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Thought leadership and innovation for the Pharmaceutical Industry

The healthcare delivery market is undergoing dramatic change, adapting to survive in a much tougher business climate we call Healthcare 2.0. This should prompt pharma organizations to reevaluate the assumptions on which they’ve built their commercial model, or they risk falling behind the curve.

By Rita E. Numerof... on Nov 3, 2014

Across the healthcare delivery landscape, virtually everything related to purchase decisions and market access is in flux. New stakeholders, new processes, and new criteria are increasingly focused on product value. Manufacturers need to ask themselves whether their current commercial operation can deliver the agility and the skills to respond to a broad range of emerging needs and requirements for success. If the answer is ambiguous, it may be time to redefine roles, responsibilities, processes, and accountabilities across the organization to ensure that the commercial operation is ready for Healthcare 2.0. 

Changing Stakeholders

Payers, employers and patients are demanding greater transparency and evidence of value - better health outcomes at lower cost - from healthcare delivery organizations and indirectly, from manufacturers.  Delivery organizations are responding in three ways.  First, they are consolidating at an accelerating pace in an attempt to leverage scale to gain efficiencies and greater purchasing power.  Of the roughly 5000 hospitals in the country, approximately 41% were independent as of 2010, but M&A activity has increased every year since then. The industry averaged 91 consolidations annually from 2010-2012, compared to an average of 55 in the 5 preceding years, and only 13% of hospitals have a strategy to maintain complete independence. 

Secondly, hospitals and systems are experimenting with various forms of at-risk payment, such as Accountable Care Organizations, Patient Centered Medical Homes, bundled pricing, and population health management.  A common element shared by these approaches is that they give providers a stake in the cost of care provided, rewarding them if they deliver at less than agreed-upon costs, and punishing them for higher costs.  The pace at which hospitals have adopted at-risk models varies.  Some organizations have moved quickly to enter into shared savings arrangements, while others are much more conservative, adopting a “wait and see” philosophy. 

Thirdly, they are changing how they decide which products to use.  Decisions are increasingly evidence-based and driven by a product’s economic and clinical value to various stakeholders.  This increased focus on value has coincided with a decrease in the influence of individual physicians in the decision making process.  Administrators and C-suite executives are implementing cost management techniques such as competitive bidding and better inventory control, long used in other industries.  They are therefore looking to their suppliers to provide greater evidence of product economic and clinical value.

Commercial Model focused on Value Delivery

As I have mentioned previously in this column, organizations need to align their R&D, Medical Affairs and Commercial functions if they are going to function effectively in the evolving healthcare environment.  The commercial model needs to be responsive to customer demands for evidence demonstrating product economic and clinical value.  Alignment of these functions is also needed to ensure that such evidence is generated early enough to support a compelling value proposition and optimal reimbursement on market entry, not as a post-market afterthought.  

A further hurdle exists beyond reimbursement. The commercial model must also address the challenges of getting the product adopted in the marketplace. Just because an insurer or PBM is willing to pay for a product doesn’t guarantee that a provider will be willing to include it in their formulary or on a more restrictive care path. The commercial organization must be designed to communicate the value of the product to all stakeholders in terms that resonate with their clinical and business objectives.

Enhanced Capabilities for Engaging with Customer

Sales and market access staff should treat their territories and accounts as businesses, thereby redefining their roles in anticipating and generating business results consistently".

Reps are no longer primarily interacting with physicians and presenting features and benefits. Increasingly, they will need to engage in value-added conversations with executive decision-makers to identify needs, develop responsive product and non-product solutions, and articulate compelling value propositions. Moreover, they will need to represent and be able to deploy the full capabilities of their company.  That’s because customers increasingly want to discuss the entire portfolio of products and services offered by the manufacturer. This sophisticated selling approach will also rely on contributions from a wider team, rather than individual sales people alone. 

To be successful, companies need to create clear and comprehensive accountabilities.  For example, sales and market access staff should treat their territories and accounts as businesses, thereby redefining their roles in anticipating and generating business results consistently. In this way, they will be better able to measure sales potential and forecast accurately, creating realistic plans for which they can be held accountable at the account, channel, territory, district, and franchise levels.

Stronger diagnostic and influence skills are needed to meet the growing challenge of complex accounts and improve sales performance.  This can be achieved in part by improving the commercial organization’s analytical skills and business acumen.  It may also involve redesigning the commercial structure; a new combination of tools and processes to improve analysis of account, channel-mix, and territory activity; revised metrics and incentives; and development coaching and behavior change.

No matter how good a company’s marketing programs or sales training, the current environment still requires new infrastructure and processes. Different skills and tools are needed to analyze business potential, assess and coach consultative sales skills, and leverage best sales practices throughout the organization.  These are the foundational elements which ensure companies provide the complex coaching aimed at developing the right competencies and getting commercial staff to model appropriate behaviors.

Keys to Success

Achieving the appropriate level of business acumen to properly diagnose account or territory potential may require a mix of retraining and recruitment of new sales staff.  A structured assessment of existing competencies will determine the mix required.  Then, building the necessary level of performance will require significant time and engagement by commercial leadership.

This modified behavior will extend to an improved assessment of the sales process and greater understanding of how to translate the strategy into sales representatives’ activities aimed at building long term relationships based on mutual benefit rather than “taking orders” for products.

For customer facing teams to engage appropriately in operationalizing strategy, the entire commercial organization -- comprising strategic marketing, market access and sales - will need to be properly aligned with a common understanding of new tools and how those tools fit into structured account management. 

To secure this alignment across the organization, roles must be clear, with responsibilities, accountabilities, and objectives well defined.  Also needed will be metrics supporting an incentive plan that encourages appropriate behaviors and outcomes. 

There is no “quick fix” to prepare the commercial organization for Healthcare 2.0.  Companies must base their transformation on rigorous analysis that objectively compares current capabilities against the emerging needs and demands of their customer set. A comprehensive approach that addresses gaps in structure, tools, skills and behavior will be needed to compete successfully in the evolving healthcare environment.

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Numerof & Associates is a strategy development and implementation firm, which has worked globally for more than 25 years helping major pharmaceutical, device, diagnostic, payer and delivery organizations create and deliver value across healthcare.  Expert in business model transformation, Numerof specializes in developing economic and clinical value propositions, redesigning commercial models, and crafting market access strategies for the pharmaceutical industry worldwide.