With many pharma industry leaders restructuring their commercial model in response to pressures on the industry, the discussion on the topic has moved away from ‘should we’ to ‘how do we’?
The industry needs to offer increased flexibility, allowing healthcare professionals to choose how and when to engage while meeting an increased demand for demonstrable value in medicines. This demands agility from commercial models that has previously been unavailable.
One of the many obstacles slowing the pace of change is that businesses that have succeeded under antiquated models will advocate for business as usual.
While this approach may work in the short-term, the successful model that will be in place in ten years’ time is very different and those who don’t adopt this soon will pay a price.
Same problem, different challenges, new solutions
Advances in diagnostics and the efficacy of treatments means people are living longer than ever. Ageing populations that have growing expectations and dependency on medication, twinned with the fact that in many economies fewer people are funding healthcare, are causing financial issues. Pricing, reimbursement and market access therefore remain the pharma industry’s core challenges.
Over the last twenty years or so mass-market blockbuster products have been the backbone of big pharma business. The three biggest blockbuster drugs, Lipitor, Humira, Advair, collectively generated sales of over $350 billion, making up a significant portion of their patent owner’s income. The success of such products means they have dictated a simple, catch-all approach to commercial models.
The new challenge for manufacturers comes in two fundamental forms.
Firstly, there isn’t any room for new blockbusters – Lipitor for example has been, and will remain, the go-to treatment for high cholesterol. The market opportunity for drugmakers is in immunology, oncology, rare diseases and orphan indications, with nearly all new R&D projects in these areas.
Invariably these treatments come with a substantial price-tag, exceeding $100,000 per patient, per year in some cases. There is an inherent conflict between the need for these drugs and the burden on healthcare economies around the world when it comes to managing the affordability of the treatments. The pressure on pricing and margins is growing – the political rhetoric in the US is demanding cheaper drugs, the EU has a legacy in lowering prices and even economies such as Japan, which have historically been willing to pay for pricier treatments, have in the last three-to-five years started to look to cheaper generics.
Secondly, some of the aforementioned blockbuster drugs are facing real competition for the first time from biosimilar developers. Humira for example loses its primary patent protection in 2018 and will face growing competition.
The challenge for businesses is to manage these conflicts and sell in the emerging spaces. Traditional commercial models are no longer fit for purpose, the increasing onus on pharma is to demonstrate the real impact of their products in new ways to a range of stakeholders with unique wants, preferences and regulatory constraints.
Analytics and the move to multichannel models
With drugmakers migrating into the same highly competitive space, they will be competing for marginal gains across new product portfolios. There aren’t likely to be many new blockbuster, go-to drugs in immunology, oncology, rare diseases and orphan indications. The differentiator for pharma businesses will be to excel at demonstrating the value of medicines to a range of stakeholders, and this requires new skills in medical communications, sales, marketing and the supporting services they offer.
The new market dynamic requires a move from a simple commercial model that focuses on brand awareness. Traditional methods such as the sales rep backed with adverts and marketing materials (brochures, flyers) to communicate the product’s value proposition are being replaced with ones that engage multiple stakeholders, through multiple channels to cater for niche requirements.
If we take the UK and NHS as an example:
- A new drug product is licensed
- Guidance for the product is then provided by the National Institute for Health and Care Excellence (NICE)
- The product is then (potentially) added onto local formularies which are designed to reflect local needs, reduce variation in prescribing, and allow rapid adoption of new medicines and treatments.
In the third step of this process there is room for variation as the regional Clinical Commissioning Groups in the UK manage their respective budgets in accordance with demographic health needs. The so-called ‘postcode lottery’ has meant that more expensive, less common treatments have been available in some regions of the UK but not others.
This is a more complex sell for pharma companies and a different, more flexible engagement model that acknowledges the marketplace is required.
There have been some reactive changes from the pharma industry in response to this new environment. A noticeable shift away from generalist to specialist reps is well under way but commercial models rely on a multitude of roles, and they all need to function collaboratively to be at their most effective. Everyone from primary care representatives and field service teams to contact centre operators and trainers need to be similarly specialised.
Many companies have started to adopt this multichannel approach and incorporate more digital channels into their sales activity. However, very few are integrating their efforts and fewer still are using data effectively to inform their campaigns.
Commercial teams need to be more astute at acquiring, interpreting and circulating data to inform a more nuanced approach and understand what is working, in which markets. For example, Japan is quite traditional and healthcare professionals prefer face-to-face meetings, whereas in the UK, northern Europe and some states in the US, reps find it increasingly difficult to access professionals.
This is a very rudimentary example, but ultimately channel preference, optimum time and frequency, sales data and prescribing behaviour all need to inform the approach that a sales team takes.
The ability to quickly redistribute spend to channels that are working is essential as is the flexibility to scale investment in response to changes in market conditions. These decisions must be informed by solid interpretation of sufficient volumes of data.
The Holy Grail for pharma sales teams is to comprehensively understand the multichannel engagement mix for each individual customer and create tailored approaches that maximise return on investment (ROI). The more customised a sales journey is, the greater the profitability it will offer.
While businesses that fail to adapt may not see any immediate problems, the coming years will be very telling. A one-size-fits-all approach will lead to reduced uptake of new products and a rapid marginalisation of legacy products – the financial repercussions could be significant. Flexibility and scalability are pillars that every commercial model will need to be built on. To make best use of marketing assets, pharma businesses need to be able to respond to insights on products and market performance. This means the ability to significantly scale back or ramp-up specific activity is essential.
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Julian Tompkins is president of Ashfield Commercial and Ashfield Patient Solutions
