Field Force Evolution: Adapting to a New Ecosystem

The ongoing changes, and challenges, to the way drug companies promote and sell products to their customers are too numerous to recount in one place. But there is one overarching factor that continues to influence every aspect of the decision-making process with respect to managing an effective professional sales operation: cost.

To win in the offline, outdated, and broken share-of-voice model, pharma companies needed to simply outspend the competition by putting more boots—or cap-toe oxfords and high heels—on the ground. If you had a physician's ear more often than someone else, market share consistently followed. Post patent-cliff, there are fewer resources to throw at professional promotion, and when money does talk, it's mostly the government that's listening. Physicians in general are less available to sales reps—less than half of the physicians surveyed by CMI/Compas recently said they'd see a sales rep in person without restrictions—and many have ceded the fundamental choice of which drug to prescribe to formulary committees overseeing networks of clinics and hospitals, where a growing number of physicians now practice medicine.

Like the US economy, the drug market seems to have turned a corner, with key indicators like the number of FDA approvals on the increase. But also like the US economy, external forces in the healthcare ecosystem are having unpredictable effects on the recovery. Outside of specialty companies in key therapeutic areas—like Novo Nordisk, Biogen Idec, and Gilead—most companies are experimenting with new ways to get more bang for their buck, while simultaneously promoting a culture of compliance. "The industry is in middle school right now, everybody is trying out new behaviors to figure out what works and what doesn't," says Matt Gurin, vice president, Hay Group. As the Hay Group finishes tabulating the results of its annual pharmaceutical sales force effectiveness study, a portion of which is devoted to compensation, Gurin says the reemergence of potential blockbuster products has some companies scrambling to ­retain the reps they still have.

Pay structure largely unchanged

Companies have downsized their sales forces so dramatically that managers ­believe the only reps left in the stable are the cream of the crop, and they don't want to lose them to competitors, says Gurin. As a result, there hasn't been much experimentation with compensation, at least outside of managed care (GSK notwithstanding, but that's another story). The longtime standard in terms of salary to bonus ratio has held at between 75/25 and 80/20 for salary/bonus, plus or minus five percent, says Gurin. Gerry Melillo, president of sales services at PDI, a contract sales firm, agrees that "most companies have not followed GSK" regarding that company's arm-twisted methodology for assessing sales reps and awarding bonuses. As for base salary, Melillo says the figure hovers between $65K and $75K per year. Bonuses—determined by the volume of product a rep successfully moves—typically run about 25 percent of total compensation, equal to between 30 percent and 35 percent of the base.

Andrew Ajello, SVP, national diabetes sales at Novo Nordisk, says he feels good about offering Novo reps a 75/25 salary to bonus split. "Reps hate what GSK did," says Ajello. "We hired all their good people." In addition to direct compensation, Ajello says Novo offers solid benefits and "awesome cars," the latter of which many younger generation reps find attractive. "We're unique in the cars," says Ajello, adding that while Novo is shifting toward a diabetes education and patient-management approach with physicians, the company is "still selling something, and if you do it right, you'll get a nice compensation based on the volumes that you generate."

Ajello notes that when Schering-Plough launched Claritin, in 1993, the company offered up a Dodge Viper to the top selling rep in the nation, and set compensation at 50/50, salary to bonus. In that kind of situation, "people are going to go overboard," says Ajello. (Novo's cars aren't bonus prizes—they come with the job.)

Among therapeutic areas, oncology reps are still the highest paid in general, and greater specialization usually commands a greater base salary, somewhere between $80K and $90K, says Melillo. For smaller pharma companies with only one or two products on the market, it's not uncommon for the salary base to be down around $55K per year, with another possible $25K or so in bonus. Then there's the recent college grad getting paid "thirty something thousand dollars a year just to go in and make sure there are samples in the office," says Melillo.

From selling to merchandizing

If most pharma companies aren't upending the sales model with respect to how reps are compensated, they are experimenting with a more service-oriented model that focuses on channel specific resource allocation. The mix of roles and responsibilities that round out a company's field force are beginning to reflect changes that consumer packaged goods and the tech industry instituted years ago: expect to see more of those pharma conference speakers from Hewlett Packard and Pepsi that everyone used to criticize for being irrelevant to the heavily regulated drug industry.

"The [drug] industry is focusing on the end customer experience," says Jennifer Colapietro, a partner at PricewaterhouseCoopers. Industry executives are "reassessing their go-to-market business models and practices to figure out how to provide more value, or added services to the end physicians in the clinics and hospitals." This requires reps to maintain an active knowledge of an individual physician's business and patient population, says Colapietro. "It's no longer just coming in and detailing a product...[sales managers] are organizing around a portfolio of products, programs and services, so that the field rep has a broader arsenal regardless of the individual they happen to be speaking with." That includes services that flow through the physician to the patient, like disease education materials, financial assistance or co-pay cards, or call center information for patient questions about a therapy.

Other channel-specific roles are emerging to help service physician practices and other healthcare delivery systems in an attempt to differentiate a product by the added services that come with it. Matt Gurin says Pfizer has been able to pivot away from one of the most extreme patent cliff scenarios—Lipitor—in part by experimenting with new service roles. One such role is reimbursement specialists; instead of talking to physicians about drug attributes, these "specialists" come in to help ensure that patients can get access and reimbursement for a drug after the prescription has been written, or that the physician practice itself will get reimbursed. Another is long-term care reps. "Long-term care is as much about reimbursement and Medicare as it is about understanding the product," says Gurin. These reps are tasked with "understanding the demographics and symptomology of elderly patients, and the economics of long-term care," Gurin says.

IBM went from marketing PCs to marketing "solutions," and Procter & Gamble went from huge sales forces calling on grocery store chains—and making sure the Ivory soap was well positioned on the shelf—to having account managers calling on Walmart and Target, recalls Gurin. "You have 10 customers who make up 95 percent of the business."

Fewer promotions into market access

Payer consolidation in the healthcare market—the combined Express Scripts/Medco PBM now represents some 155 million US covered lives, and some 40% of the total drug volume in the United States, according to concerned letters Sen. Tom Harkin (D-IA) and others sent to the FTC prior to the merger approval—has led to a shift in the core competencies required for certain account managers, and a change in career path for others, says Gurin. "Increasingly, there is not a direct path from field sales into managed care, or market access. Companies are looking for business to business, account management people, not pharmaceutical sales insiders who are looking to make more money or get out of managing people directly."

Pharma is willing to train people for the new account manager role; it's an economic buy at the corporate level, says Gurin. For an account manager in the context of consolidated, enormous payer accounts, the core competencies "aren't product knowledge...it's the ability to negotiate your way into the corporate hierarchy or sophisticated matrix to find out who the buyers and influencers are, what their buying triggers are, what the economics of their value chain are, and to be able to put together a solution, or a value proposition, that will get their attention."

Gurin says he doesn't see a lot of district managers that have the business acumen or the executive presence to step into that kind of role, given the stakes. The days of the traditional RAM, or regional account manager—the person who typically called on small managed care networks and reported in to the sales organization—are coming to an end. A RAM used to be "somebody good with numbers and relationship management, but either wasn't good at managing a sales force, or had done something weird," says Gurin. "We have several clients who have cut the cord on that in terms of a career path. To us, that's a bellwether in the change of the kinds of people working in these roles."

In response to a question about reimbursement pressures in managed markets—prior to the news that Novo Nordisk lost two contracts with Express Scripts—Ajello insisted that Novo "is not going to give our products away. That's a decision we've made. It might not drive the market share, but we'll be very profitable as a company." That may be true in Novo's case, for now, but consolidation in the commercial payer space will demand some careful math and deft maneuvering going forward. Considering the drug volume Express Scripts and others like it represent, pharma companies will have to come up with an increasingly sophisticated answer to the question of, "How low can you go?"

iPads won't save reps

Even if "the most effective selling tool we have is a credible, experienced ­pharmaceutical rep," as Gerry Melillo of PDI puts it, pharma still faces a difficult environment for accessing physicians. Reps are expensive, too, which is making it easier for executives to flirt with new technology; after all, iPads don't pull much of a salary after the initial investment. Most of the first generation, million-dollar physician portals have died quietly online due to physician neglect, but other kinds of non-personal or remote physician engagement are part and parcel of the multi-channel strategy most companies have adopted. Multi-channel engagement is as much about cost savings as it is about serving physician needs. "You're seeing a lot more virtual speaker programs to reduce costs and to reduce travel," in addition to being able to service physicians outside of normal business hours, says Colapietro.

In access-restricted zones like hospital-based networks or academic medical centers, it's important to support other channels for physicians. And for older products at later lifecycle stages, it makes sense to provide basic services digitally; physicians familiar with a product over time don't need a rep coming in again with the same information. But for launch brands and products early in the lifecycle, Melillo says "personal promotion is still what drives [sales]." An Accenture survey from last March found that the top strategic priorities for senior sales and marketing executives in 2013 were, in descending order: reducing costs; mastering multi-channel marketing, improving use and effectiveness of digital marketing; harnessing analytics to drive improved ROI and customer satisfaction; and improving sales force effectiveness.

Ajello says Merck is one of the few companies to successfully build and execute a centralized, closed-loop marketing function based on a technology platform, but he remains unconvinced about the ROI from a "double-digit million dollar investment" in iPads for the entire field force. Gurin says the iPad won't save the rep, "but for the ones who are left, it will probably make them more effective." Not because they can dazzle physicians with interactive promotional materials or let docs self-navigate through a detail, but because companies can push dashboard data out to reps as they sit in the waiting room. That gives reps a chance "to see the latest information on the physician, his patients, his peers, and what he might be interested in," says Gurin. "Companies are moving away from just using iPads as a marketing platform, and are using it more as a business platform to arm reps with the latest business information or relationship information, as opposed to just the e-detail and targeting tool."

As the acronyms start to pile up—ACOs, IDNs, PHOs, etc.—face-to-face access to physicians is expected to decrease even more, as detailed further in the adjoining Quantia/CapGemini study. According to the study's authors, reps will need to become coordinators of information sources, not the predominant providers of it. The technology platforms themselves will take a backseat to the data they generate, and new analytic capabilities allowing headquarters to take a closer look at what's happening everywhere around the world, from the duel perspectives of sales strategy and compliance.

Open Payments upside?

Nothing helps to level the playing field like a new, all-encompassing regulatory requirement. While the cost burden of CMS's recently rebranded Open Payments initiative is significant, it's possible that the law will effectively rein in some of the more excessive "transfers of value" to physicians, many of whom won't like having their names listed next to a pharma company and dollar amount on a public website. If that happens, companies will be pushed even harder to engage physicians and KOLs in ways that don't involve jet setting and haute cuisine. If they succeed, that could be a good thing for the bottom line.

Sales reps, as the first point of pharma contact for many physicians, may serve as whipping boys for potential problems with Open Payments, namely the dispute period, a 45-day dogfight next summer when physicians will be shown their respective dollar amounts prior to publication, and have a chance to dispute them. Colapietro says PwC's clients are trying to figure out ways to "send this information out ahead of time, particularly to their top docs and top teaching hospitals, and to vet that with them outside of the whole dispute process, so they can resolve anything off to the side." In the event that doctors aren't able to resolve a dispute over how much "value" they've received since August 1, the amount will get posted anyway, but it will be posted as being "in dispute."

Colapietro says CMS has "indicated that they're going to monitor companies with an excessive amount of disputes, which could kick off an investigation based on concerns about data accuracy and integrity." In the spirit of controlling costs and doing more with less, sales reps might make a splash with their managers by mitigating disputes beforehand, by explaining the rules and requirements to physicians and addressing any concerns.

Even with a lot of new drugs launching and soon to be launched, sales forces aren't likely to expand very much. But the reps still out there in the field will have to zero in on the key influencers and high-decile docs, and offer them something more, without transferring more value. Relationships, in this context, will matter more than ever.

Ben Comer is Pharm Exec's Senior Editor. He can be reached at bcomer@advanstar.com