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Devolution and the new customers


Jonathan Akehurst takes a critical look at how the newly devolved nature of the NHS is forcing pharma companies to reassess their marketing and sales strategies.

Until the 1990s targeting GPs or consultants used to be fairly straightforward. Then a series of changes and reforms transformed the largely homogenous nature of the NHS, altering priorities and planning as well as who makes key prescribing decisions - now it is even more complex. The newly devolved nature of the NHS means that, for the purposes of sales and marketing strategies, the previous monolithic structure is gone for good.

Just look how far the old command and control structured NHS has come in the last few months. Isn't it strange that such a bureaucratic, supposedly ponderous beast can confuse the forward-thinking, market-led, competition-thriving pharma industry? Maybe it's not a surprise at all - essentially traditional and conservative, the pharma industry is slow to embrace change, and markedly slower to adapt to changing markets than the financial services industry or big FMCG companies, for example.

Honey, I've shrunk the field force

For years, a relatively simple model has driven pharma sales, marketing and customer development in the UK: increasing sales 'heads' directly increases prescription sales. An easy equation, leading to a proliferation of interlocking sales teams, driven by pressure to show rapid ROI in the face of the twin problems of generic onslaught and slowing down of new 'blockbuster' products to market.

Various estimates put the total numbers of reps in the UK in 2004 at around 12,000, probably the high watermark of salesforce headcount. Presumably, somebody, somewhere may have noticed that there was often more blue-suited industry representatives in the waiting room than patients. It is no surprise that as numbers have escalated and customer access become more difficult, productivity and effectiveness has nosedived - making an impact in such a 'noisy' market is bogging everyone down.

Salesforce proliferation - the 'arms race' is a curious symptom of a reliance on 'old methods' and a corporate nervousness of being left behind in the scramble for brand prescription building. The US companies have already started cutting back, with the UK yet to follow suit.

It is a year since Takeda took the radical step of scrapping its sales team and building a more dedicated group of regional account directors (RADs). The jury is still out on the results and impact of this decision and no one has rushed to follow their lead.

Generating measurable revenue gains is all good hard accountancy - it is worth taking a moment to consider the damage that has been done to pharma industry/NHS relations by the sheer number of 'detail men' on the ground.

Less tangible than ROI calculations, the supplier-prescriber relationship has undoubtedly suffered (check out www.nofreelunch.org if you remain unconvinced!).

Apart from the spiralling costs, if your customer actually begins to question the validity and value of the contact, then it's time for a rain check.

They're customers Jim, but not as we know them

For an industry fairly obsessed with research, little attention appears to have been given to customer needs - probably because they would not choose to receive multiple 'details' on various therapy strengths and presentations!

There is no shortage of databases, market research and customer surveys going on but is anyone actually acting on the results? With the exciting (or scary) news that more than 75% of the £60 billion NHS budget lies in the hands of PCTs, things clearly have to change.

Duncan Morris, managing director of contract sales organisation AmDel, sees a mixed response from the pharmaceutical industry to changes within the NHS. "Some companies have tried to align themselves and their resources much more closely to the NHS and some companies haven't. But more and more companies are understanding that the impact of these changes is greater than it's ever been."

GPs now come in a bewildering range of shapes and sizes - the flexibility of the GMS contract is leading to practice diversity as never before. Not only does customer targeting and segmenting become more important, but the level of understanding by the representatives needs ratcheting up too.

"One of the most important things that pharma companies should be doing is skilling their reps up to a level where they can continue to add a good deal of value to the customer base. Quality of salesforce is going to be the defining factor of success in the future and my feeling is that medical reps have stood still in terms of their training. They need to be much better at account development, and at understanding their role in the greater sales position," Morris adds.

An old industry habit being challenged is the 'location mentality' - the long-term divide between primary and secondary care. Maybe it's time to take a step back: real segmenting means more than classifying customers by their job, status or location.

It means understanding their behaviour, motivation and decision-making.

For example a PCO-lead GP may have more in common with a consultant who is also a clinical director in a hospital, yet they are normally managed by different sales teams, who rarely communicate, using different material.

Trust me - I'm an account manager

Recent research from Via International shows the need for 'someone who is not trying to sell us something. We want a liaison person who is trying to inform us'.

It is disappointing to see that many PCOs have fed back that account managers appear to add little value to sales reps specifically failing to adequately research the individual customer, local guidelines and priorities and PCO objectives leading to a generalised approach, when really the opposite is required.

Locked away in pharma head offices all over the country are the types of resources and information that these PCO decision groups desperately need: project management skills, budget and financial modelling data. Unlocking some of this 'sensitive' data would be very productive and help build longer term mutual partnerships, while helping to equip account managers with a broader portfolio of tradeable services.

What could be more useful than discussing and agreeing market share growth and potential cost benefit issues as part of a PCT three-year budget projection? As John Prendergast, business development director at Alchemy, suggests: "Good pharmaceutical approaches to PCTs involve providing Cost Impact Calculators, or other cost models that enable PCTs to calculate within their own responsibilities what the costs to them will be, rather than on a national basis."

A lack of trust is often at the heart of some of these issues - the PCO requires unbiased and substantiated information to make informed decisions, which is a long-term industry weakness. Invaluable trust has also been undermined by marketing activities - attempts to subvert local guidelines, promoting direct to prescribers when it is contrary to guidance and a general inconsistency of approach.

"Decision-makers within PCOs do not want money, or any kind of programme that involves the close link to a pharmaceutical company for fear of not being independent, and beholden to the company. They will not be interested in promotional campaigns or any link to specific drugs. They do not want biased company information, only peer reviewed, published papers that hold up under close scrutiny," comments Alchemy's Prendergast.

There is clearly a gap between knowing who the people are, understanding their role and communicating effectively with them. GPs with a significant role in their local PCO are well known and heavily targeted by the pharma sales teams, but access to them is inevitably becoming restricted.

The industry is trying out a range of solutions, from RADs to specialised sales teams. Armed with a broader portfolio of information, market and cost-effectiveness data, they should be able to deliver useful information to this sophisticated customer group. The rise of the healthcare development manager or NHS liaison has been inexorable but are they achieving the task?

Andrew Trouton, business development director for PharmaPoint suggests otherwise. "Whatever their title, a dedicated, better-informed sales team will make more progress. It has become very clear that decision-makers within PCOs are really not very interested in products and sales messages from the industry, and these customers' doors will become increasingly difficult to open."

What is working? "It is possible to have a different conversation with these customers, based on an understanding of their role, their priorities and some of the pressure that they are under. The best way to do that is through 'peer-to-peer' contact - getting a practising GP to talk to a PCO lead GP is getting some good results. We've built up a network of GPs across the UK who are able to talk to neighbouring PCTs," adds Trouton.

"The sort of projects that they work on can be divided into several categories: to overcome a prescribing 'block' and help secure local 'endorsement' to follow-up on NICE guidance, where PCT uptake is patchy and in some pre-launch marketing work. It's  sometimes much easier for a fellow prescriber to uncover misconceptions or objections to products than a company's representative."

With upwards of 350 PCTs across the UK, there is a complex set of priorities to address - no company can set up and manage joint ventures, co-working plans or any other initiative across the board. Opportunities for business development across the entire portfolio need a tough strategic analysis.

The talent pool

As the industry faces up to these challenges, then there will be a realigning of resources - the balance will shift more towards managing PCOs and other organisational customer levels.

For those choosing in-house sales rather than peer-to-peer working, the resourcing choices are similar to the broader field force recruitment ones - developing and employing your own teams or using an outsource specialist contract sales organisation (CSO).

Chris Phillips, managing director of Chase Recruitment says: "I can understand a client requirement of a specialist outsource PCO team. In reality it's not a practical solution - quite simply if you have a good track record HDM or similar, then you're in high demand. Why would you work on a contract? My recommendation for any pharma  company considering this question is without doubt to develop your top performing people and recruit to fill those vacancies, not try to build an external PCO team.

"At Chase we see an optimistic future for high calibre recruits, who are often entering the pharma industry with commercial experience. They are looking for varied roles and challenges which have not always been available."

Undoubtedly, in field force resourcing, flexibility will be the key to a successful pharma businesses gearing up for local opportunities and developing more diverse (and interesting) roles. As local PCT guidance or formulary support is successfully negotiated by the account manager, prescriber contact will be required in a more traditional model - the classic 'hunter-farmer' strategy.

Working with PCTs

The days of paying lip service to customer differentiation, unbiased data and local strategies are long over. A number of issues are very apparent:

  • There is a need for the development of long-term (up to 2008) local plans, working with PCTs.
  • Account managers or similar roles require skills training and real development to take them beyond the 'super-rep' mentality that prevails today.

Perhaps putting high performing sales people into these roles is a mistake - unless they can move beyond selling a product, or even a concept they could be the wrong people. It's more of a question of who are the right people for your customers, rather than fulfilling a company structure.

One of the risks is to work to deliver different sorts of goals - moving beyond a product and ROI focus to a fostering of relations that will produce measurable results in the future.

The signals are very clear: these customers do not want more in-depth product messages and ignoring them will only do further damage.

Taking a more lateral approach to in-house data - previously viewed as 'too sensitive' to share with customers - will assist in building more trusting relationships and help repair the damage done by heavy-handed marketing. True joint initiatives require more risk-taking than is currently the norm and there is plenty of room for new and exciting ideas.

Sometimes it's a good thing to reflect on your customer - increasingly headcount and marketing budget need to be allocated at locality level. Flexibility will become one of the keys to competitive advantage, rather than pure marketing muscle.

With more than a third of sales teams operated by contract organisations, there are lots of flexibility lessons to be learnt as the debate in the boardroom over headcount costs intensifies. The ability to deliver high quality sales contacts across differing localities over varying time scales is an interesting challenge.

This is definitely not the end of pharma salesforces, but it is time for a redefining of what they do and how they do it.



BY JONATHAN AKEHURST
E: pharmafocus@wiley.co.uk

Monday , August 01, 2005