Governmental authorities increasingly focused on economics, growing competition by generics, the implementation of rebate contracts, networks of doctors and an increasing deficits in public health care budgets: these are only a few of the changes that are forcing the pharma industry to develop new strategies not only in research & development but also for sales & marketing. In order for today’s pharmaceutical companies to survive they have to break with existing mindsets and habits and develop and implement innovative strategies.
Evolution of the company culture
The pharmaceutical industries developed company cultures over time that helped them succeed in the old environment but that hinder change today. Up to the 1980s, pharma culture was formed by visionary and innovative researchers. Then commercial pressures began to dominate the business. The focus on key performance indicators, processes, sales figures and ROI targets created a highly successful industry that offered security, stability, multiple privileges and good financial rewards. And the company culture was marked by stability, top-down organizations and long-term planning.
Today these strengths of yesterday are precisely the things that get in the way of transformation.
The success, even survival, of the pharmaceutical industry will not only depend on a visionary research strategy, or on the most efficient organization and the best marketing. It will require the ability to adapt the company culture, facilitate innovation and ensure the company has the required talent and competencies.
The characteristics of the new culture don’t have much to do with stability and security. The new culture needs to focus on leadership and workforce engagement, effective cooperation within a more complex matrix organization, effective communication and open discussions and acceptance of new ideas. The new culture has to provide transparency, reduce anxiety while not offering security, and build on values and behaviors that will renew employee identification with the organization. In times of talent shortage and major change adapting the corporate culture to become engaging and enabling will be key.
What’s one day of life worth?
Several governmental reforms have occurred during the past years because of the increasing financial constraints of health care systems.. Institutes such as the IQWiG in Germany or the NICE in the UK are pushing the pharma-economic dimension more and more into the spotlight. Drugs are not only evaluated on the basis of their therapeutic effects but also against concrete cost-benefit analyses. But this is difficult to quantify. What is a drug that allows a patient to swallow only one pill per day instead of three worth? How much additional cost is acceptable to provide an easy-to-handle insulin injection? How much does society value a 1% increase of lifespan probability? What kinds of treatments is our society ready to finance? This moral-economic discussion has just started. Limitations in the access to drugs and treatments are not yet being discussed and politicians are still trying to avoid this unpopular topic by focusing the discussion on short term budget solutions. The early generification of block busters, limited reimbursement of drugs, a stronger pressure on prices and rebates, changes in the legislation for the substitution of original drugs by generica and last but not least the implementation of rebate and discount contracts are just the first consequences of this controversy. But in the end, all partners of the heath-care system will need to find solutions that go beyond the purely financial aspects of the issue and correspond to the real challenges of an inverted age pyramid.
In the short term how pharma companies are able to respond to these changes can be achieved by cost optimization, acquisitions of components in Phase III and securing company-specific pipelines. But even in the mid-term, strategic and organizational changes will be required and these will only be implemented in a sustainable way if the company culture is renewed.
From local markets towards local-global optimization
Up to now the western developed nations have represented the largest markets. In the future, emerging markets such as China, Brazil, India, Mexico, Turkey and Russia offer enormous potential. By 2020, these countries will represent one fifth of the worldwide pharma turnover (Source: PricewaterhouseCoopers, 2007). In addition, more and more research will be localized in Asia; national authorities will cooperate internationally; a pan-European authority will most likely be created and decision-makers in the health care system will consolidate cost-benefit data from various countries. The pharmaceutical industry will need strategies that allow them to draw the benefits of global opportunities while respecting local conditions if they want to get the most out of this change and manage the dilemma of increasingly globalized health care policies and economics with increasingly localized markets and opportunities.
From selling product to providing health solutions
New ideas are also required in the area of sales and marketing. Sooner or later direct-marketing of products to doctors will no longer allow companies to reach their ROI goals. At the same time, there will be broad opportunities for offering new and innovative services, ranging from information for doctors on new rebate contracts to consultation services for chronic diseases in cooperation with health insurers. So this will require a fundamental change in the existing organization and activity of field forces. A portion of these can evolve towards offering services that include holistic and innovative product packages that exceed the single drug and for which patients will be willing to pay additional insurance premiums. The entire area of “Health and Wellness” as opposed to “Illness” and the research on prevention of disease provide new business opportunities and markets.
From medical representatives towards key-accounts
Organizational changes will be necessary to implement these new strategies. It will be less and less efficient to market drugs that are linked to rebate contracts since doctors will no longer have the power to decide on the product. So the client will change. No longer selling mainly to doctors, the pharma industry will need to learn how to deal with purchasing departments, complicated tender processes and negotiators of health insurances. New competencies include specialized Key-Account-Management, a strong legal department, trained negotiators and targeted lobbying with national and international authorities. This means an inevitable reduction and re-qualification of today’s field forces and in parallel the strengthening of specialists and Key-Account Managers.
From Information towards networked communication
The management of information also needs to be fundamentally reviewed. Up to now it has been important to provide doctors with relevant study results in a timely and clear way. In the future, complex communication networks will also require pharma representatives to provide business intelligence on local doctor networks and key accounts. Just observing the power of patient platforms in the US gives us a first glance at how important the interaction with the external stakeholders is becoming – far beyond the purely marketing aspects.
The fear of waking up
It is hard to predict where all these changes will lead but we have seen that each one of them has consequences for the organization and working methods of big pharma companies. And yet, they continue to interpret the changing, new environment with stable, old patterns and habits. This inevitably leads them to reproduce “tried and true” solutions and rather than moving towards evolution and successful adaptation. Change is difficult to embed and only few serious alternatives are being discussed. Pharma companies are plagued by the obvious consequences of such transformation: insecurity, disorientation, low motivation, restricted communications, reduced identification and engagement and last but not least the loss of talents, which threatens the future development of the firms even more.
Clarity of purpose and clear leadership are essential to facing today’s challenges. And at the end of the day, people will be the most critical resource to make it happen!