Pharma Reform

In our series about pharmaceutical representatives we have covered factors impacting their job function, market expectations, what needs to be done to launch and market a pharmaceutical product, and what it means to be a professional pharmaceutical representative.  Today we are going to discuss the organizational implications and what has to happen throughout the corporation to make this transformation for professional representatives a successful reality.

If we work back from how the market is evolving and what companies need to do to address the changing expectations of a broader and at times, more sophisticated customer (not just physicians), we can see that the implications for change at a pharmaceutical company are organizational and not just for “sales”.  This is truly transformational for executives and senior management, R & D, and commercial operations.  Companies will fail miserably if they are merely looking at how to change their sales organization (e.g., restructure, new compensation, and new titles).

Of all the issues we could discuss, getting all the functional areas aligned for this change is the one that precludes most pharmaceutical sales organizations from making the fundamental changes they know they should make in light of the evolving new healthcare market. What we are talking about is formulating an organizational strategy that creates a comprehensive culture and support system that embraces the role of the professional representative so they and the company products can succeed in the evolving new healthcare market.

The first change that needs to take place is the organizational mindset from the traditional “sales” position to that of the professional representative.  Your CEO and executive team play a huge role in this.  They must see professional representatives in the light we have described and not as “expendable field people” deployed tactically to drive sales.  This mindset change requires that executives and senior management understand the changing healthcare market at the customer level (not just physicians).  They must appreciate how the role of professional representative will be different from that of the sales job they have known for decades and probably did themselves.  If executives and senior management don’t understand the difference, it will make no sense to implement any of the other organizational changes needed.   In fact, the other changes are probably not going to get their support because they will seem like a waste of time and money to the “sales rep” oriented executive team.

If it is not somebody on the executive team proposing the changes it is incumbent on the person or team that is to make sure the executive team fully comprehends and supports the strategy, organizational implications, and the rationale for the changes being proposed.  As bureaucratic as large companies can be, but more importantly because of the multi-functional implications,  this is not just a discussion over coffee.  It will require well thought out planning with a series of discussions to work out details of the functional implications and to garner functional support.

Each company and executive team will be different.  Company strategy, financial position, product pipelines, and even the expertise and competency within the organization will factor into how receptive an executive team might be to the magnitude of change being proposed.  Whether or not you can get the executive team to buy in and how to do that may be interesting fodder for another series but in our next post, let’s just assume the executive team is on board. They not only understand and are ready for change but  embrace it, expects it, and they are ready to support it.  I know this is a big assumption but we can’t get to where we need to be without it so let’s play this out in the next few posts.  What else has to change?  Stay tuned. mike@pharmareform.com

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For industry insiders, Pharmaplasia provides a nostalgic look back at the changing pharmaceutical industry over the past five decades.  The book is packed with management and leadership lessons learned as industry veteran Mike Wokasch explores the root causes of mistakes and poor decisions that led to diminished trust and credibility and its current state of dysfunction.  With specific recommendations for change, Pharmaplasia answers many of the questions being asked about how pharmaceutical companies can increase R & D productivity; reduce operating expenses without sacrificing profitability, and what they should do to align with the evolving new healthcare market in light of healthcare reform.

“Wokasch’s insightful view of the pharmaceutical industry offers some logical explanations for the volatile changes and disappointment in that once proud business sector. As a senior level insider with access to key decision makers, Mike is able to provide both concrete examples and an educated perspective of the pinnacles and pitfalls surrounding this important segment of our economy and lives. This is a must read for both senior level pharma executives and those aspiring to bring back the real value to this once respected industry.” Jim Patchen

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From our last post it should be apparent that successful pharmaceutical companies will move to a considerably more complex product sale than a simple discussion about indications for use and potential side effects or adverse reactions.   The technical depth of the science, the volume of data, and breadth of expertise required (basic sciences, therapeutics, diagnostics, pharmacoeconomics, and new quality metrics and outcomes) will require a level of scientific and technical expertise beyond that required or expected for most traditional sales presentations.  Success for pharmaceutical representatives will also require a much broader understanding of market dynamics (government, insurance, payers, and managed markets) and enhanced territory management skills beyond physician call scheduling.

I’m sure some readers are saying they already do these things and this is not new.  I am going to make a point here that might irritate some readers but it needs to be made.  There is a difference between being a sales representative and being a professional representative.  I believe sales representatives have little opportunity in the future of the pharmaceutical industry while professional representatives will be in high demand.

Being a true professional is more than just getting paid to do something.   So what’s the difference between being a professional and not being a professional?  One way to distinguish a professional from others is that they works so hard at being good at something that they can  even make difficult things in their profession look easy to do.

I know you have seen it.  There are those who always have perfect scores on package insert tests and always win the product presentation contests.  They even know stuff you don’t need to know.  They are also the ones who know every office staff person in their territory and have more access in their territories than most of their competitors.  They are always in their territories until late, sometimes even after most sales representatives would consider beyond a reasonable time to call on an office.

Professional representatives are frequently the ones who volunteer to help or mentor new representatives.  Probably most interesting is they are also the ones that seem to complain the least and accept regulatory or market challenges as something they just have to deal with.  And, while they may be critical of marketing materials, they offer constructive feedback and find ways to work with what they have.  They also welcome skillful manager coaching and performance reviews as ways to get critical feedback on how to get better rather than looking at them as their manager checking up on them and a scorecard for incentive compensation.

For every job there are different levels of performance and expertise.   If you are a sales representative you do what needs to get done, make the calls you can, learn enough about your products to deliver the marketing message and answer the important, high probability questions, and in the end,  hopefully you’ll deliver the sales expected.  You give the company a full day of “work stuff” and maybe even do some “work stuff” at home to make you feel better about being committed to your job.  Again, there are varying degrees of performance and expertise in being a sales representative.

If, on the other hand, you are a professional representative, you commit to a much higher level of job performance and expertise than merely going through the motions and doing “work stuff.”  You research more, study harder, practice often, and try to reach a level of job performance and expertise beyond the expectations of others.  You are doing it not just to increase sales in your territory.  You are doing it not just to be the smartest person in your district or to garner favor with your District Manager.  You are not even doing it just to please your customers.  You are doing it because it is your profession and you are committed to being a professional representative.

Today both types exist (pharmaceutical sales representatives and professional representatives) but I believe you have no choice in the evolving new healthcare market.  If you want to be employed as a pharmaceutical sales representative, your days are numbered.

If, on the other hand, you are committed to being a professional pharmaceutical representative you have a much higher probability for being employed and having a positive impact on patient care.  And while you may find the market more complex and products more technically difficult, you will find that overcoming those challenges will be even more professionally satisfying.  You will also find that patients in your territory who should be on your products will have a higher probability of that than if you are a pharmaceutical sales representative in that same environment.   Professional representatives will be in demand because, while there are plenty of people who can be pharmaceutical sales people, there are far fewer people who are ready, willing, and able to commit to the hard work and effort required to be a professional pharmaceutical representative.

In our next post we will discuss how the corporate mindset and expectations must be aligned to support professional pharmaceutical representatives in the evolving new healthcare market.

mike@pharmareform.com

In our last post we discussed the increasingly comprehensive approach that R & D will need to take in order to deliver products that can meet increasing market expectations.  Before we get into the implications for the pharmaceutical sales representative it is important to understand what needs to happen for one of these more advanced products to be used appropriately so as to optimize the clinical benefits and to realize the potential value and cost benefit.  The intent here is not to draft a marketing plan (and I’m sure I’ll miss something anyway) or bore you with all the details about launching and promoting a product but rather to highlight the enormous task at hand.  Here are just some of the steps and hurdles to adoption and appropriate use that will be needed to get the most (clinical benefits for patients, economic benefits for payers, and financial reward for the companies that do it well) out of innovative new products with more comprehensive product profiles:

• The market must be made aware of and educated about the product, who it is for, what it can do clinically, what patients can expect if they take the drug and why it has value as a therapeutic option
• Healthcare providers and laboratory personnel must be educated about the companion diagnostics including the potential use of genomics testing. (What the tests are, who should be tested and who doesn’t benefit from testing, how to do the testing, what the tests can and can not tell you, and how to interpret the results).  Insurers and providers also need to understand the economics of ordering and using a test (when does it make economic sense, when is it cost prohibitive).
• Formularies must have the data they need to evaluate the product, its appropriateness for their patients and the potential clinical and economic impact on their patients and plan or institution.
• Prices and reimbursements must be negotiated
• Supply chains must be informed and stocked (potentially includes lab testing and handling supplies)
• Government decision makers, hospitals, insurers, and physicians will need to understand the clinical value, cost benefit, and impact on quality metrics and patient outcomes
• Hospitals in particular, will need to understand how to evaluate the product (have validated designs and models) for determining the impact on quality metrics, patient outcomes, and pharmacoeconomics within their own healthcare systems.
• Physicians and patients must understand how best to use the product for optimal clinical benefits
• Patients must understand the importance of compliance and adherence and the consequences of neglecting to take the product as prescribed

Some might argue that these are the same issues and tactics that have to be dealt with in the market today.  None of this is a lot different than what companies are doing or at least should be doing now.  If that is true, then with all this to get done for so many products in a large very complex market, why is it that so many pharmaceutical sales representatives find themselves out of a job today with an increase in discussions about the lack of value being delivered and the potential extinction all together of the pharmaceutical sales representative job?  We’ll explore that further in the next post.

mike@pharmareform.com

If we are trying to figure out how sales representatives can add value, we must start with those who will determine whether or not there is value being added… the customer.  This may be obvious to some, especially sales representatives, but over the past several decades pharmaceutical industry management has characterized the “value added” in the context of what sales representatives can do for the company or the product and not what sales representatives can do for the customer.  So let’s start with the customer (which is not just physicians in the evolving new healthcare market) and what their needs are and how we can add value by meeting or exceeding those expectations.

I don’t want to get off on a tangent but the needs and expectations I’m talking about here are not for things like lunches being delivered or a return of the tchotchkes.  Unfortunately, the industry trained physician offices into developing these expectations in lieu of meaningful clinical discussions about products.

So let’s review some of the evolving market expectations for pharmaceuticals that the industry must be ready to meet, especially in light of healthcare reform:

• Safe and effective products that can be differentiated (clinically proven and with label claims where possible) from currently available treatment options (including preventive medicines)
• A clear understanding with supportive data for the basic science behind the product, its mechanism of action, and rationale for efficacy and potential side effects and adverse reactions.
• Clinical data to support “comparative efficacy” and other claims of differentiation or even superiority (justify the premium pricing)
• Personalized medicine supported by biomarkers and companion diagnostics that can predict response, determine extent of response, and anticipate side effects and adverse reactions with specificity and accuracy
• Real world pharmacoeconomics data to support the economic value of the product and pricing that reflects the value being delivered. Again, justify the premium pricing.
• Hospitals will want data and methodologies to demonstrate the impact of products on newly established quality metrics and outcomes data that will be used to force rank their institution performance against national standards.

One of the first implications of meeting these more demanding market expectations is that pharmaceutical companies must readjust their thinking to be more selective in their pipeline evaluations and  a lot more comprehensive in their approach to research and development.  In the past, you could just find a compound, identify the potential indications for use, do the clinical studies, get approval, and go to market.  This traditional “get it to market” approach to R & D will deliver products and data that fall short of market expectations and hamper commercial viability of products in the evolving new healthcare market.

It also becomes apparent that regardless of the representative’s scientific or technical expertise, even the best of sales representatives will struggle to address these market expectations if the research foundation and data are lacking.  I believe this is one of the reasons sales representatives are struggling today.  Pharmaceutical research has not kept pace with the demands of the market and sales representatives are being asked to compensate for limited regulatory product labeling, a lack of product differentiation, and minimal real world clinical data that can be used in product discussions.

But let’s assume your company is committed to a much more comprehensive research approach to deliver truly innovative new products with robust data packages.  This has significant implications for how pharmaceutical sales representatives can add value for customers.   You might be surprised by some of the implications we’ll discuss in our next post.  mike@pharmareform.com

I and others have speculated about the demise of the pharmaceutical sales representative position.  Diminishing physician access, regulatory constraints on promotion, outdated activity – oriented management expectations, and misguided and sometimes misleading marketing materials that seem to have been developed by clueless corporate – based MBAs have all challenged even the best of sales representatives trying to do their job.  Rather than dwell on what has gone wrong, and why the traditional sales representative role isn’t working any longer, let’s take a look at where to go from here.

To survive, most would agree that pharmaceutical sales representatives must add more value for customers and be able to justify the substantial expense of continuing to have them in the field.  One of the more popular solutions often proposed is to enhance the scientific and technical expertise of those who want to pursue this profession, modeling the position closer to that of a Medical Science Liaison.  But, after having spent considerable time reflecting on this I have come to the conclusion that the challenges facing the sales representative position are not necessarily just related to the lack of skill, competence, or expertise.  Rather, I believe the pharmaceutical sales representative dilemma is a symptom of the current state of industry dysfunction with broad based, deep seated root causes within most pharmaceutical companies.

If this is true, then companies and especially senior commercial management are making a huge mistake and wasting time and money by taking a narrow minded approach to resolving this problem by thinking that this is a sales issue best left to sales management to figure out and fix.  It is equally naive to think marketing can figure this out and strategically determine the clever new tactic to resolve this “sales” issue.  Territory realignments, new territory management analytics, flashy new electronic detailing aids, and even enhancing hiring standards are desperate attempts at a magic bullet, quick fix for what I believe is a much broader, inherent organizational misalignment with the evolving healthcare market.  Companies that appreciate the pervasiveness of the organizational dynamics that impact the sales representative will be able to more efficiently identify the changes needed (less trial and error) and will be able to deploy more impactful commercial organizations for the evolving new healthcare market.

Over the next several posts, we’ll discuss the basis for this conclusion (Hint: it starts with the customer), what organizational changes companies need to make (Hint: it has less to do with sales than other parts of the organization) before company representatives can once again add value and justify their deployment, and finally how the job description for field deployed company representatives will change.

mike@pharmareform.com

More often than not you hear Pharma defend high prescription drug prices as necessary to cover the high costs associated with pharmaceutical research and development.  Over the course of 7-10 years or longer they may spend $1.0 billion or more to get a product to market.  While the time and costs of drug development may be real, the rightfully skeptical healthcare market and patients have never really accepted this rationale for high prescription prices, often pointing to the more visible high cost of marketing and sales.  And now, this high cost of R & D rationale has become even less believable.

What makes this rationale even less believable today then ever before?  The fact that pharmaceutical companies can afford to spend tens of billions of dollars on mergers and acquisitions while dismantling the acquired companies, laying off thousands of employees (including research scientists), and at the same time, reducing the R & D investment the two merged companies might have otherwise spent.

The other area that challenges the credibility of the bogus high pricing rationale is the affordability pharmaceutical companies have to pay hundreds of millions of dollars or even billions of dollars in fines and settlements for alleged and sometimes proven wrongdoing.

Unfortunately, the billions of dollars spent on mega-mergers and litigation settlements don’t go towards producing any innovative new products.  Pfizer spent $68 billion (equal to the total annual amount of industry spending on R & D) to acquire Wyeth and Merck spent $41 billion to merge with Schering, not to mention the hundreds of millions spent by the two on restructuring, legal, and banking fees.  None of this money went to R & D.

Similarly, none of the $2.3 billion in fines and settlement Pfizer recently coughed up nor the hundreds of millions of dollars of settlement paid by other companies for their alleged indiscretions will go to R & D.   In fact, Pfizer’s $2.3 billion settlement represents more than 30% of their anticipated $6 billion spend on R& D this year.  The $2.3 billion alone would have put any other company in the top 20 of pharmaceutical companies in R & D spending.

So when Pharma says they need high prices to support R & D it is no surprise that the healthcare market and patients recoil with skepticism, frustration, and animosity.

mike@pharmareform.com

It’s been going on for decades and there seems to be no end in sight.  Good news for pharmaceutical companies and their executives.  Drive billions of dollars in revenue while saving hundreds of millions, if not billions of dollars in expense.  What are these strategies that seem to be working so well for those who have figured it out and dare to deploy it?

The first strategy involves avoiding expensive clinical trials but capitalizing on markets of unmet medical need where you can formulate a story around why your product might make sense for those patients even when you have little or no data. The second strategy is to take advantage of the fact that all prescription drugs have side effects and possible adverse reactions.  By mitigating and disguising the safety issues hidden in the cloud of prescribing information it is easy to downplaying side effects and adverse reactions, even if they might be fatal for some patients.  You can even create a perceived competitive advantage by implying your product has fewer and less serious side effects and adverse reactions than other therapeutic options.

Yes, it might be embarrassing to get caught and you may have a credibility issue with some physicians who don’t go along with your therapeutic rationale or concocted story but the negative financial consequences are pretty benign.  FDA could send you a warning letter.  The government might even fine your company or make you ante up some money to settle the case.  The same is true for product liability litigation.  Yes, there are legal fees and occasionally the company may have to pay the victims multi-million dollar settlements.   But, none of these consequences has near the financial impact of the positive revenue upside that can be generated over the same period of time.

Here is the best part about these strategies.  Many pharmaceutical companies try to play by the rules, so sorting out those who are intentionally deploying these strategies takes time and it is more difficult to identify than you might think.  Companies do inadvertently stray into off-label promotion and may appear to be understating their product risk profiles, especially as interpreted by the FDA.  This makes it all the more effective to hide strategically intended campaigns.  The FDA has to nit pick every promotion they get around to reviewing for clues of impropriety which ties up valuable agency resources making it all the more difficult to do a comprehensive job of surveillance.  Without any real regulatory consequences for non-compliance, the FDA must rely on whistleblowers going to the Department of Justice with their cases in hopes of putting a stop to protracted and egregious abuses of these strategies.  But that also takes time and years to gather sufficient documentation to legally take a company to task.

I am not advocating these strategies.  To the contrary, I believe these corporate orchestrated strategies are potentially harmful to patients and contribute to diminishing trust and credibility of the industry.   But, unfortunately, until the negative financial consequences exceed the revenue and earnings opportunities there is little incentive to stop the use of these strategies in companies with “whatever it takes”  cultures. mike@pharmareform.com

People with a job in the pharmaceutical industry are fortunate just to have a job given the current state of unemployment in the US.  At the same time, slow revenue growth, patent expirations, depleted pipelines, and layoffs from downsizings can create anxiety and well founded despair, discontent, and insecurity.

If you’re wondering about your company’s viability in the evolving new healthcare market or considering a move to another company, here are a few things you might want to assess and check out:

• Does the executive team describe their vision in terms of patients and value to healthcare or do they talk about how big the company will be and what industry ranking by revenues they are shooting for and how they are going to get there?
• Is your C-level and management team committed to an uncompromised culture of integrity and what have they done to prove it? DOJ Corporate Integrity Agreements don’t count as proof of their commitment.
• Does your company make decisions based on doing what is right or are decisions driven more by what is legal or what is regulatory compliant?
• Is your executive team more concerned about just having something to sell and the ability of sales and marketing to drive sales than they are about having innovative products that can deliver meaningful clinical benefits to patients?
• Is R & D focused on a few therapeutic areas they intend to conquer with a broad basic science approach and a continuous search for expertise to help them or is your company merely searching for any compound or technology that might have a commercial opportunity?
• Are you proud of your management team, their skill and expertise or are you wondering how in the world they got to be managers?
• Is your marketing team dominated by MBAs who have never spent a “real day”, much less a year or more, in the field? Market research focus groups don’t count as “real days.”
• Are the entry requirements for your sales organization based on high standards for professionalism and technical competence or are people hired because they can talk a good story (read BS meter overload) and have exceptional social personality traits (look nice and are very cordial)?
• Are sales managers focused on the value reps are delivering to their customers or are they still concerned about trying to quantify your activities and deliver the marketing message?

No company is perfect, but if your assessment from these questions are not as reassuring as you might like them to be, you might have good reason to be concerned.   We haven’t even gotten into assessing business considerations like financial stability, pipeline strength, acquisition vulnerability, or litigation exposure.

If you like the answers you got from this assessment you are very fortunate indeed.

mike@pharmareform.com