Can Pharma Change its Business Model? Yes, We KAM
Seismic shifts in the structure of the healthcare business landscape are making the move to an account management approach essential.
KAM in pharma is now expanding rapidly as the need for an account management approach becomes “truly global”, according to Martin Parkinson, author of a new report on key account management. Pharma companies are responding to a set of common drivers across the global healthcare ecosystem, albeit that the relative significance of each specific driver varies from geography to geography. “I think that’s quite different to how it has been even just a few years ago.”
The account management model is gaining traction in several geographies as it spreads from its traditional heartland in northern Europe to the rest of Europe and North American markets. “We’re also starting to see that it has been a necessary approach in emerging markets.”
Parkinson, a one-time NHS manager and Pfizer executive now at PA Consulting Group, is author of the “Key Customer Engagement Report – Towards Key Account Management in Pharma”, co-authored by Magnus Franzen and published by eyeforpharma.
Encouragingly, some of the early adopters are starting to see the fruits of their endeavors. They made the move several years ago and are “now getting it pretty much right and they’re actually starting to see the results”, Parkinson reports. “I think there’s always been a question as to what the results are from this. They’re actually able to achieve things that they probably were not able to achieve using a more traditional model.”
Key takeaways
Parkinson underlines three important lessons from pharma’s recent experience with the KAM model:
1. “It takes a few years to get this right;”
2. “When you do, you start to get results, and I think this is a real positive;” and
3. Organizations need to think differently about how they define value.
Novartis, Sanofi and Pfizer are among the companies that Parkinson highlights as having been successful with KAM. “They’ve been doing it for a while now and they’ve gone through the pain of trying to embed it and get all the organizational issues and culture sorted out.”
How painful has it been? “It’s a difficult change for a company. You’re effectively asking a company to evolve what has made it successful for the past 30, 40, 50 years or more.” Parkinson points out that the problem is particular difficult for pharma organizations because the account management approach is additive. “You still have to continue in most markets to talk to and sell to doctors. So you get into this rather strange situation where you’ve still got a traditional sales force where it’s looking like it’s doing a fairly traditional thing – because that is still required – but you need to put an extra layer in.”
While this also happens in other business sectors, often other industries have been more successful in segmenting their customers in the past. “We don’t do that to quite the same extent and I wonder whether that is a reflection of the way the market is actually structured in healthcare.”
The healthcare industry’s conservative approach is also likely to have reduced the speed of introduction of a KAM approach, Parkinson acknowledges, though he also stresses that pharma companies are in the main highly successful and highly profitable: “Given the success of the past, it’s hardly surprising companies demand a high level of proof before changing.”
Value
Pharma needs to think differently about value. “I think the more successful companies have probably made that marketing mind-shift change.” He stresses that account management is no longer something that sales does, and everybody else can ignore, particularly marketing.
That starts to direct what the managers are trying to do and that translates differently as you cascade down through an organization. That bit, people are still struggling with, I think.”
“Pharma has been very successful in providing value to physicians – the value that they provide to physicians is obviously the medicine that enables doctors to manage their patients. What they need to think differently about now is how to do the same thing for payers and providers, thinking about the organization and the institutions themselves.”
For instance, pharma now needs to understand such questions as what a hospital is trying to achieve as a business – its objectives. “That starts to direct what the managers are trying to do and that translates differently as you cascade down through an organization. That bit, people are still struggling with, I think.”
In addition, there is the whole shift towards outcomes-based metrics, although cost control will inevitably be a major driver for hospitals. “You need to be thinking about that because that is going to be the overarching driver – saving money while maintaining quality. So, it is actually quite a difficult piece to work through but it works if you can find the right value proposition: this is probably an element of service wrapped around your medicine, to deliver greater efficiency which saves money but also improves quality.”
The more successful companies are thinking through the way they deliver value, while also “getting all the structures and the training and the people right”, Parkinson emphasizes. In particular, they are finding ways to avoid simply discounting their offerings as part of a strategy of escaping a race to the bottom in terms of price.
What defines KAM?
The research found that there is a wide range of definitions and abilities across the industry in terms of what pharma defines as a key account manager – anything from a rebadged rep up to the glorified heights of a genuine strategic account manager. “There is a vast range out there.” At the top end of the scale, Parkinson highlights the rise of specific teams in the United States that are being formed to serve the big provider organizations.
Furthermore, there are differences in approaches even within organizations. “If you look at different companies you’ll see differences at different levels, so a KAM in one country is not the same as a KAM in another country. And sometimes even when you look within the same affiliate, and look across different business units, a KAM in one is not the same as a KAM in another.
This poses difficulties in the context of many companies’ move towards regional marketing and support functions, where such diversity can cause real issues. Marketing material created for payers and providers in one country may be completely unsuitable in another “because they’re seeing different customers and it’s a different job” – so an increasingly local approach is required which flies in the face of some current organizational trends. “There’s real inconsistency there.”
But should there be consistency across the industry? “Ideally, you would say yes. Achieving it is going to be difficult to say the least. I’m not sure what would drive it. More importantly, really, there should at least be consistency within the same company. Each company is going to have a slightly different flavor of account management anyway, a slightly different blend because of its portfolio and its needs. Within the same company it would make sense to have these things defined.”
People issues
Consistency is especially important in terms of KAM role definitions in order for companies to be able to hire and develop the right people, Parkinson acknowledges. “I think that is one of the issues for the industry generally, as this starts to move forward. It will be more problematic to recruit into these roles – the fact that you have been a key account manager for the past six years in another company doesn’t necessarily mean that you are actually a key account manager. Recruitment processes will be designed to sift that out.”
Companies spend a lot of time initially as they start to move to this sort of business model trying to explain to the customer what’s going to be different, and then along comes somebody else with the same job title who basically just behaves like a normal rep. That really sends out a mixed message.
Companies need to challenge the assumption that reps make good account managers, according to Parkinson. “There’s no reason why they can’t but I think you should look at account management as a different job.” It’s not automatic; it’s as different as being a salesperson and a marketer. “You’re looking for people who have got real business acumen and some strategic thinking, not just operational, and are willing to take on accountability and ownership.”
Other important qualities include customer curiosity and tenacity to drive things through, and a KAM’s confidence in the belief that they are having peer-to-peer conversations with senior customers like hospital general managers and chief executives. Confidence is not built by skills training on its own.
This ambiguity in role definitions also brings confusion for the customer. “Companies spend a lot of time initially as they start to move to this sort of business model trying to explain to the customer what’s going to be different, and then along comes somebody else with the same job title who basically just behaves like a normal rep. That really sends out a mixed message.”
Geographical factors
In the US, the real move towards KAM has only been evident over the past few years, driven by changes such as the Affordable Care Act and other reforms – and the healthcare system’s response. This has led to consolidation in the market, with the formation of ever-larger providers and the integration of insurers and providers.
“They’re creating really, really big – seriously big – groups and organizations. It’s quite surprising, the size of some of these groups and the control they’re now having on physicians.” The consequence is that physicians’ autonomy is being eroded.
In Europe, where healthcare systems are mostly national and free at the point of need – either publicly funded through taxation or by social insurance – the recent economic downturn “has clearly had a massive impact”. This has resulted in rising payer influence and control. At the same time, there has been a significant shift towards the specialty market. Both of these factors are influencing the way pharma needs to address the marketplace and building the momentum towards KAM.
In emerging markets, there has been a significant portfolio shift that is driving KAM, Parkinson found. “In the past they have sold into out-of-pocket-type markets – in primary-care markets patients pay for the drugs themselves; however, they’re now moving into specialist markets.” Until recently, pharma has not had to deal with insurers on a significant basis in emerging markets but specialty drugs are significantly more expensive and fall under the remit of the insurers – so companies are having to build relationships with those insurers to gain access to those markets.
Pharma organizations should also note that the pockets of KAM excellence are by no means confined to the developed world: the interviews conducted for the report highlighted some good examples in South America for instance.
Organization challenges
The big organizational challenge around implementing the KAM model lies around leadership. “That won’t come as any surprise. It is difficult, and that came through very often in the report – getting leaders who have come up through the ranks of pharma on a share-of-voice model and starting to say to them ‘We really need to step away from that which made you successful.’ That’s not easy for anybody – to turn their back on what made them a success.”
Cross-functional buy-in is also vital. The more successful companies have been able to implement an account management approach across the organization rather than KAM just sitting in the sales function – market access, field sales and medical, plus marketing and the back-office functions are all involved in the KAM approach.
Important culture changes include the need for an understanding that senior managers need to release power from the center. “The center has to set the business objectives and the goals, but you then have to relinquish some of that command and control from the center down to the people in the accounts – actually in the field – to take those big business objectives and say ‘So, what does that mean for me and how can I achieve them locally’, and understand that that’s going to be different from one area to another.
“Again, that’s not easy for companies that have made their bread and butter on the share-of-voice model where you’ve got a target list of customers and ‘we’d like you to see them four times in the next six months; and, by the way, we’ll count how many times you’ve done it’.” The difference is huge – it’s the difference between empowering good people and being totally process driven. “That can be scary because, if it doesn’t work, the general manager is the one who’s going to have the difficult conversation.”
So, ultimately what makes a good KAM? Parkinson agrees that the roles of general manager/country manager and KAM are in many ways parallel, and converging.
“Increasingly what companies need to be looking for are people who have that sort of skill set. Actually, it’s not just about sales. You need to be able to do the odd sell, here and there, but that isn’t the core of what you’re looking for. What you’re looking for is somebody who, in essence, can run their own business because that’s really what you’re going to be asking them to do.”
The difference is between being reactive and capturing existing opportunities or being more proactive and generating the environment for growth, he concludes.
Key Customer Engagement Report – Towards Key Account Management in Pharma is published by eyeforpharma. Author Martin Parkinson is a specialist in key account management, healthcare marketing and go-to-market model design in the pharmaceutical and life sciences industries within the Global Life Sciences practice at PA Consulting Group. Co-author and editor Magnus Franzen is Head Analyst at eyeforpharma.