Selling to IDNs: Strategies for Success
Changes in healthcare delivery are rapidly undermining traditional pharmaceutical commercial models. Customers are fewer and larger as hospitals consolidate into integrated delivery networks in the face of rising cost pressures, stiffer financial penalties and the imperatives of healthcare reform.
Last month, in IDNs - What Pharma Needs to Know, I explored reasons why integrated delivery networks (IDNs) represent a new type of customer for pharma manufacturers. To recap: IDNs are big, and often leverage their size to negotiate prices, accelerating commoditization of pharma products; IDNs have shifted purchasing decisions away from individual physicians and toward cross-functional teams of administrators and physicians, who bring an institutional perspective to decision making that traditional sales strategies don’t address; and some IDNs are starting to assume risk for the care they provide, making them even more value-conscious as they decide what products to buy.
To succeed in the evolving healthcare landscape, manufacturers of pharmaceuticals, medical devices, and diagnostics need to challenge the assumptions on which they have built their commercial models. “Call reach and frequency” is no longer a dependable sales formula to succeed in the new healthcare landscape. As a shrinking customer base concentrates on managing costs and delivering better quality, manufacturers must develop new capabilities which support a market-based approach based on the value of their products. New commercial models are needed to address the needs of these new customers.
Based on our extensive experience working with both IDNs and manufacturers, the key capabilities required to implement a market-based commercial model include:
- Strategic account management: The traditional model is based on establishing relationships with individual physicians and explaining how the product will support the physician’s goals. In the new healthcare delivery landscape, “physician as account” is being replaced by “IDN as account,” and pharmaceutical manufacturers need to provide account management teams with the skills and incentives needed to manage their accounts strategically. Account management teams will need to recognize that, although all healthcare delivery organizations are focused on reducing cost and improving quality, each customer organization is unique and must be treated as such. It’s necessary to understand their business drivers, identify their key decision makers, and discern their current risk profile. Ultimately, you must be able to demonstrate how using your products and services will impact the customer’s bottom line.
- Complex sales skills: With fewer accounts and more centralized decision making, manufacturers will no longer require the extensive reach of a large sales force. This leaner sales force will need expanded capabilities to succeed in a new, more complex sales process. Prioritizing each account based on its potential and then working to optimize the value of the account requires a level of business acumen not commonly found among traditional sales reps trained to focus on a product’s features and benefits. The core competencies for sales reps will need to be redefined – they must have the ability to engage key decision makers with sophisticated scientific understanding of their products and the financial benefits they offer. New sales tools will be needed to demonstrate the economic and clinical value their products have to offer. Finally, new performance metrics will be needed to measure the quality of account management rather than just the volume of sales.
- Ensuring stakeholder value: Economic and clinical value drives a market-based commercial model. Manufacturers must identify what constitutes value to all relevant stakeholders – including payers, physicians, administrators, and patients. Companies must ensure that delivering value is at the core of all activities, from portfolio investment decisions, to product development, and extending across the entire product life cycle. This will require coordinating activities across the R&D/commercial barrier, which often requires changes in roles and accountabilities. Then, manufacturers must communicate the value proposition, with the necessary supporting evidence, in terms that resonate with their customers. That way customers can understand how manufacturers can help them better manage their business and provide better outcomes for their patients. Achieving this goal requires the design and implementation of new structures and capabilities to generate the necessary data, the ability to articulate and communicate a compelling value proposition, and engagement with senior executives at increasingly complex, rapidly evolving institutions.
The market and regulatory forces driving providers to form IDNs will continue to intensify as managing healthcare costs and quality continues to be a global priority. Manufacturers must move quickly to develop new commercial models, and the new skills, competencies and capabilities required to engage with these new customers effectively and successfully. By doing so, manufacturers will ensure their models reflect new realities and equip themselves to meet rapidly evolving customer goals.
Rita E. Numerof, Ph.D. is President of Numerof & Associates, Inc. Numerof is a strategy development and implementation firm with more than 25 years’ experience helping major pharmaceutical, device, diagnostic, payer and delivery organizations create and deliver value across healthcare. Experts in business model transformation, Numerof specializes in redesigning commercial models, developing economic and clinical value propositions, and crafting market access strategies for the pharmaceutical industry worldwide. For more information, visit our website at www.nai-consulting.com