Challenges in the Shift to Payer Marketing and Engagement
Pharma companies are moving away from prescriber marketing towards customer-centric discussions with payers and providers. In this article, we outline some of the major obstacles that stand in the way of this adjustment.
The cost of employing a sales force to distribute clinical data, marketing information and drug samples to very large numbers of physicians has become unsustainable. Building and maintaining effective working relationships with physicians has been estimated to cost tens of thousands of dollars per physician in the U.S.(1).
This type of prescriber marketing strategy is additionally under fire from legislative changes placing greater constraints on the kinds of activity that sales and marketing teams can engage in. From August 2013, the Sunshine Act in the U.S. requires that records of physician-industry interactions be kept and made publicly available. And a recent report shows that pharma companies do not expect these changes to be isolated; 71% of respondents are developing similar regional standards across countries in anticipation of greater transparency requirements in Europe.
The Affordable Care Act and global economic turmoil following the 2008 financial crisis have further amplified already substantial budgetary pressures. Increasingly, economic evidence - based on for example a cost-benefit analysis - is required as part of pricing discussions. This is happening at a time when many brands are coming off-patent, a change which has been described as “an opportunity for payers and patients to accelerate generic penetration, reduce price benchmarks and insist on value for money.”(2)
Legislative and structural changes in Europe have also upset market dynamics. The UK and Germany are just two of the major European markets to adopt value-based pricing. The impact of legislation at the EU level in recent years has been extensive; regulators have gained greater discretion due to more flexible standards governing drug approvals. A new and fragmented landscape of decision makers has emerged, creating a market access environment in which pharma companies may need to negotiate with as many as nine different levels of stakeholders to complete basic purchasing decision.
Challenges of key account management
The traditional focus on providing drug samples and informational content to a large number of clinicians is being replaced by efforts to encourage cross-functional engagement with a limited number of senior-level decision makers. Key account management has long been used in other industries, and increasingly is being adopted by the life sciences. We identify three of the central challenges.
Targeting and tailoring
With over 850,000 licensed physicians in the U.S., it’s estimated that pharma companies employ around 120,000 sales representatives to communicate with prescribers about their products. Communications at this level are high in volume and low in complexity, often involving little more than free samples and the distribution of boilerplate marketing materials.
By contrast, payer marketing involves developing value propositions that are tailored to each audience. Understanding an organization’s needs and preparing an appropriate value dossier takes time. With this kind of customer-centric approach, the decision-making process plays out over a timescale of months or even years, rather than weeks, and expectations must be shifted accordingly.
Targeting high-level payers and providers is a customer-intensive process. It means identifying the right contacts and preparing cross-functional teams to communicate with different levels of a target organization. The cost per visit is considerably higher, but the impact of decision making at this level reaches across an organization. Companies must be prepared to adjust their horizons and invest more in the medium-term for an effective return in future years.
Discussions with payers and healthcare providers naturally tend to involve economic arguments, and will involve the presentation of complex health economic data that demonstrate the clinical and economic impact of a new product.
To communicate effectively in this way it’s necessary to ensure that the right human resources are available in-house. Expertise in these areas is costly and it can take time to develop capacity in the right specialisms. Market access and health economic expertise that was previously only essential at head quarters, is now required in each market.
In part, developing expertise may be about training and professional development for existing staff, to ensure that different teams have enough understanding of each others’ capabilities for them to collaborate together effectively. Health economists are capable of producing academically sound studies, but may not understand how to present that data in a way that account managers can use in the field. On the other hand, key account managers may understand the nuances of a product’s commercial landscape, but may need training to gain confidence in the health economic evidence that underlies a value story.
Both of these points feed into a more general observation about how industries react to changing circumstances. In general, the smaller and younger an organization is, the easier it is for it absorb new evidence, reassess strategy and change direction. By contrast, larger companies - and pharmaceutical companies are some of the largest in the world - may suffer from a kind of institutional inertia.
The metaphor that comes most readily to mind is to think of big pharma as supertankers in the ocean: navigational instructions take a long time to be absorbed, and changes in direction do not take place overnight. As ever when it comes to strategic change, companies should be prepared to challenge sacred cows, plan ahead, and prepare key staff for something new.
The largest gathering of European Payers will be taking place later on this year in Germany. To find out more information on how you can work with and market to payers and HTAs from your region visit the Payers Forum Europe official website.
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