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1 Cutting Edge Information Edge Information v3179/ Publisher Sample Phone: (US) or or (Int'l) Hours: Monday - Thursday: 5:30am - 6:30pm EST Fridays: 5:30am - 5:30pm EST customerservice@marketresearch.com MarketResearch.com

2 PHARMACEUTICAL SALES MANAGEMENT SHARPENING CUSTOMER-CENTRIC STRATEGIES TO RESTORE ACCESS AND STRENGTHEN RELATIONSHIPS 1000 Park 40 Plaza, Suite 440 Durham, NC

3 EXECUTIVE SUMMARY The healthcare marketplace has changed as a result of regulations and technological advancement, and so have healthcare providers needs and position. Pharmaceutical companies, in turn, have had to evolve their organizational structure and strategy to meet this new environment. Sales teams, in particular, have needed a new approach as their staffing numbers have decreased and physicians are closing their doors to pharma or leaving primary care. Shrinking numbers of sales reps have also caused companies to rethink their hiring practices. Today, companies place more value on candidates entrepreneurial qualities than on the slick and tenacious rep of the past. These more businessoriented reps can leverage full-service packages alongside products. Additionally, they use customer relationship management (CRM) tools to their full advantage. Tools such as closed-loop marketing and physician feedback have helped launch some pharma companies into a new age where the product itself is secondary to improved patient outcomes. Many companies have achieved success by using new sales technologies and tactics that better meet customers demands. They incorporate strategies such as edetailing and organizational customer-centricity to reach their target audience. Many companies have also reduced rep mirroring and created teams to fill in the gaps left by the new market forces at work. Multiple stakeholders nurses, pharmacists and hospital administrators, for example have gained prominent influence in recent years. This development has resulted in a need for new teams, such as key account management (KAM). These KAM teams not only speak to these multiple stakeholders effectively, but they can also coordinate messages from other teams outside of sales to any one stakeholder.

4 EXECUTIVE SUMMARY 17 EMPLOY KEY ACCOUNT MANAGERS TO OPEN COMMUNICATION CHANNELS WITH THE NEW DECISION MAKERS Regulations and the marketplace surrounding healthcare have changed drastically in the past few years, and pharmaceutical companies need to evolve their own strategies to match. With physicians either specializing or joining larger groups such as hospitals and integrated delivery networks (IDNs), the primary care practitioners (PCP) sales reps once used to speak to are no longer the sole decision maker for each prescription. Formularies especially in European countries, but increasingly so in the US as well have begun to play a larger role in which drugs end up in patients hands. Pharma companies, therefore, need to find a way to reach the administrators, nurses and others involved with the process for deciding which treatments end up on the formulary. For many companies, key account managers (KAMs) fulfill this need. A successful KAM strategy, however, requires more than renaming sales reps to account managers. Instead, companies need to hire individuals with skillsets outside of traditional sales, train them to speak to customers differently, and allow the KAM team freer rein over their own territory and accounts. Companies need to speak with these accounts via employees with higher business acumen. These skills differ from those of reps best suited to making a single sale to a single person. Especially with many HCPs and organizations trying to block themselves off from pharma companies, the more business- and relationship-oriented account managers are better able to reopen these doors than reps are. Additionally, KAMs need to wear the mantle of leading a cross-functional team consisting of all the groups that call on physicians and other decision makers within the accounts. Proper coordination of sales, medical affairs, marketing and even market access allows the right message to reach its intended target at the right time relative to all the other messages from the company. Avoiding both feast and famine of visits or messages is paramount to successful customer relations and sales. This coordination can also prevent any conflicts between the information given to targets by any two given teams. Confusion over an aspect of the product or therapeutic area could easily deter a customer from purchasing it. Companies should also continue to employ sales reps in a more traditional role to create pull-through demand from the end of the line. Even within a restricted formulary list, physicians, nurses and pharmacists retain some leeway in their prescribing habits. These sales reps, however, must work in conjunction with the account managers and other teams within the company to deliver products and services to the customers, in addition to delivering return on investment back to the company.

5 MAXIMIZING CUSTOMER CONTACT WITH PHYSICIAN ACCESS STRATEGIES 48 Key Recommendations: 1- Allocate the majority of rep time to face-to-face physician detailing. 2- Maximize the effectiveness of office visits. ALLOCATING TIME EFFECTIVELY ACROSS MULTIPLE ACTIVITIES AND PRODUCTS Pharmaceutical and medical device sales representatives must fit a number of activities into their daily schedules. The typical sales rep must find time to detail physicians and other stakeholders including nurses, medical directors and pharmacists either in-person or through digital or mobile communication. To maximize their time, reps must also accommodate travel time as well as time spent waiting in doctors offices. Many representatives conduct sponsored sales events outside of doctors offices. While these activities consume significant amounts of time, representatives must still accommodate internal team meetings, strategy planning and training. Figures 1.18 through 1.25 show field representatives time allocation across all companies surveyed. Representatives are categorized as primary care, specialty and hospital reps in the US and EU. Key findings from these data include: Most surveyed Top 10 and Top 25 US companies primary care reps spend the largest percentage of their time between 3 (Company 5) and 68% (Company 8) of their time face-to-face detailing physicians. Only Company 7 reports allocating an equal amount of time (1) to another activity, traveling between appointments (Figure 1.18). Top 50 US primary care teams surveyed also dedicate the largest percentage of their time to time face-to-face detailing physicians (Figure 1.19). These teams also report dedicating substantial time up to 2 (Company 16) to detailing non-physician contacts and traveling between appointments (up to 3 at Company 13). For surveyed Top 50 US specialty teams, reps allocate significant portions of their time to detailing physicians and non-physician contacts, waiting in doctors waiting rooms and traveling between appointments (Figure 1.20). Only four companies report spending the largest percentage of their time detailing physicians. For surveyed companies outside of the Top 50, specialty reps prioritize detailing physicians and non-physician sales contacts (Figure 1.21). While three companies report that reps spend 50% of time detailing physicians, nonphysician detailing consumes up to 3 (Company 38) of field reps time.

6 MAXIMIZING CUSTOMER CONTACT WITH PHYSICIAN ACCESS STRATEGIES 49 Company 48 reports that its US hospital reps spend no time detailing physician targets (Figure 1.22). Instead, these reps dedicate the largest percentage of their time (3) to detailing nurses. All other Top 10 and Top 50 companies report reps spending between and 60% of their time with physician targets. Medical device Company 57 s US hospital reps dedicate the largest percentage of their time to discussing formulary access with hospital executives, at 18% (Figure 1.23). Most small pharmaceutical and medical device organizations surveyed report that reps spend most of their time detailing targets. Companies 49, 51, 52 and 56 focus on physicians. Companies 53 and 55 prioritize nurses. Companies 50 and 54 s reps distribute their attention equally between the two contacts. Of all surveyed field rep categories, EU primary care and specialty reps report the highest percentage (19%, on average) of time dedicated to waiting on doctors in waiting rooms (Figures 1.24 and 1.25). This percentage is nearly double compared to all other surveyed field representative categories. Averages among other rep types range from 8% to 11% of total time. Percentage of Field Reps Time Allocated to Specific Activities at Top 10 and Top 25 Companies (US Primary Care) Percentage of Time 100% 80% 60% 40% 20% 4% 1% 5 1% 9% 1% 1% 2% 1 2% 1 9% 20% 50% 5 40% 3 50% 2% 1 20% 1% 2% 7% 68% Other Administrative tasks (entering notes, writing s, etc.) Samples management In meetings Planning/Strategizing/Routing Training Conducting sponsored sales events outside of doctors offices Traveling between appointments Waiting on doctors in waiting rooms 0% Top 10 Top 25 Detailing non-physician sales contacts edetailing/contacting targets online Face-to-Face detailing physicians Company Figure 1.18: Percentage of Field Reps Time Allocated to Specific Activities at Top 10 and Top 25 Companies (US Primary Care)

7 STAFFING EFFICIENT FIELD FORCES IN TODAY S SALES ENVIRONMENT 143 Key Recommendations: 1- Hire reps who can work independently and manage their territory as a business. 2- Build deeper product knowledge among reps to improve physician communication. 3- Use less mirroring to develop better relationships 4- Create institutional or key account teams to handle large account decisionmakers. 5- Manage rep-dm ratio to improve training and increase DM field involvement. PROPER STAFFING LEVELS KEY TO FIELD SALES STRATEGY It is no secret that pharmaceutical companies have undergone drastic sales team realignment in recent years. Once vast armies of sales reps are now smaller, more targeted and efficient teams. The president of Company C, a consulting company, pointed out that one Top 10 company used to have 14,000 sales reps in the US but now only employs 3,000 reps to cover the same area. DEPLOY BUSINESS-MINDED SALES REPS TO FOSTER BETTER RELATIONSHIP MANAGEMENT According to the Company C president, the president of this Top 10 company had known for a decade that it had had too many sales reps and all other companies did too but none knew what would happen if they were to make cutbacks. No company did anything until the recession exacerbated the companies financial situation to the point where the great rep armies were unable to be maintained. Today, life science companies need to think about sales more strategically and deploy fewer reps. One Top 25 company employs 1,400 reps across the US and 33 countries in Europe. The company is careful to allow a certain amount of autonomy to teams within countries that differ so vastly from one another. Company B, also a Top 25 company, maintains two separate sales teams a large one of traditional reps and an institutional team that handles large accounts. The institutional team currently holds only three reps. Although the interviewed executive would like to expand the team to seven reps, even that size is a far cry from the large blasts of reps companies had previously used. The director at Company B explained the new skills that companies desire in sales reps. Although the best reps in the past were slick and tenacious, the qualities that make a sale today are more business-oriented. Current sales reps need to be relationship managers who are able to work independently and manage a territory as if it were their own enterprise.

8 CHAPTER 4 HARNESSING EMERGING TRENDS TO TRANSFORM SALES FORCES Changes in the life sciences commercial landscape have prompted sales organizations to restructure and repurpose their forces. In the past, sales forces met fewer competitor products and less legislation when working with physicians. A sales representative could walk into a doctor s office, offer a brief explanation of their product s clinical benefit and be on their way to their next office visit. Today s sales teams face a new set of challenges ranging from a growing number of generic and biosimilar products to difficulties meeting with physicians. To succeed in this competitive and closed commercial space, sales forces must embrace new strategies to identify and cultivate relationships with their key customers. This chapter examines two major changes that are influencing the strategy and structure of life science sales organizations: customer-centric commercial models and key account management (KAM). These shifts from the traditional product-focused teams could position sales forces to succeed in the evolving commercial environment. Research highlights key differences in product- and customer-oriented approaches, as well as best practices for creating and implementing a customer-centric strategy. Further research explores KAM teams roles in the new sales model including strategies for building KAM teams. 4

9 HARNESSING EMERGING TRENDS TO TRANSFORM SALES FORCES 172 Key Recommendations: 1- Adopt tools to shift from product-centric to customer-centric model. 2- Invest in increased communication, key account management and target profile creation. 3- Segmentation allows reps to target best-fit physicians with the most relevant information. FOCUS SALES EFFORTS ON CUSTOMER NEEDS AS WELL AS PRODUCT BENEFITS Pharmaceutical and device companies should evolve their sales strategies to match physicians growing needs and interests. A decade ago, companies could focus sales strategies almost exclusively on product benefits of blockbuster drugs. Today s crowded market requires sales forces to look beyond these benefits. Forces must provide not only physicians, but also patients and other stakeholders, with supplemental value. However, today s market has faced two blockbuster patent cliffs one in 2011 and another in Current pharmaceutical sales margins are decreasing due to these expiring patents, as well as the increasing presence of generics and biosimilar products in the market. The available products are not the only changes in pharma s commercial space. Companies face a growing physician access challenge as more and more practices and institutions close their doors to sales representatives. Faced with these obstacles, sales teams must adjust their approaches to match their customers needs. Customer-centric commercial approaches focus on providing physicians with the most relevant information. This focus may be the key to maintaining, or even improving, physician access and sales margins. But sales teams should not end their efforts at the physician s office. Teams should also expand their current view of the customer, moving beyond the physician to also include the patient, healthcare institutions, payers and regulators.