Feel the force

By Matt Buttell

With patent expiries and generic competition on the rise, the pharmaceutical industry is being scrutinized like never before. As a result, sales force effectiveness is taking top priority.

“Meeting analyst expectations on Wall Street remains the number one metric for a pharma CEO, and as long as that remains the case, there won't be a gigantic amount of change”
-Dorman Followwill

"There is no such thing as a no-sale call. A sale is made on every call you make. Either you sell the client some stock or he sells you a reason he can't buy. Either way, a sale is made; the only question is: Who is going to close? You or him?"

These are the words of Ben Affleck's character Jim Young in the 2000 movie Boiler Room - a dark and intense drama depicting the perils of working on a highly pressured, highly-paid sales floor at a suburban investment firm.

While the movie is a dramatization of what life is like as a cold-call salesman, the 'boiler room' concept that goes hand-in-hand with sales is nothing new to the pitching floor: especially as far as Hollywood is concerned. Think Oliver Stone's 1987 classic Wall Street, where Michael Douglas' depiction of ruthless stockbroker Gordon Gekko earned him an Oscar win: "Greed is good", Gekko warned us some 13 years ago. Or Alec Baldwin's Blake in the 1992 movie Glengarry Glen Ross, where he defines the ABC of sales as "Always Be Closing."

Of course, outside the realms of the movies, while the reality for the sales force may not be half as ruthless, it is just as dramatic. And not least for the pharmaceutical industry. That's because the industry is currently at a crossroads, facing the very real problem of patent expiries and the rise of generic substitutions - and the pharmaceutical sales force is top of the critical agenda.

The challenges facing the pharmaceutical industry in 2010 are multi-faceted and have already been well publicized.  For one, a slowdown of growth levels within mature markets is leading to a refocusing for the industry - in particular, Big Pharma - that sees future profits lying in emerging markets such as China and India: markets that have been dubbed by the media as 'pharmerging'.

As such, the pressures on the sales forces' of pharmaceutical companies are great, not least as many of pharma's biggest markets are now saturated with sales representatives. A direct result of this sees the industry's selling techniques becoming increasingly ineffective and the industry is now being forced to embrace the reality that this model guarantees neither growth nor future profitability.

Instead is the argument that there is a new opportunity presenting itself to the industry: the realization that moving beyond sales force growth and mass promotion and into a new era of sales force effectiveness.

Denied access

According to the Pharmaceutical Sales Force Effectiveness Strategies report published by Business Insights last year, the social, demographic and economic context in which the pharmaceutical industry operates is changing dramatically, with huge implications for the industry as a whole. Dr. Ksenija Jakovcic, a Business Development Manager at SanMed and author of the report, notes how these challenges will have major ramifications for the way in which pharmaceutical companies market and sell the medicines they develop over the coming years.

The study aims to highlight how the pressures associated with these challenges impact market efficiencies and discusses the idea that, currently, no aspect of pharma operations is under as much scrutiny as the sales and marketing function.

It is an interesting point, given how pharmaceutical sales representatives are currently facing tight restrictions regarding access to physicians, not to mention - highlighted by President Obama's ongoing healthcare reform debate - something of a negative public opinion right now. In fact, in reference to a lack of access, Jakovcic writes that about "one in four US physicians work in practices that refuses to see pharma reps.

"And of the doctors who do see reps, about 40 percent will meet with them only with scheduled appointments," she adds. What's more, findings reveal that the "by-appointment-only" figure jumped by 23 percent during the last six months of 2008, a year before the report was published.

Arms race

One of the biggest issues facing the pharmaceutical sales force is the fact that while the perceived benefits of high return on investment have, in the past, been a key driver for companies to increase numbers, the reality has meant that a surplus in the number of reps. That, alongside a raft of new pressures - including busier physicians, the proliferation of new drugs, greater competition among companies that produce and market drugs and evolving customer dynamics - has seen the ROI on detailing decline.

What's more, the pharmaceutical industry remains somewhat cautious about the concept of change. In fact, according to Dorman Followwill, Vice President of Healthcare EIA at Frost & Sullivan, the industry remains incredibly slow to this idea.

"I began my career in the Silicon Valley, the center of change and speed, so I was very much used to things happening quickly," he explains. "This is a vastly different world from the pharmaceutical industry, where things move much more slowly."

Followwill goes on to use the analogy that, over the last 30 or 40 years, the pharmaceutical industry has operated more like the automotive industry, something he defines as an "interesting cross- industry comparison", given the significant meltdown the US automotive industry experienced last year.

"Obviously the pharmaceutical industry doesn't want to see itself at that point, so there is a lot of angst and worry currently circulating in the pharmaceutical world," he adds. "Nonetheless, the industry remains incredibly slow to change."

In fact, warns Followwill, until pharmaceutical companies shift their focus, change for the industry is unlikely to happen at all. "The industry is largely geared ruthlessly toward Wall Street and shareholder values, which have to be driven on a quarterly basis," he explains. "Meeting analyst expectations on Wall Street remains the number one metric for a pharma CEO, and as long as that remains the case, there won't be a gigantic amount of change. The pharma industry is probably not going to look that different in 10 years' time."

New ideas

Jakovcic, meanwhile, only echoes Followwill's thoughts, explaining that while caution certainly does remain, the industry is slowly beginning to explore new ideas and innovative sales models. "Although only seven percent of surveyed respondents believe that new sales models will be rolled out in the next two years, the majority of interviewees expect that focused pilot projects will indeed gradually pave the way to new business models," she writes.

She believes that the most successful future pharmaceutical sales organizations will include a significant variable component and will be engineered for agility and for greater cost effectiveness. "A solution for the future is to establish a smaller internal sales organization composed of the highest performing sales reps. To build in flexibility, this fixed resource would be supplemented by variable resources provided by contract sales organizations (CSOs), whose expertise is in the rapid deployment and redeployment of custom profile sales teams."

What's more, the pharmaceutical industry, which has long been described as counter-recessionary - a fact largely based on the assumption that people will always need drugs regardless of the state of the economy - has shown signs of being far from invincible. According to analysts, whilst the recession-proof theory might be true at a surface level, a more granular analysis reveals dissimilarities between different segments of the industry.

For instance, the providers of branded drugs, blockbusters and the newest treatments tend to make long-term investments in R&D, and have high sales and marketing costs as a result, while those manufacturers of off-patent, older drugs - usually manufactured at a much lower cost than the branded molecular rivals - typically operate off a lower R&D cost base, with smaller sales, marketing and budgets in tow.

This issue has only been exacerbated by the ongoing recession and global economic crisis. As such, companies are asking themselves if this is the time to be investing in pharma sales or not as the industry refocuses its ideas on the way to approach the sales floor.

However, the industry's bottom line (profit) remains the bottom line, and it is clear that Big Pharma is going to have to change its sales model - though whether this will come about as a want or a desire to change, rather than a necessity, remains to be seen. In the end, the pressures the industry is facing - such as saturated markets, declining margins, increased pressure from generic competition and fewer blockbusters - mean that cost cuts are inevitable, and eventually that has to include cuts within the sales force.

Thankfully though, as change does slowly begin to envelop the pharma industry, the Hollywood mentality of sales force effectiveness, at least, seems to disappearing.

As such, Michael Douglas' egotistical Gekko, or even Alec Baldwin's belligerent Blake, seemingly no longer have a home in pharmaceutical sales. Instead, the general consensus is that success lies in striking a balance between "soft skills" and "hard skills" and analysts say that Emotional Intelligence - which includes attributes such as listening skills and dressing and behaving in a professional manner - are required just as much Consultative Selling Skills (CSS), which include knowledge about the product, the medical condition it treats, and - in the end - the skill to close the deal.

So, maybe Ben Affleck's speech as Jim Young in Boiler Room shows some truth after all, but for Blake's "Always Be Closing" mantra of years gone by, it seems the number's up. And in its place, perhaps the usually static pharmaceutical industry will adopt a new ABC of sales: "Always Be Changing".

Side effects

Researched and organized by eyeforpharma, a division of a private company headquartered in London, UK, the Sales Force Effectiveness Summits for 2010 go a long way to highlight the importance this topic is bringing to the industry.

The first summit will be held in Barcelona in April and aims to give attendees a real insight into how change is impacting the industry. Keynote speakers will share knowledge designed to transform the pharmaceutical business model from product focused to customer-facing.

A second summit will be held in New Jersey in Ma, tackling similar issues for the US market.

For more information on the Pharmaceutical Sales Force Effectiveness Strategies report please visit www.GlobalBusinessInsights.com.