“No, you cannot manage accounts.
They do it themselves.”
Mid 2011 Rainer Seiler and I published the “first ever textbook” about “Pharma Key Account Management”.
This first edition was specifically designed and written for the German market. It contained a lot of detailed information about those new stakeholders representing the change drivers of the traditional pharma sales model.
Writing this first book proved a fascinating exercise indicating the huge complexity that marketing and sales in a pharmaceutical company today encounter. The situation in 2011 was different from what pharmaceutical companies had to cope with in past decades and the speed of change still is almost breathtaking.
Legal actions came so fast that the pharmaceutical industry hardly could follow. Let alone did the industry try to actively shape what we tend to call the “pharmaceutical market”.
The major issue was that until just a couple of years ago, there had not even been a market in the economic sense of the word.
The central characteristic of a market is the presence of demand and supply. In most countries where pharma companies detail prescribing physicians, pharma uses the word “market”. Why does the word “market” in the narrow sense of the word not even apply? Because the demand side of the equation is missing.
A similar error occurs when pharma talks about selling to their customers when they mean detailing a drug to a prescribing physician.
In the true sense, a prescriber of course is not a customer. A customer is defined as “Someone who bought or purchased a product or service.” Buying and selling is a transactional business, an exchange of a product or service against money.
What has been called “selling” in the past decades did not result in transactions between a physician and a company. Most probably “selling” will not be an appropriate term in the future.
What a pharmaceutical field force pursues and achieves was and is not transactional. This means selling and buying does not happen. “Deals” and “negotiations” as trained in “selling skills courses” assumedly have contributed a lot to pharma’s poor reputation of today.
The simple introduction of the word “selling” into pharmaceutical field forces in the early 1980s drove senior management, field force mentalities, and mindsets into a rather shortsighted corner.
It mis-shaped business processes, reduced rep’s education and led to the share of voice model: the highest possible call frequency with the highest possible number of field force lines allocated to one product.
Respecting needs and requirements of prescribing physicians was, probably still is, an unknown or at least disregarded concept.
Having experienced almost 40 years of constant change and seeing the pendulum swing back, made me sharing as much as possible with my readers.
BY PROF. BRIAN SMITH
THIS ARTICLE FIRST APPEARED IN THE NOVEMBER 2014 ISSUE OF PME (PHARMACEUTICAL MARKET EUROPE)
FOR LIFE SCIENCE COMPANIES, EVOLVING IS GETTING HARDER, NOT EASIER.
I felt sympathy last month when Novo Nordisk pulled out of inflammation R&D, following some poor phase II results. Novo is a great company, trying to simultaneously dominate its core business in diabetes while evolving into a broader based company. So this news goes to show how difficult evolution is for life science companies. And evolutionary science suggests it's only going to get harder. As is my habit in Darwin's Medicine, let me explain the science before I try to draw out some practical implications.
What most of us shorthand as 'evolutionary theory' is more accurately described as the neo-Darwinian synthesis, a mid-20th century convergence of several great thinkers' ideas. One of these was Sewall Wright, an inbreeding expert whose parents, coincidentally, were first cousins. One of Wright's most useful contributions was the fitness landscape model, a three-dimensional plot of phenotypic traits on the two horizontal axes and fitness on the vertical. I use these models in my work to display how the industry's social and technological environments interact to create peaks and troughs in the industry landscape.
You don't need to be a pessimist to worry about the ability of the industry to adapt to the future
In simple terms, successful business models are those welladapted to occupy peaks in this landscape. Equally, the valleys between the peaks are places of lower fitness. By and large, the evolutionary process of variation, selection and amplification tends to allow business models to evolve uphill but never downhill. Just like species, business models that become less fit over time become extinct. And there's the problem. Suppose you're a successful company sitting at the top of your fitness peak and you see the need to move, either because your current habitat is disappearing or you want to occupy a bigger, more profitable peak. To get from one peak to another means going into the valley and evolution doesn't allow this. Imagine a company losing money for many years while it milked its existing business and invested in another. Sewall Wright, talking of course about biology rather than business, said that there were two factors that influenced the ability of a population to move from peak to peak; variation and selection pressures.
In terms of industry evolution, this translates into one driver and one barrier. Variation and experimentation in practices, strategies, structures and other traits increase the speed of evolution. Strong selection pressures, which punish lack of fitness, slow down the movement from peak to peak.
It doesn't take much to see that our industry - highly regulated, incestuous, relatively slow moving - isn't a frenzy of business model experimentation. Similarly, shareholder pressures, intense competition and market access pressures add up to intensifying selection pressures. You don't need to be a pessimist to worry about the ability of the industry to adapt to the future. There is, however, a glimmer or two of hope. Sewell's brilliant thinking allows for two short cuts across the valley of death. Sometimes, one can find a bridge or causeway across the valley that doesn't mean going downhill. And sometimes, it's possible to leap across the valley in a single bound by injecting a clutch of new genes from outside, instead of gradually mutating your own.
OK. Enough hero worship of Sewall Wright, although it is not undeserved. What might bridges and gene-injections look like to a life sciences company trying to cross the valley from one peak to another? Well, the bridges are a set of circumstances where variation in strategies needn't have a short-term cost. So special funding for some technologies that allow incremental movement from one way of doing things to another would be an example of this. Special payer funds for cancer treatment, government investment in new e-health solutions and joint ventures with payers and providers would be bridges to the new peaks. And leaps across the valley? Well that would be the acquisition of really different new capabilities from another firm by whatever form of relationship. This is rare, much rarer than its incremental, incestuous counterpart. But funds like Roche's Venture Fund are set up to do just this. But both bridges and gene transplants are uncommon and difficult.
Wright's thinking suggests most firms won't emerge from the valley. It also suggests that the new peaks will still be populated but by industries with non-pharma genes. Think Google and Apple perhaps. And lest you think this is too metaphorical, we've seen exactly this before. In the late 19th century second industrial revolution, few apothecaries survived and the industry became dominated by firms with a history in dyes and coal tar. Those apothecaries who did survive found bridges or acquired chemists' genes. But, to end on a positive note, that transition was before Sewall Wright gave us maps. Today's pharma companies have a better chance of surviving. But only if they read Wright's maps.
ARTICLE FROM PROF. BRIAN SMITH. He is an authority on the pharmaceutical industry and works at SDA Bocconi University and Hertfordshire Business School in the UK.
First a clarification, what this book will not deliver: It is not a cookbook, reciting benchmarks and best practices, which are supposed to guarantee success.
Almost the opposite is true:
Sharing ideas, conceptual approaches, hopefully future proof for the mid-term future, delivering a common understanding, and above all, defining a common vocabulary. This is what this book is about. It is written from almost 40 years of experience, following discussions and sharing events and experiences with pharmaceutical professionals in more than 25 countries on four continents. Writing was a challenge, considering so many countries, different markets, varying payers and health care systems.
Once we know your comments, we will update, revise, improve and release an updated edition as needed.
In the vast majority of countries, in the so called developed and similarly the emerging markets, the sales model of the pharma industry appears to be moribund if not yet already “dead”. 2012 Booz & Company (worldwide, National Analysts, booz&co, 2012) published these interesting survey results:
Their question to senior managers in pharma was: Q: Many people have raised the idea that the current commercial pharmaceutical model is broken and needs significant repair. To what extent do you agree with this assessment?
68% of respondents believed that the current pharmaceutical model is broken and needs significant repair. Fewer than 10% believe the model is not broken.
Experience tells that pharma tries to export their sales and business model into the emerging countries. Owed to globalization and shared experiences across continents on many platforms, the learning curves today seem to be much shorter and steeper in those recently established market places.
The “share of voice model” will fade out in the emerging markets a lot faster, than it did in the developed markets.
Additionally in almost all countries, pharmaceutical products nowadays are marketed in a true market surrounding:
There are drug companies, which offer supply, and there are commercial and professional entities which stand for demand. Demand can come from a state or governmental tender, a national health system, Medicare, Medicaid, PBM, an NHS, PCTs, distributors, hospital or pharmacy chains and many other possible networks or legal entities.
In contrast to the individual prescriber, in all these entities, decision making is done by a number of people. Individuals contribute but do not make decisions by themselves.
And this is the definition of an ACCOUNT:
An account is an entity, group or network of people in which decisions about drugs, devices or services are made by a number of people.
In numerous projects we found, that the acronym KAM was used indicating the most various things and details, leaving it to being an undefined word or acronym.
Subsequently there must be a demand for the clarification and highlighting many details around
KEY ACCOUNT MANAGEMENT IN PHARMA
Key Account Management is about establishing and maintaining a robust and lasting business relationship.
The numeric KAM 3.0 is derived from the similarly numbered evolution of marketing in the last 30 years.
Kotler’s marketing concepts started with product centricity, evolved to customer centricity and currently we talk, learn and read about Marketing 3.0. “From products to customers to the human spirit.”
Making Key Account Management future proof will need an underlying philosophy being much more holistic than simply selling pillboxes. The overriding question will be if KAM 3.0 is adopted as the novel business model.
From experience, you can tell that procedures and market approaches of the past will not withstand the omnipresent political and other pressures.
After started working in the pharma field force in 1975 in Germany, colleagues shared with me plenty of their experiences in the pharmaceutical area in these days and the time before mine. At the restart of the German economy in the 1950ies, the number and locations of medical practices were limited and fully regulated. Not all of the physicians therefore could find a place to settle and open their own medical practice in these days.
After the first pharmaceutical companies had restarted, they invented a personalized channel to inform prescribing physicians about their products:
Pharma started hiring, educating and sending pharmaceutical advisors to doctors in their private practice.
In these early days, “pharmaceutical advisors” have usually been medical doctors themselves and they started visiting their colleagues to tell them how to treat a specific disease and use or administer a specific drug.
EXHIBIT 1: A MANAGERIAL “TRIPLE JUMP”
If the pharmaceutical advisor was not a physician himself, at least he needed to be a pharmacist, i.e. a member of the health care guild.
Only people with such a background, a reasonable degree of seniority and high trustworthiness could discuss, advice, and listen to doctors being on par with their colleagues in the office or a hospital ward.
To differentiate from OTC, in these days prescription drugs were called “ethical drugs”. It was perceived being unethical to talk or even press a physician into prescribing or using “my” drug.
Whenever there was a good reason to advise the prescription of another company’s medicine, this was fine and fully in line with the professional goals.
If a doctor needed advice or assistance in his therapeutic decisions, pharmaceutical advisors have been the perfect source of knowledge, displaying common medical sense, carrying huge wisdom from knowing plenty of other colleagues and having intimate insight into many doctor offices.
The doctor’s own and fully respected domain consisted of the steps:
assessing and examining a patient
finding a diagnosis.
After diagnosis was clear, therapy was to be started.
The claim of pharmaceutical advisors in these days was to know almost everything about the therapy in their respective area of competence. They had a deeper knowledge in the therapeutical arena, than a “normal” physician could have.
When one of those medical representatives knocked at the door, in many cases the doctor asked his nurse to close the office, keep patients away and allow him half an hour discussing with the advisor from well-reputed pharmaceutical companies. Coffee and cookies offered by the doctor have been somewhat standard. The doctor sometimes felt honored, being important enough to be visited.
In contrast to today, the word “customer” was obsolete. Words as selling etc. did not exist and calls were called “visits” and lasted around 15 minutes plus on average.
Doctors saw these visits as a perfect break in the every-day office. They could change from asking and listening to patients, to talk and exchange at high-level par. Doctors enjoyed the break, being encouraged to talk, asking many questions and receive valued advice in return.
Those were the days.
It was in the early 1980’s, when words like sales, selling or sales force had been introduced into the profession of the pharmaceutical representative. Pharma’s “only living contact to physicians” was put into a new and very different pair of shoes.
The everyday life of the former “medical advisor” changed considerably: the transition from medical advisors, respected consultants with rich knowledge, a welcome interruption of patient routine, carrying a lot of therapeutical experience and delivering real value to physicians had started.
Medical Representatives were about to become sales people.
One of the major drivers of these changes in self-conception and in the profession was the availability of “sales data”. With the availability of these data, the objectives of pharma changed. “Creating a preference” to prescribe my drug, driven by value delivered through reps was gone. The era of sales and market share started.
In 1972 IMS Health became a publicly listed company and in 1973 Medical Communications and Life Sciences divisions have been formed. At the beginning of the “era of selling”, every company established their own market intelligence. Market data, the comparison with competitors, the size of an indication area etc. have been heavily used from product managers and forecasters around the world. Increased granularity of data and the option to look into sales at a brick level drove change and desire to hold reps accountable creating revenue.
This was a starting point of monitoring and auditing pharmaceutical sales and one of the tipping points for “pharmaceutical advisors”. More and more they were converted into “sales people”. The fashion of setting sales objectives started.
Huge and heavy sales reports, 100s of pages of “tractor-feed” paper, printed with the first laser printers, contained data of a quarter, my own product and its competitors and of a group of reps. Computers still were of the size of 3-bedroom apartment and the paper printed was measured in tons.
The physician and his needs no longer were of relevance for marketing & sales in the pharmaceutical industry.
First line and senior managers started talking about revenue of a drug achieved or missing; they judged their field people for gains and losses and held them responsible for missing revenue.
The quality of a rep from now on was measured in sales, sales increase, market share, market share increase or any kind of index made from these numbers.
The good rep from now on was the one with high sales.
The quality of their advice, their often very intimate yet professional relationship with prescribers, the huge knowledge about disease and drug, their ability to differentiate their advice, ask the doctor and add value to every minute of the doctor’s time did no longer count.
A professional link between community physicians through knowledgeable and trustworthy reps from the pharmaceutical industry ended.
Since then the physician and his needs and requirements have no longer been of relevance for marketing & sales in the pharmaceutical industry.
The sales model had finally changed and the business model is the same until today: Promote drugs to prescribers and make them prescribe.
Many senior managers still are using the old vocabulary, attempting to tweak and redefine meaning and perception. It often looks and sounds like “riding a dead horse”.
“It is important to understand the current definition of selling, and in pharma that continues to be primarily ‘message delivery’ – and usually a product message at that - and certainly that needs to change.” (Paul Simms, 2014)
The problem in above quote from an eyeforpharma paper is that “selling” to a doctor hardly is defined, let alone is such a definition updated.
Selling in principle stands for a transaction, an exchange of one value against another. Selling