Phil Taylor explores the new sales and marketing strategies suggested by a recent Booz & Co-sponsored survey of the pharma sector
Two thirds of US and EU pharmaceutical industry executives have arrived at the conclusion that the current business model is broken, according to a recent Booz & Co-sponsored survey. That result won’t surprise pharma insiders. The survey collected data from more than 150 senior industry executives with influence or responsibility for sales and marketing resources in their organizations.
Some 68 per cent of respondents said they believed the current business model is "broken and needs significant repair", while fewer than 10 per cent believed the model is not broken. The main challenges for the drug industry over the next two years are downward pressure on pricing and healthcare budgets—cited by 76 per cent of respondents—with 70 per cent believing that the need to demonstrate cost-effectiveness is also a major challenge.
Other challenges cited by more than 50 per cent of those surveyed included restrictive market access, increasing generic competition, decreasing access to physicians by sales forces, and the patient's diminishing ability to pay for treatment. (For more on cost-effectiveness, see How to build value through comparative effectiveness research; for more on market access, see Market access: How network intelligence increases value ; for more on generics, see Dr. Bates Talkback: How to mount an effective defense against generics.)
More complex models
"The pharmaceutical industry is the eye of a hurricane of change," said Danielle Rollmann, a partner in Booz & Co's global health practice. "The sales and marketing model is being forced to move to one that is much more complex. This is happening in an uncertain market with incredible pressure to reduce budgets. The only clear path out of the storm is for companies to identify and focus on building the few critical capabilities they will need to succeed."
More than 40 per cent of respondents said they expected sales force time allocated to products would decrease by around a third, while just over a quarter felt it could increase by as much an average of 58 per cent, and a third expected there would be no change.
"Those of us who work with pharma companies to develop and implement commercialization strategies know very well the challenges of maximizing asset value in this new environment, where both key customers and customer expectations are being redefined," commented Susan McDonald of National Analysts Worldwide, which carried out the survey in collaboration with Booz. "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."
In response the changing environment, many of those surveyed indicated they planned to shift sales force attention away from community physicians to key accounts, key opinion leaders (KOLs), payers, and hospitals/group purchasing organizations (GPOs). (For more on KOLs, see Special report: KOLs and pharma.)
Digital and social media
"The power base in the industry is fundamentally shifting toward insurance companies, integrated providers, and patients,” commented Booz & Co partner David Levy. Influencing a sale is getting increasingly complicated and requires more innovative approaches to reach multiple audiences, so expect to see more innovative digital and social media in this space, he added. (For more on digital and social media strategies, see Special report: Pharma and social media and Special report: Pharma and the iPad.)
The most dramatic changes in sales force time and budget allocation was reported among those respondents who are convinced that the model is broken, according to the survey. In contrast, those who are not convinced the model is broken are making few adjustments to their spending.
More than half of all those surveyed said they expected to rely more on innovative pricing strategies, collaboration with payer organizations, pharmacoeconomic studies and new service models, with direct-to-consumer and patient adherence initiatives also tipped to increase. (For more on direct-to-consumer marketing, see Pharma and direct-to-consumer marketing in Japan; for more on patient adherence, see Special report: Patient's Week 2011.)
Those polled also said they planned to do a more effective job of demonstrating value through outcomes, continuing to emphasize direct-to-consumer (DTC) marketing, in recognition that patients hold the other end of the purse strings, and more effectively using innovative digital media channels.
The survey uncovered an increase in doctor-focused social media, mobile technology and e-detailing spending. In addition, almost 40 per cent of the executives polled said they planned to cut back on print advertising.
While the survey shows that executives are thinking in terms of payer engagement, it also showed clearly that in the majority of cases this does not occur until after a product candidate has reached Phase III. Some 29 per cent of respondents said engagement with payers occurred after Phase III, with another 26 per cent saying it occurred during the Phase III program; 24 per cent started this process between Phase II and III, and 21 per cent prior to or during Phase II.
"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," said Germany-based Booz & Co partner Rolf Fricker.
For all the latest pharma sales and marketing trends, check out SFE USA on June 12-14 in Somerset, NJ.
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