Pharmaceutical Company Restructuring Considerations for the Future

In the last post we discussed how Big Pharma might have avoided having to lay off so many of their loyal employees had they done a better job of managing their business for the long-term.  Well, easy to look back and criticize but how about looking forward?

Here are some things for Big Pharma executives to consider as they restructure for the future:

  • No single blockbuster product can fix a dysfunctional pharmaceutical company.  It can only buy time to make the inevitable difficult but necessary changes.
  • The pharmaceutical market will become increasingly global with less regional variation in treatment practices, regulation, and pricing.
  • Unsubstantiated value of seemingly unjustifiably high prices will be met with market rejection, outright price controls, government price negotiations, and higher rebate expectations.
  • Relative to Big Pharma pipeline needs, Biotech will have a finite supply of clinically meaningful differentiated innovative products available for acquisition
  • Traditional marketing and sales activities will have little impact on prescribing behavior which will be more influenced by scientific rationale, demonstrated meaningful clinical benefit, and the impact on overall healthcare costs of treating the patient
  • Prescribing will be increasingly managed with “best practice treatment guidelines” prompted and monitored for compliance through e-prescribing technology
  • Electronic medical records with medical information systems driven algorithms will allow for real world assessments for determining relative therapeutic benefits and healthcare cost implications of treatment options
  • Financial incentives, cost management benefits, and more effective products and programs will drive a revitalized interest in making preventive medicine and medically prescribed life style changes a priority
  • Product and treatment assessments will be more rigorous, more sophisticated, and less easily influenced by Pharma companies unless they have  compelling real world clinical data to support their claims
  • Comparative efficacy will become a regulatory and healthcare market expectation
  • Therapeutic options will include stem cell, gene therapy, and synthetic biology- derived treatments.  Some may ultimately eliminate the need for chronic treatment in small molecule mass markets.
  • Drug-device and delivery systems will target treatments to specific disease targets, increasing efficacy at lower doses while reducing the potential for side effects and adverse reactions
  • Companion diagnostics and personalized medicine will be a regulatory, market, and healthcare provider expectation
  • Reliable, high quality manufacturing that ensures consistency and safety will be a differentiating feature for pharmaceuticals, especially for generic drugs
  • Affordability will eventually mean denying insurance coverage (private or government) for high priced drugs with marginal therapeutic benefit, especially those with minimal end of life benefits
  • To maintain profitability under intense pricing pressure Pharma companies will be forced to dramatically reduce their operating expenses (well beyond their current thinking)
  • Big Pharma companies that maintain their large organizational size will have less pricing flexibility and will be hampered in their ability to deliver innovation, ensure customer satisfaction, and avoid regulatory and legal missteps

So what to do now:

  • Pharma recruiting, training, and talent management must improve with a focus on expertise, competence, and integrity.  Hire and develop “the best” (e.g., world class scientific expertise, visionary leadership with integrity, highly skilled operations personnel) rather than just finding somebody who has done or can do the job.
  • Focus research on comprehensive understanding of diseases rather than just exploiting chemistry and disease targets.  Strive for preventions and cures rather than just developing another compound or molecule to get to the market.
  • The number of pipeline projects is only meaningful in the context of new market expectations.  Products that can not deliver clinically meaningful differentiation should be objectively reevaluated for commercial viability in a more demanding healthcare market. Fewer development programs will make it past this assessment if companies are truly objective and critical in their evaluations.
  • Pipeline target product profiles should define the potential “comparative efficacy“ and the meaningful clinical benefits relative to other therapeutic options
  • Identify and develop plans for securing the specific data needed to substantiate the claims of efficacy, safety, and “value”.  This is not just to meet regulatory requirements but to withstand rigorous, more sophisticated managed market expert assessments.
  • Make companion diagnostics a requirement for pipeline projects
  • Develop managed market expertise throughout the organization not just as commercial function.
  • Develop healthcare system collaborations that allow for understanding, designing, and executing comparative product and treatment assessments in different electronic medical records systems
  • Assume none of the traditional marketing and sales tactics will work (including social media) and then prepare plans for promoting your products in this new healthcare market. For example, think about how electronic medical records and best practice treatment guidelines will influence e-prescribing.  How will you educate a physician population without traditional tactics?
  • Assume that even your most aggressive cost cutting programs in operations will not be enough.  Root out legacy, non-essential expenses as if you were facing bankruptcy.
  • All non-core competencies should be critically evaluated as outsourcing opportunities
  • Invest in expertise, competence, integrity, and high performance systems and equipment to ensure consistent high quality manufacturing (if the company plans to continue manufacturing as a core competency). Invest and retool your processes now for the future.

Critical Success Factors

  • Innovative new products with companion diagnostics
  • Robust real world data to support clinically meaningful differentiation
  • Organizational managed market expertise
  • Talent management focused on expertise, competence, and integrity
  • Low cost, efficient yet reliable operations
  • Commercial programs designed to help healthcare providers and patients realize the full value of the company’s products
  • Become a trusted and credible source of disease and treatment information
  • Patient well-being must be a priority (e.g., patient safety more important than negative impact on sales or potential implications for litigation)
  • Leadership and organizational integrity

The intent here was not to draft a business plan but rather to identify some of the predictable changes of the evolving new healthcare market that will impact Pharma companies.  This was merely to demonstrate that it is possible to anticipate the changes we see evolving in the market and prepare for them if we look forward and take action now.

Now, I’m sure some of you are thinking… ” do you think we are idiots? You made me read all this for nothing.  Obviously, the industry and its executives are doing this.  We have strategic planning groups of MBAs working full time on this stuff.”

Well, I’m pretty sure industry executives thought they were taking care of the future back in the mid-1990’s as well.

Painful Pharmaceutical Industry Downsizing was Avoidable

Layoffs, divestitures,  and closing of facilities continue in the pharmaceutical industry and I don’t believe we are even close to seeing the end.  This is horribly painful and almost inhumane in some cases.  Big Pharma executives could have and should have seen that their business model, product pipelines, and more importantly, their balance sheet projections were not sustainable in the evolving healthcare market that was becoming increasingly managed, more cost conscious,  and more demanding for innovation, clinically meaningful differentiation, and proof of value (think about the recent public review of Provenge®).

I believe the current layoffs are in large part a result of Big Pharma mismanaging the cash they were generating over the past two decades.  Innovation in R & D was not critical for market success when you could “tweak molecules” and drive sales of even marginally differentiated products with aggressive, and wastefully expensive marketing and sales tactics.  Efficiencies in operations were not a priority when you had so much cash coming in that the modest  savings generated by pseudo cost reduction programs seemed inconsequential and not worth the effort.  And despite laboring through annual departmental political battles for headcount requests, cash rich Big Pharma continued to add staff while still delivering Wall Street acceptable operating profits.

You can’t blame the economy for historically bloated operating expenses, diminished R & D productivity, or the billions of dollars spent on litigation, fines and settlements for questionable marketing and sales activities.  The patent cliff and the increasingly managed evolving new healthcare market were not only predictable but their impact could have been mitigated had executives worried more about long term strategies rather than focusing on meeting quarterly numbers to appease Wall Street and ensure their own personal financial security.

But now Big Pharma has no choice. There is no way for the slowing revenue growth to support the expensive, inefficient operating infrastructures they have accumulated over the last several decades.  Unfortunately, and even unfair perhaps, this means their front line employees will bear the brunt of the mismanagement.  Even more unfortunate, is the loss of jobs at Big Pharma at a time when unemployment is at an all time high and the global economy is struggling to recover.

Even without 20/20 hindsight, I believe the current situation was avoidable.  Had Big Pharma pursued innovation in the mid-1990’s rather than relying on “tweaking chemistry” just to get products to the market, managed their expenses when cash was plentiful, and had the foresight to begin adjusting their strategies and workforce for the evolving new healthcare market rather than trying to be the biggest Big Pharma you would not be seeing the layoffs we have been experiencing.

So what does Big Pharma need to do to make sure they realize the benefits of this painful but necessary downsizing?  We’ll discuss that in the next post.

Pharmaplasia™ reviewed in the context of Pharma Issues and Challenges

A review of Pharmaplasia™ was recently published as commentary to a discussion about well publicized issues and challenges facing the pharmaceutical industry noting:

“How did we come to this, and is there hope that these companies will behave differently moving forward.  That is the subject and basis for the book Pharmaplasia written by Michael Wokasch.  The book does a very good job of describing the history of the pharma industry, with emphasis on the past 20 years and the conditions under which the companies chose to pursue marketing tactics with such questionable ethics.”

“All these topics are well covered and discussed in ‘Pharmaplasia’.  For those interested or involved in the industry, it is an important book to read, and I’m very glad I did.”

Ralph Casale

The Motley Fool CAPS blog

Pharmaceutical Sales Representatives Really Do Hate Scripted Presentations

I would say that from the feedback, comments, and tone of comments I have received pharmaceutical sales representatives definitely hate scripted presentations.  Here’s my take on it.

I should have made a point that pharmaceutical sales representatives should not be expected to deliver the exact same script verbatim to the same physicians more than once. I don’t believe there is any way to make the exact same scripted presentations not sound disingenuous.

If your company feels that compliance with a Corporate Integrity Agreement mandates tightly scripted sales presentations, then those responsible for drafting those scripts must do a much better job of crafting them as prescribed in the previous blog.

Companies and commercial management that feel scripted presentations will be more impactful than letting reps “wing it”  must also do a much better job of crafting the presentations, making them much more rep and physician-friendly as prescribed in the previous blog.

Perhaps I got this from my first District Manager ( one of the best I ever met in the industry)  but I am a firm believer that for product presentations there is always “a best way to say it.”  Getting a scripted presentation right is really hard work and requires an iterative process to get it right.

I also know that when I am shopping to make an important purchase I prefer a sales person who is well prepared with a carefully crafted, well thought out, information packed, and smooth flowing logical presentation (including answers to my questions and objections) than somebody who just “wings it.”  You may nail it occasionally by “winging it”, but I believe you will be more consistent in delivering important information and come across as more professional with a well scripted, prepared presentation.   Again, I also believe the more you practice delivering the presentation the less it will sound robotic and monotonous.

My impression from the feedback is that the scripted presentations pharmaceutical sales representatives are being asked to deliver do not meet the quality of presentations I have referred to in these posts and no amount of practice will make them better.   That being the case,  I would probably hate them as well.

Why do Pharmaceutical Sales Representatives hate Scripted Sales Presentations?

For some pharmaceutical companies scripted sales presentations have become a necessity to assure compliance with Corporate Integrity Agreements.  For others it is a way to ensure consistent delivery of the marketing message.  And for a few, it is really intended to ensure that a professional presentation is delivered rather than leaving it to sales representatives to figure it out or just “wing it.”

I’m guessing most representatives see scripted presentations as demeaning, belittling of their competence, and unprofessional.

Let’s think about this.  Do stage performers such as for Broadway shows or comedians, feel this way?  Do musicians (think of your favorite singer or band) feel this way?  Do great orators and professional speakers feel this way?  Do even the best of news anchors feel this way?  When the president or another politician delivers a speech, do they feel this way?

Hardly.   So why do pharmaceutical sales representatives feel this way?

I believe there are several reasons why pharmaceutical sales representatives hate scripted sales presentations.  Here are just a few:

  • The scripts are poorly written and not honed to perfection through an iterative process using real sales representatives with real customer feedback
  • The scripts don’t accommodate different practice settings, physician personalities, patient types, or treatment alternatives
  • The scripts are not conversational, sound scripted, and often intentionally avoid opportunities for customer engagement (lack interaction)
  • The scripts are more focused on delivering message than they are about how they affect (“land on”) the customer (think emotionally and intellectually)
  • The scripts (including answers to questions) are not practiced (rehearsed) to perfection with incorporation of natural voice modulations and corresponding supportive intonations
  • The scripts don’t anticipate the questions that are likely to be asked (or reps don’t practice the answers) so it looks like the rep only knows the product message script.

Yes, there are legitimate reasons why pharmaceutical sales representatives don’t like and even despise scripted sales presentations.  In the context of the above issues, scripted sales presentations can seem demeaning, belittling of a person’s competence, and come across as unprofessional.  That doesn’t mean they have to be.

I believe it is actually unprofessional to think you are so good at sales that you feel you can “wing it” without a scripted, well rehearsed presentation on sales calls.

Like many sales professionals in other industries, professional pharmaceutical representatives should embrace and arm themselves with carefully crafted, engaging, information packed, rehearsed to perfection presentations.  And, answers to customer questions they have encouraged should just become a natural part of their well prepared presentations.

It is hard work to get the scripts right in the first place and then it takes more hard work and practice (to perfection, not just random impromptu “role plays” with your District Manger) to deliver impactful scripted sales presentations professionally.