H E A L T H C A R E

Pharmaceutical Sales ForceEffectiveness StrategiesEvaluating evolving sales models & advancedtechnology for a customer centric approach

By Dr Ksenija Jakovcic

ii

Dr Ksenija Jakovcic

Ksenija Jakovcic is Business Development Manager at SanMed, and provides

independent consulting services to the pharmaceutical and biotechnology industry.

Following her medical practice, Ksenija has worked with international pharmaceutical

companies in Austria and the UK around the areas of clinical research and sales &

marketing. Ksenija holds an MD from the University of Vienna, Austria and an MBA

from the London Business School.

Copyright © 2009 Business Insights Ltd This Management Report is published by Business Insights Ltd. All rights reserved. Reproduction or redistribution of this Management Report in any form for any purpose is expressly prohibited without the prior consent of Business Insights Ltd. The views expressed in this Management Report are those of the publisher, not of Business Insights. Business Insights Ltd accepts no liability for the accuracy or completeness of the information, advice or comment contained in this Management Report nor for any actions taken in reliance thereon. While information, advice or comment is believed to be correct at the time of publication, no responsibility can be accepted by Business Insights Ltd for its completeness or accuracy.

iii

Table of Contents

Pharmaceutical Sales Force Effectiveness Strategies

Executive Summary 9

The pharmaceutical industry at a crossroads 9 Sizing and structuring the sales force for strategic advantage 10 Recruiting, training and motivating an outstanding sales force 11 Reinventing the pharmaceutical sales model 12 Utilizing new technologies for sales excellence 13 Beyond 2010 – The future of pharmaceutical sales 14

Chapter 1 The pharmaceutical industry at a crossroads 16

Summary 16 Introduction 17 The state of the pharmaceutical industry 18 Patent expiration and generic substitution 18 Pipelines not delivering innovative products 20 Slowing growth in mature markets 23 Government intervention and price controls 25 Poor reputation and new restrictions 26

Restricted access for pharmaceutical sales representatives 27 Pharma industry revises Codes on interactions with physicians 29

The traditional go-to-market strategy 31 ROI in pharmaceutical sales force has plummeted 32 The access problem 34 The end of armies of pharma sales reps in the field 34 Need for new marketing and sales approaches 36

iv

Chapter 2 Sizing and structuring the sales force for strategic advantage 40

Summary 40 Introduction 41 The role of the sales force 41 Determining sales force size 42

Activity-based method 42 Target return-per-call method 43 Sales response method 44

Getting sales force deployment right 45 Resource allocation 45 Optimal profitability 46

Matching sales force structure with companies’ business lifecycle 48 Sales force structure 48 Getting the size right 50

From mass market endeavor to individual physicians’ needs 51 Rethinking targeting strategy 51 The impact of lifecycle factors on sales force targeting 55

Year 1 – New product launch 55 Year 2 – Accelerate growth 56 Year 3 – Defend and grow 56 Year 8 – Manage the sales decline 58

Conclusion 59

Chapter 3 Recruiting, training & motivating an outstanding sales force 62

Summary 62 Introduction 63 Hiring pharma sales reps: Getting the process right 64 The impact of bad hiring decisions 64 The right recruit 65 Key points to consider when hiring 67 The evolving training needs of the pharma sales force 69 The training dilemma 70 Training for the new environment 72

Changing environment places different demands on sales training 75 Motivating and compensating the sales force 79

Motivation 80 Driving performance through incentive compensation plans 82

Conclusion 83

v

Chapter 4 Reinventing the pharmaceutical sales model 86

Summary 86 Introduction 87 Sales force model progression 88 Addressing a range of new customers 89 Existing stakeholders are gaining influence 90 The path to key account management 92 Is the pharma sales rep an endangered species? 95 The customer-centric approach: a new model for pharmaceutical sales 95 From mass army to specialty sales force 98 Conclusion 99

Chapter 5 Utilizing new technologies for sales excellence 102

Summary 102 Introduction 103 e-Learning – meeting sales reps training needs 104 Case study – e-Learning as part of AstraZeneca’s sales training strategy 104 e-Detailing 105 Virtual live e-Detailing 106 e-Detailing through a portal for doctors 106 Scripted e-Detailing 106 The benefits of e-Detailing 107 Putting it in practice: The key factors for success 108 From tablet PCs to closed loop marketing 109 Will closed-loop marketing transform the pharma sales process? 111 Common pitfalls on the way to implementing closed-loop marketing 114 How to ensure successful implementation of closed-loop marketing 116 Conclusion 117

Chapter 6 Beyond 2010 - The future of pharmaceutical sales 120

Summary 120 Introduction 121 The sales force of the future: variable in size and structure 121

vi

Will samples need pharmaceutical sales reps? 123 New industry models and their implications for sales force effectiveness 125 Aligning marketing and sales to match the healthcare environment 126 The use of analytics to drive sales force approaches 126 Content-driven interactions between sales reps and customers 126 To what extent will the sales model change in the immediate future? 127 Designing a marketing and sales function that is fit for the future 129

Chapter 7 Appendix 134

Bibliography 134 Index 136

List of Figures Figure 1.1: Projected revenue losses ($bn) due to patent expirations, 2007e-2012p 19 Figure 1.2: R&D investment ($bn) in the US, 2004-2007 21 Figure 1.3: FDA new drug approvals, 2000-2008 22 Figure 1.4: Global pharma market growth slowdown 24 Figure 1.5: Survey of US medical practices, February 2009 28 Figure 1.6: US sales force size - top 30 companies, 1997-2007 32 Figure 1.7: Pharma sales rep funnel 34 Figure 2.8: Field force: Sales, cost and profit impact 47 Figure 2.9: The impact of three different sizing scenarios on company profits 50 Figure 2.10: Physician segmentation enabling effective targeting 54 Figure 2.11: Modeling doctors’ prescribing behavior 58 Figure 3.12: The training trade-off 71 Figure 3.13: Effective sales force training responds to a new selling environment 73 Figure 3.14: Sales rep characteristics with the most influence on physician satisfaction 74 Figure 3.15: Implications for future sales force training 76 Figure 4.16: Sales force restructuring and innovation - State of the industry 89 Figure 4.17: The expected shift in marketing and sales efforts 91 Figure 4.18: Implications for pharma companies on the path to KAM 94 Figure 5.19: e-Detailing as part of the multi-channel approach to CRM 109 Figure 5.20: CLM feedback loop 112 Figure 5.21: TGaS survey on CLM implementation among top pharma companies, 2007-2008 114 Figure 6.22: Sampling trends %, 2008 124 Figure 6.23: Readiness for new business models in the next two years 128 Figure 6.24: Future organization of the pharmaceutical marketing and sales function 130

vii

List of Tables Table 1.1: Blockbusters going off-patent 2010-2012 20 Table 1.2: Planned job cuts by big pharmaceutical companies, October 2008 35 Table 2.3: Target return-per-call method in eight steps by Zoltners & Sinha 44 Table 2.4: Comparison of sales force sizing methods 45 Table 3.5: Common pharmaceutical sales force training settings 70 Table 5.6: How tablet PCs support sales force activities 110 Table 6.7: New approaches to marketing and sales challenges 127