mass-market to a target-market approach, according to a recent report by PricewaterhouseCoopers (PwC).
The pharmaceutical industry’s current sales and marketing model will no longer be practical as the industry is forced to change its approach in response to market pressures, industry analyst PricewaterhouseCoopers (PwC) has claimed.
According to the report Pharma 2020: Marketing the Future, the industry will have to shift its focus from simply ‘pushing pills’ to demonstrating through products and services that it can promote health, improve quality of life and reduce healthcare costs.
One in five doctors now refuses to see any sales representatives and returns on sales visits to doctors have declined in the developed world, the report states. There is increasing resistance from doctors and regulators and growing public scrutiny over the interaction between pharma companies and healthcare professionals.
Pharmaceutical manufacturers have responded with various cost-cutting measures so that by the end of 2008, PwC claims, big Pharma had announced plans to shed over 60,000 jobs globally, many of them in sales and marketing.
According to PwC, the pharma industry’s salesforce of the future will be dramatically smaller, more agile and require new skills. Tomorrow’s field force will need an education in science or health, greater understanding of specific complex diseases and the ability to negotiate with powerful payers and medical specialists. Its focus will no longer be just selling products, but better managing health outcomes through a full complement of health management services..
Steve Arlington, global pharmaceutical and life sciences advisory leader, PricewaterhouseCoopers, commented: “Products alone will no longer guarantee the pharmaceutical industry’s long-term future. The shortcomings of pharma’s current marketing and sales model can no longer be addressed by simply reducing the size of the sales force; the problems go deeper.
“If pharma succeeds in bringing bold, brave changes to the current model it will be in a much better position to ensure that the billions of dollars it invests in R&D are wisely spent, and eliminate the need to spend massive sums persuading increasingly sceptical doctors to prescribe medicines whose clinical superiority may be questionable. The pharma industry will be able to slash its expenditure on sales and marketing by selling products and services that the market will pay a premium price for.”
Balance of power shifting to payers
For years, pharmaceutical companies have decided what their products were worth and priced them accordingly, investing little effort in understanding the payer’s perspective or what the market was willing to buy. With healthcare costs rising, payers including governments and private insurers are becoming the ultimate arbiters of pricing and value, reimbursement and prescribing decisions.
There will have to be a stronger link between marketing and R&D, according to PwC. For many years, pharma firms have more or less ignored the payer’s perspective when developing medicines, with the result that just eight of the 27 new therapies launched in 2007 were the first of their kind. However, this is already beginning to change, as indicated by Novartis’ recent deal with NICE to pay the agency a consultancy fee for advising on the design of a Phase III trial to measure the efficacy and cost-effectiveness of a new drug. GlaxoSmithKline also recently took the step of giving government officials in the UK, France, Spain and Italy a say in deciding which of its pipeline compounds to progress.
The often contentious relationship and competing agendas that have long existed among pharma companies, payers and providers will end as pay-for-performance and comparative effectiveness analysis force them to work together for the common goal of improving health outcomes for the patient and demonstrating value for money. Pay-for-performance is already evident in the UK, in such reimbursement schemes as those employed by Johnson & Johnson for Velcade and Novartis for Lucentis. There are also now plans to extend this approach with a flexible pricing system that will better reflect the value of medicines.
Product portfolio to change
The current blockbuster model was designed to promote mass-market treatment of common diseases such as hypertension, diabetes, high cholesterol to primary care physicians. Sixty-five percent of these drugs are now sold generically in the US and 70% in Central and Eastern Europe. In the next ten years, only drugs considered truly innovative will be financially rewarded with a premium price.
Good medicines will no longer be enough in isolation. As the balance of power shifts to payers and patients, qualitative criteria – such as the extent to which a treatment makes a patient feel better, whether it allows them to return to work or reduces the cost of caring for them – will become increasingly important. Pharma companies will therefore have to collaborate with others in the healthcare arena to provide a range of products and services from which patients can pick, both to differentiate their offerings and preserve the value of their drugs. These may include services such as health screenings, compliance programmes, exercise facilities and nutritional advice.
Pharma companies that choose to focus on specialised medicines will gradually shift their product mix to include more biologics and medicines that are targeted to specific and more complex disease states.
Science is leading the pharma industry toward specialist medicine – highly effective therapies developed for specific complex conditions, developed in small doses and in need of refrigerated handling and storage. Specialised drugs are significantly more expensive, in some cases costing thousands for a single dosage or treatment. The global market for specialised medicines, which accounted for 44% of worldwide prescription drug spending in 2008, could be twice the size of the current market for all prescription drugs by 2020, according to PwC.
This change in focus to specialist therapies will require significant cultural and organisational changes. As these drugs are prescribed by specialists, rather than GPs, sales and marketing executives will need considerable scientific knowledge, as well as a clear grasp of the health economics involved, since the drugs will attract greater regulatory scrutiny due to their expense. A pharma company promoting these products will have to offer complimentary diagnostic and support services, appoint a smaller salesforce with greater knowledge and invest in patient education. However, the rewards will be a longer period of exclusivity and greater customer loyalty.
Regulatory harmonisation
The FDA and other leading regulatory agencies are exploring various new methods for assessing, approving and monitoring innovative medicines. While a single global regulatory body is unlikely, there may well be a common regulatory regime across pharmaceuticals, medical devices and diagnostics. Plus, more global regulatory harmony will make simultaneously multi-country launches routine.
By 2020, the launch of a new drug will become much more incremental. The big bang, big budget blockbuster launch will be replaced by a process in which clinical outcomes information is continuously disseminated in a series of much smaller waves. New medicines will be launched with ‘live licenses’, conditional on further in-life testing to substantiate their safety and efficacy in larger/different populations.
According to PwC, the future sales and marketing process must master each of these dynamics and synthethise them into a new system. Pharma companies will need to restructure their marketing functions accordingly, with the appointment of key account managers who will be responsible for collaborating with healthcare payers to shape the information doctors receive and provide hard proof that a product really is safer, more effective or more economical than its rivals before they add it to the formulary.
The shift to specialist medicines will require a greater focus on brand management to improve the longevity and value of products, closer working between sales and marketing and R&D, more use of professional networking sites to engage with patients and health professionals, and improved collection and sharing of information through ETM systems.
Simon Friend, global pharmaceutical and life sciences leader at PricewaterhouseCoopers, concluded: “In the past, the sales and marketing function shouted loud and jumped high to sell products. Soon, the imperative will be who can add the most value, not who can sell the most pills. The pharmaceutical companies that succeed in demonstrating value will be rewarded with a longer period of exclusivity, stronger financial health and greater loyalty to its brand. The challenge for pharmaceutical companies will be managing through the changes in their business model as the shift from blockbuster to specialised evolves over the next ten years.”
The report Pharma 2020: Marketing the Future is available at: www.pwc.co.uk/eng/publications/pharma_2020_marketing_the_future.html
In a time before multiple sales forces were the norm and before linear additions based on a sales multiplier (i.e. add a sales force member to achieve double sales growth) were the norm, the best representatives were conscientious and knowledgeable partners rather than purely focused on sales. It is sad that the industry trained and subsequently found itself unable to utilise the skills and experience of many good reps pushed out when the formula for success was based on a numbers game as opposed to quality. I was once told that Quality x Quantity is a constant and perhaps this formula is re balancing towards quality. I hope that all those now redundant previous sales people employed promoting best medical practice by communicating and targeting key innovations can achieve their full potential in other their careers.
Yours sincerely
Brendan Kerr
Natural Living Assets