pharma marketing - post ucpmp and mci guidelines
TRANSCRIPT
PHARMA'S TWO MOST AWAITED EVENTS OF
2015 ARE HERE!
SEE INSIDE FOR DETAILS
MEDICINMANField Force excellence
TM
February 2015 | www.medicinman.net
Since 2011
MedicinMan Volume 5 Issue 2 | February 2015
Editor and Publisher
Anup Soans
CEO
Chhaya Sankath
COO
Arvind Nair
Chief Mentor
K. Hariram
Advisory Board
Prof. Vivek v; Jolly Mathews
Editorial Board
Salil Kallianpur; Dr. Shalini Ratan; Shashin Bodawala; Prabhakar Shetty; Vardarajan S; Dr. Mandar Kubal; Dr. Surinder Kumar
International Editorial Board
Hanno Wolfram; Renie McClay
Executive Editor
Joshua Soans
MedicinMan Academy:
Prof. Vivek Hattangadi, Dean, Professional Skills
Development
Letters to the Editor: [email protected]
1. Leadership begins with self-awareness ..........6
Leadership begins with asking yourself: “What kind of a leader do I want to be?”
K. Hariram
2. Digital technology and patient centricity ......9
Digital technology as a force multiplier to reach
consumers at their exact point of need.
Salil Kallianpur
3. A Unique Model of Patient Adherence .........13
The pharmacist is uniquely situated to facilitate
patient compliance. Is pharma taking note?
Hanno Wolfram
4. Incentive Compensation Design ....................14
How companies can design their compensation plans based on a fair and effective set of guiding principles.
Amit Jain
3. Discounts Kill! ...................................................19
Lowering prices as a singular competitive strategy
will lead to a death spiral in the industry, lowering
profits and creating oligopolies.
Hanno Wolfram
(Click to navigate)
CONTENTS
BRANDST RM 2015BRAINSTORMING FOR PHARMA BRAND MANAGERS
13th March 2015, Mumbai
Morning Session – Networking Breakfast 0830 onward Session 1 - 0930 – 1100 – UCPMP and MCI Guidelines: How Can Pharma Marketing Address these Challenges Effectively? Pharma is under pressure globally as unethical business practices come under scrutiny and penalty of regulators. Salil Kallianpur, Brand Director, Europe @ GSK looks at new ways of marketing in an era of tighter regulatory and social controls. Followed by panel discussion and Q & A from delegates.
Tea Break and Networking 1100 to 1130
Session 2: 1130 – 1230 PM Marketing Practices of Mankind Pharma – Lessons to be Learnt by Dr. VK Sharma, Vice President at Unichem Labs and formerly with Mankind Pharma followed by Q & A
Session 3: 1230 to 1330 – Seretide Case Study by Nandita Dandekar of GSK
Lunch – 1330 to 1430
Session 4: 1430 to 1530 – How Can Indian Pharma reinvent the Field Force – Doctor Interaction through use of Digital and Social Media – 2 Case Studies: One International and one Domestic pharma by Anup Soans
Tea Break: 1530 – 1600
Session 5: 1600 – 1700 – How to Optimize Healthcare Communication Creative Agency Services
Session 6: 1700 – 1800 – Career Planning and Advancement for Marketing Managers – What are the Key Competencies
Salil Kallianpur
Anup Soans
Dr. VK Sharma
MEDICINMAN
Morning Session – Networking Breakfast 0830 onward
Session 1: 0930 to 1000 - Changing Role of Field Force – Keynote Address by Sanjiv Navangul, Managing Director, Janssen India.
Session 2: 1000 – 1115 CEO Roundtable Discussion on Optimising Field Force in the Changed Market Conditions moderated by Sujay Shetty, Pharma Lead at PwC
Tea Break – 1115 to 1145
Session 3: 1145 to 1330 Field Force Learning and Development – Best Practices of Leading Pharma. Presentation followed by Panel discussion and Q & A by delegates.
Lunch: 1330 to 1430
Session 4: 1430 to 1530 – Mindset Change: The Key to Transforming Field Force to Meet Challenges of the Changed Marketplace – Anup Soans
Tea Break: 1530 to 1600
Session 5: 1600 – 1700 – Role and Responsibilities of Front-line Managers – First Line, Second Line and National Sales Managers – By Hariram Krishnan and Deep Bhandari – Presentation, Discussion and Q & A
Session 6: 1700 – 1800 – Closing Address – Career Planning and Advancement for Sales Professionals – What are the Key Competencies
Deep Bhandari
FFE 2015FIELD FORCE EXCELLENCE
14th March 2015, Mumbai
Faculty and Final Program Schedule will be available by February 15th on request – [email protected]
Nandita Dandekar, Marketing Manager, GSK
Sujay ShettySanjiv Navangul
Amlesh RanjanK. Hariram
Sunder RamachandranSubroto Banerjee
REGISTRATION
Hosted by www.MedicinMan.net. Organized by Knowledge Media Venturz.
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6 | MedicinMan February 2015
In my coaching sessions with various clients, one common question I get asked is is “how do I develop my leadership skills?”
This word ‘Leader’ or ‘Leadership’ means many things to many people. It is often associated with the title or the mantle that people carry in their organisations.
Most of the times the word is approached from an ‘ego centric’ point of view rather than from a ‘responsibility-based’ thinking. We all know and there are so many articles written on the sub-ject with variety of viewpoints. To me, Leadership is the ability to inspire and influence and it is directly related to work. This applies to families as well as organisations or, for that mat-ter, any place with a set of people converging for a common purpose.
I strongly believe that developing leadership qualities and skills can only come through work and not independent of it. Every individual, in all walks of life has some qualities that relate to leadership skills. However, developing the same in various contexts require conscious efforts.
Hence, I am a strong believer in defining the role of a LEADER as “someone who develops people through work.”
Like any other development, the starting point of leadership development is, “Do you know what you are as of now or what kind of a leader you are?”
K. Hariram
E
LEADERSHIP BEGINS WITH SELF-AWARENESSLeadership begins with asking yourself: “What kind of a leader do I want to be?”
7 | MedicinMan February 2015
This self-awareness in the individual who is an upcom-ing leader helps in moving into the next step of “what kind of leader you want to be?”
This means one has to be clear of the intent (lead-ership intent) and also the impact. In an article that appeared recently in HBR titled, ‘What Kind of a Leader You Want to Be?’ written by Rebecca Newton, the term ‘leadership footprint’ is used to describe both inten-tion and impact. She further goes on to talk about the central points to develop leadership footprint as below:
´ Defining the kind of leader you want to be
´ Knowing clearly how that aligns with, and help achieve, your organizational vision and purpose
´ Fostering self-awareness, reflecting on your own behaviour and encouraging others to give you feedback
´ Recognizing differences that may arise between your intent and your impact
´ Self-regulation - The strength and the challenge of self-regulation is ensuring that you have coher-ence between your personality, your behaviour, and your leadership goals.”
´ Choosing the assumptions about yourself and others that you need to rely on for your leader-ship footprint to be realistic and sustainable
Most often, it is vagueness that stifles progress or development. Asking relevant questions brings clarity and helps in directing the learning efforts to reach the desired level.
In an internal engagement survey done by an MNC, 97% of employees reported that they can see how their work is linked to the purpose of the company. Does this apply in a larger context is something one should look at.
I repeatedly coach my clients about their ability to define themselves and also what kind of a leader-ship culture they want to build around themselves. This also calls for their own observations and others’ feedback. This helps them to know whether they are on track and more importantly, realign themselves to keep building it on a day-to-day basis.
So when any one is talking about their leadership development, do ask and answer “what kind of leader do you want to be?”
“At its best, leadership development is not an “event.” It’s a capacity-building endeavour. It’s a process of human growth and development.” -KH
K. Hariram | Leadership Begins with Self-Awareness
K. Hariram is the former MD (retd.) at Galderma India.
He is Chief Mentor at MedicinMan and a regular contributor. [email protected]
”
Most often, it is vagueness that stifles progress or development. Asking relevant questions brings clarity and helps in directing the learning efforts to reach the desired level.
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9 | MedicinMan February 2015
“Patient centricity is something you see in CEO messages but rarely in action”. With those words I thought I had stuck my head into a beehive recently at the ‘DigiSights 2015’ event on the sprawling campus of SIES College in Navi Mumbai. Surprisingly, I was stung not by bees but by the fact that the audience agreed with my statement. A thought that was intend-ed to provoke thinking and challenge, was accepted matter-of-factly by the assembled group of industry executives and students of the college.
What is patient centricity?Patient centricity is not about how you can take your brand to the patient. It’s neither about engaging the patient, nor about compliance. Generally these are the three angles on which pharma thinks. Hence we see a slew of patient awareness leaflets, patient engagement/as-sistance programs and compliance enhancers and tips from pharma companies. I’m not say-ing that these tactics are unimportant. I’m just saying that’s not patient centricity.
E
Digital technology as a force multiplier to reach consumers at their exact point of need.
Digital technology and patient centricity
Salil Kallianpur
Salil Kallianpur is an executive from the pharmaceutical industry. He is a very interested
observer of the health care industry, its politics and strategies. Being a change evangelist, he thinks
pharma can do a lot more on the intersection of public policy, technology and health care delivery.
”
10 | MedicinMan February 2015
Patient centricity is often easily confused with en-gagement and compliance. Engagement is defined as “actions individuals must take to obtain the great-est benefit from the health care services available to them.” Compliance is following the orders of your doctor diligently. Both these are not patient centric-ity. This makes engagement and compliance patient oriented but not patient centric.
Patient centricity is slightly different and has been defined as ‘a dynamic process through which the patient regulates the flow of information to and from him/her via multiple pathways to exercise choices consistent with his/her preferences, values, and beliefs. This fundamentally transformative concept affects how health care decisions are made and who has the authority to make them.’
To me, patient centricity is as fascinating a concept as it is contradictory. It is fascinating because it puts power into the hands of the patient. And it is contradictory because pharma does not like giving away power over its messages or processes. Phar-ma has traditionally never enjoyed interaction and has depended on ‘pushing’ messages across rather than having ‘conversations’. It probably also explains why we make do with medical reps who are not the sharpest knives in the drawer and scarcely do any-thing about it.
Why are we not patient centric?Healthcare is an industry characterized by an asym-metry of information, which means that the seller knows a lot more about the product than the buyer. While this is often used as a statement to instill a sense of pride in sales reps (“no one knows as much about your product as you do”), it can also mean that the consumer does not have enough information to make an informed decision. And when he doesn’t, he decides on the only thing that he can use to compare, which is the price of one product versus another.
This can dramatically change in the information age when the internet allows access to information to almost anyone. Availability of information suddenly allows patients (consumers) to participate in de-cisions about their health. Can you imagine how valu-able this can be in a self-pay market? If price sensitiv-ity of consumers is pharma’s greatest challenge, why can’t pharma think seriously about patient centricity
...patient centricity is as fascinating a concept as it is contradictory. It is fascinating because it puts power into the hands of the patient. And it is contradictory because pharma does not like giving away power over its messages or processes.
Salil Kallianpur | Digital Technology and Patient Centricity
11 | MedicinMan February 2015
which can create transparency and trust in a consum-er about a company and its products and services? Won’t services that create such trust in consumers empower them more? Won’t such empowerment make them advocates of pharma’s products?
The issue is that pharma rarely thinks beyond the doctor. We route every single piece of information through the doctor. At the conference as I spoke about how the ubiquitous internet allows us to make information available directly to consumers, I realized that the word DTC is taboo. It is so because pharma only thinks of pushing brand messages to everyone it addresses. This, while study after study shows that consumers trust branded messages lesser than credible third-party alternatives. It would be funny if it wasn’t ironical that pharma seems blissfully unaware that it ranks somewhere between Big Arms (weapons manufacturers) and Big Tobacco (cigarette manufacturers) on trust and credibility! Despite this, we continue to talk about creating trust and transpar-ency for our stakeholders.
Opportunities for services to build trust and loyaltyHow about putting our money where our mouth is for a change? How about telling consumers exactly what they want to know. How about listening and conversing with them and not merely pushing our products? How about building long-lasting relation-ships through services that they value rather than through branded messages which they don’t? In the connected world where every person and thing is connected to the Net, consumers tell us so much about themselves every single day. What they’re doing and eating. Where they’re visiting. When and how well they’re sleeping. What issues they have with raising children. What stress they go through. Etc. Etc. How about active social listening? That would not break any privacy data laws. Over years and through assiduous collation of such data from the public domain, trends begin to emerge. That is when health becomes predictable.
If health could become predictable through Big Data tools and analytics and we have a consumer group that considers participating in health care as very important, isn’t it a perfect match? Pharma would probably not consider it important since it wouldn’t relate to immediate product sales. But isn’t a sustained relationship with a trusting and loyal
Salil Kallianpur | Digital Technology and Patient Centricity
”
How about building long-lasting relationships (with consumers) through services that they value rather than through branded messages which they don’t? In the connected world where every person and thing is connected to the Net, consumers tell us so much about themselves every single day.
12 | MedicinMan February 2015
consumer group what every company in the world seeks? Why then do we concern ourselves with only selling our products? Why are relationships with consumers unimportant to us? I speak about patients who are the end consumers of our products. Sending discount coupons or the occasional disease aware-ness leaflet to an aware and empowered consumer is more an insult to intelligence than a service.
Building sustainable relationships with them is definitely possible. But not when we only view them as buyers of our products. It can only happen when we consider our product sales as a by-product of our relationship and not its objective. Our objective must be to serve as a ‘go-to destination’ for their health needs. Until then, we will only see patient-centricity as an ethereal, futuristic and impractical inclusion in CEO speeches, but rarely in action. No wonder the audience at DigiSights2015 agreed. -SK
Salil Kallianpur | Digital Technology and Patient Centricity
”
Building sustainable relationships with them (the consumer) is definitely possible. But not when we only view them as buyers of our products. It can only happen when we consider our product sales as a by-product of our relationship and not its objective.
SuperVision for the SuperWiser Front-line Manager is an ideal resource for first-time managers to learn the business and people management skills to excel at their
work.
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13 | MedicinMan February 2015
It is clear that patient adherence is key to the profitability of the healthcare sector:
� Only when patients adhere to therapy, a physician can be successful.
� Only when patients adhere to therapy, their health will improve.
� Only when patients adhere to therapy, the payer will get what he paid for.
� Only when patients adhere to therapy, a medication can deliver what the drug promised in optimally man-aged clinical trials.
The interdependence between all stakeholders is clear, and so is the problem!
“Medication non-adherence is one of the most serious problems in healthcare, posing a heavy financial impact on all constituencies. On the cost side, the New England Healthcare Institute estimated that medication non-adher-ence is responsible for $290 billion in “otherwise avoidable medical pending” in the US alone each year.” (Cap Gemini, 2012)
There can be an intriguingly simple solution:
Research by Durham University (published in the BMJ in August 2014) proved, that 89 per cent of people in England live within a 20-minute walk of a pharmacy. This proportion rises to nearly 100 per cent for people in deprived areas.
Pharmacists play a major role in therapy adherence, since patients have much easier access to their pharmacist and see them more frequently than their physicians.
Including pharmacists in patient adherence is a huge opportunity to make money, save money and improve patient outcomes. Or, to put it simply: becoming pa-tient-centric.
The problem is, that Rx-pharma doesn’t even know the pharmacist! There is a traditional “departmental wall” be-tween the two pharma distribution-channels: Rx-reps pro-mote products to physicians and OTC-reps fill the shelves of pharmacists. In pharmaceutical companies the word “patient centricity” circulates, but how can this become true, when pharma fails to escort the simple “patient-jour-ney” due to an antiquated(?) structural constraint?
KAM in Pharma 3.0 offers food for thought about a new business model leveraging cross–functional collaboration. -HW
E
A unique model of patient adherence
Hanno Wolfram, is the founder and owner of www.Innov8.de, a Germany based
company offering consulting projects for pharmaceutical companies.
Hanno Wolfram
The pharmacist is uniquely situated to facilitate patient compliance. Is pharma taking note?
”
Pharmacists play a major role in therapy adherence, since patients have much easier access to their pharmacist and see them more frequently than their physicians.
Key Account Management is a major issue in the
pharmaceutical industry. This topic is driving
pharma companies and their professionals since
it is an essential approach when it comes to
renovating and updating the sales model of the
past.
The contribution of the pharmaceutical industry
to prolonged, healthier life and the reduction
of infant mortality undoubtedly remarkable. It
positively affects people around the globe. It might
be a good point in time and a valuable idea to alter
the business model from "simply selling drugs" to
actively participate and contribute to healthcare.
There evidently is no other instance, storing more
knowledge and expertise around specific disease
than the pharmaceutical industry. However, this
treasure often slumbers in research and medical
departments. Key Account Management needs
cross-functional collaboration. More value,
something beyond the pill, is needed, expected,
and demanded from healthcare providers. In
a globalized world, with universal access to
information, the variations of markets, determined
by political will, the design of healthcare
and regulatory interventions are getting less
important.
One of the smallest common denominators is
that many HCPs and other players are readily
waiting for pharma to play a more active role in
the provision of healthcare, share their wealth of
expertise and provide appropriate medication.
This first edition of the probably first ever
textbook on Pharma Key Account Management is
meant to provide a basis for discussion between
professionals.
KAM in Pharma 3.0
Avaliable on Amazon(click to purchase)
by Hanno Wolfram
15 | MedicinMan February 2015
Incentive schemes act as a strategic tool to align sales-person’s behaviour with business objectives. It acts as a catalyst to motivate the salesforce. Incentive Com-
pensation is the primary tool to differentiate between salespeople based on performance and helps retain top performers by clearly calling them out. It also plays a significant role as part of total compensation structure and acts as a lever to attract top talent.
Guiding PrinciplesWhat are the guiding principles that drive the structure and definition of an incentive plan.
1. Is it aligned with desired business objectives? For example does the plan drive the right customer segments to be targeted?
2. Does it pay for performance? For example are the salespeople being paid for capturing market share?
3. Is it fair insofar as it provides equal earning opportu-nities to all salespeople irrespective of their geogra-phy, historic sales, etc.? For example are the sales-people with larger geographic territories inherently at an advantage?
E
INCENTIVE COMPENSATION
DESIGNHow companies can design their compensation plans based on a fair and effective set of guiding
principles.
Amit Jain
16 | MedicinMan February 2015
4. Is it financially responsible? For example, Is the final payout expected at the national level in line with the expected achievement with respect to the national forecast?
5. Is the pay competitive in the current labour mar-ket? For example, does it retain top performers?
6. Is the plan easy to understand for the sales force? Can this plan be executed using existing IT infra-structure and can a fully automated process be defined for successful operations?
There are inherent counteracting pressures between these guiding principles.
+ Need for the incentive plan to be simple to un-derstand but also remain fair
+ The Incentive plan should be engaging but at the same time it should be financially responsi-ble
+ The Incentive Plan should support underlying business objectives but at the same time be manageable
+ The incentive plan should be implemented with flexibility for future needs but the implementa-tion should be fast and cost-effective
Design Framework
Given these guiding principles what design frame-work components are important to consider while defining an Incentive Plan?
Total Target Compensation
How much should a salesperson should be paid in to-tal? What should be the total compensation structure including base salary and potential incentive pay-outs? The organization’s compensation philosophy in general has large bearing on this element. Defining the TTC depends on how much the organization weights compensation as part of it’s value proposi-tion to its employees. It is also important to review industry TTC benchmarks for competitiveness and clearly define organization’s desired market position. This will help ensure that organization is able to attract and retain right type of people.
Amit Jain | Incentive Compensation Design
Equal Earning Opportunities
Competitive in the labour marketPays for performance Financially
Responsible
Guiding Principles
Easy to understand and implement
Aligned with business objectives
”
Defining the TTC (total target compensation)depends on how much the organization weights compensation as part of it’s value proposition to its employees. It is also important to review industry TTC benchmarks for competitiveness and clearly define organization’s desired market position.
17 | MedicinMan February 2015
Salary-Incentive Pay Mix
What should be the ratio between base salary and incentives viz. the pay mix? The pay mix depends on the extent to which the salesperson is responsible for the final sale. For eg. Real Estate agent pay mix leans towards higher incentives because the sales are almost fully determined by salesperson capabil-ity. Sales Support roles usually tend towards having higher base salary in the mix because of their lower ability to impact the actual sale. Organizations that don’t have adequate availability of data or confi-dence in measurement of performance also tend to weigh incentives less. The pay mix should ensure that the total expected compensation remains motiva-tional and yet financially responsible. The pay mix also plays a big role in signalling the type of salesper-sons to attract to that role.
Portfolio Definition
What portfolio of brands should you focus on for each salesforce? One may choose to group all brands sold by that salesforce into one basket and measure on that. Alternatively, one may choose to provide one incentive scheme to certain key brands that need special focus and one incentive scheme for all brands sold by that salesforce. Some organizations may choose to focus certain individual brands sold as well and measure each brand’s performance separately to maintain higher focus. The portfolio definition decisions are driven by the organization’s business strategy, the brand focus they’re hoping to achieve. Fine-tuning portfolio definition helps sharpen the focus on which brands the organization wants to push more.
Metric Definition
Once portfolios have been appropriately defined, the next step is to define the metrics that define perfor-mance. What are the KPI’s that the business manages around and how can those KPIs be rolled down to sales performance metrics? Should a combination of metrics be used? The metric should be chosen such that it supports the desired business strategy. Factors that affect the type of metric chosen are the sales channel, the reliability of sales data and the brand maturity. Ideally, one incentive scheme should have no more than three plan metrics. A good metric should be clearly measurable and specific. For exam-ple, a growth stage brand may be assigned a volume growth metric but a mature brand may be assigned a volume metric based on the organizatonal business objectives.
Amit Jain | Incentive Compensation Design
”
The pay mix should ensure that the total expected compensation remains motivational and yet financially responsible.
18 | MedicinMan February 2015
Scheme Type Selection
What sort of an incentive scheme should you choose? Should it be goal-based to measure against predefined targets? Should it use a matrix type scheme type to mea-sure performance against two metrics simultaneously (Primary vs Secondary data for example)? The selection should be based on the organization’s specific needs and the way it prioritizes the different guiding principle. For e.g – fairness vs. simplicity, motivation vs. financial bud-get. Other factors which need consideration such as data reliability, confidence in national sales forecast, variation in territory potential etc. For example if the confidence in national sales forecast is low, a goal-based scheme is not ideal. If variation in territory potential is high a commis-sion against volume scheme type is not ideal.
Curve Definition
What should the design of the payout curve assigned to the component? Curve aspects like the threshold, cap, kickers and multipliers should be considered? For example, Does your organization believe in paying incentives starting at 80% target achievement or only at 100% target achievement. At what performance should you consider a multiplier to motivate top performers more? How would my curve perform financially against an unexpected higher national performance? Should I cap top performer payouts at a point to guard against outlier performances? Industry standards also play a role to some extent in defining the upside and downside risk depending on organization’s market positioning.
Incentive period definition
The incentive period definition also plays an important role in incentive plan design. What is the measurement period I should use for my incentive plan – Annual, quarterly or monthly? How often should I pay my reps? If a rep underperforms in earlier months, should I offer a chance to catch up by the end of the year? When should I run incentive calculations with respect to the end of the measurement period? These depends mostly on data reliability, expectations from the salesperson, system capability and importance of meeting shorter term na-tional forecasts vs. annual national forecasts.
All the above attributes play a significant role in the overall success of an IC plan. The qualitative impact of an ineffectively designed plan is well recognized but com-panies fail to take into account the financial implications (of increased attrition rate, lower morale, lost selling opportunity due to higher shadow accounting and dispute resolution time, higher administration cost) and don’t put enough emphasis into balancing the inherent counteracting pressures in the guiding principles. -AJ
Amit Jain | Incentive Compensation Design
Amit Jain is Co-founder and Director of Operations at Aurochs Software, an
incentive compensation solution specifically designed for the pharmaceutical industry
”
... if the confidence in national sales forecast is low, a goal-based scheme is not ideal. If variation in territory potential is high, a commission against volume scheme type is not ideal.
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20 | MedicinMan February 2015
“This isn’t just about saving money, most importantly, it is about making sure that patients stay well and get the best outcomes from their medicines.” This quote is attributed to Lord Howe, when he was head of the National Health Service in the UK.
The head of procurement from a hospital chain said:
“I say: “We need to improve our bottom line.” and they hear: “I want a discount!”
Isn’t there anything better that the pharmaceutical industry could deliver besides discounts?
There are plenty of requests from the so-called mar-ket and there are many competencies available in the pharmaceutical industry to fulfill many requests. One problem though, is that pharma does not seem to listen to those with real solutions to their problems instead of pill boxes.
It seems as if pharma knows only one game to play: “kill-ing with discounts”. At first you might “kill” competitors but this strategy can often end in suicide for the compa-ny. As long as pharma’s only strategy is to beat compet-itors’ prices, the number of pharma companies will get smaller over time. There are a number of countries where the drug business is already an oligopoly, with only very few companies left.
The thrilling question is who will the survivors of the discount battle be?
There are an increasing number of physicians, payers and other stakeholders in healthcare, complaining about pharma:
Many physicians complain about the time stolen by reps visiting them, hardly delivering anything useful. Medical reps appear trained to talk, rather than ask questions and listen.
Payers suffer from poor outcome of treatments, when only half of all patients are compliant and fail to adhere to the planned and prescribe therapy.
Depending on the country you will find, that govern-ments and their health-ministers are struggling with the role of pharma, when they sell drugs to hospitals at almost nothing, and when prescribed for out-patients demand high prices.
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Lowering prices as a singular competitive strategy will lead to a death spiral in the industry, lowering profits and creating oligopolies.
Discounts Kill!
Hanno Wolfram
Hanno Wolfram, is the founder and owner of www.Innov8.de, a Germany based
company offering consulting projects for pharmaceutical companies.
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21 | MedicinMan February 2015
Patient associations are angry, because they see high-end drugs costing a fortune for them, while in other countries they pay only a fraction of the price.
Is pharma sensing the head-winds coming?
Pharma is the only industry that hires medical reps and pays them to execute unsolicited calls in an attempt to sell drugs to people who do not even buy.
Once the reps can no longer increase the pharma com-pany’s revenue, their bosses change strategy and reduce prices. Every percentage point of discount fully cuts through profit and hits the bottom line. Everyone knows this, since the second semester in Economics. One day the margin will be reduced to a point where the currently employed number of reps is too costly.
As a consequence the field forces is reduced in number. CEOs and General Managers then all of a sudden find out that the top line does not really suffer from the reduced numbers in the field. On the other hand they see that the bottom line rises sharply, after the so-called restructuring costs are covered.
This is something contradictory to the second semester in Economics/ Marketing. It goes against the principle of differentiation. “Where is Pharma’s ‘Apple®’?
The problem is that there always is someone granting a higher discount and offering a pill-box even cheaper. This spiral is getting lethal swiftly. Europe’s largest drug market is highly oligopolistic: seven companies account for almost 80% of the generic market.
In a globalized world, GMP rules and FDA surveillance is applied globally. With huge differences in production and other costs, there is no chance for many companies to escape the lethal spiral of a price war. There are a number of countries and companies, with FDA-approved produc-tion, following GMP and any other regulatory detail that can produce at much lower cost.
These pharma companies are profitably producing pills at a cost and for a price that the poor and deprived and many governments and payers can only dream of.
There is a cure to this single strategy of reducing prices and granting discounts. If the pharmaceutical industry would develop strategies to get actively involved and contribute to healthcare by sharing all their knowledge and expertise around specific diseases, this could add huge value and considerably improve patient outcomes.
The business-model would change from selling pill boxes to improving healthcare and the sales model would change from “pushing drugs” to Key Account Manage-ment 3.0. -HW
The problem is that there always is someone granting a higher discount and offering a pill-box even cheaper. This spiral is getting lethal swiftly. Europe’s largest drug market is highly oligopolistic: seven companies account for almost 80% of the generic market.
Hanno Wolfram | Discounts Kill!