Redefining pharma sales: Staying competitive in an evolving landscape

Redefining pharma sales: Staying competitive in an evolving landscapeThe Patient Protection and Affordable Care Act (ACA) has produced dramatic changes in the U.S. health care system over the past five years. Among other things, it has brought insurance coverage to an estimated 20 million Americans. It has also instilled greater competition among health plans and has encouraged consumers to become more involved in health care decision-making.1

Other less-well-known provisions of the law are starting to alter the way health care services are delivered, most significantly by shifting providers’ attention away from the traditional fee-for-service model — in which payment depends on the volume of services delivered — and toward payment models that promote value as demonstrated by achieving better health outcomes at lower costs.

Taken together, the ACA reforms are redefining relationships among health care payers, providers and consumers in many parts of the country. To flourish in this evolving landscape, pharmaceutical companies will need to be aware of how these changes are playing out in each of their markets — and use that information to develop customized sales strategies that lead to lasting customer relationships.

What’s driving change
Trends related to ACA provisions, in combination with larger, ongoing changes across the public and private sectors, are transforming the health care landscape. All have important implications for the pharmaceutical industry because they affect how health care providers make pharmaceutical purchasing decisions. Chief among these are:

  • The expanding use of payor contracts that hold providers accountable for the health outcomes and total costs of care for designated patients. So-called accountable care organization contracts and other gain-sharing approaches encourage providers to have “skin in the game” by enabling them to earn money — or lose it — depending on whether they hit payor-set cost and quality targets. This has led to a growing emphasis on population health management, which entails monitoring and improving the health of patient populations and targeting efforts at certain subgroups, such as diabetics or cancer patients, who tend to require specialized care.

    To maintain or increase sales, it’s more important than ever for pharmaceutical companies to make the case that their drugs and treatment modalities can improve clinical outcomes in cost-effective ways. Though this creates more work for drug companies, the payoff may be considerable when one considers that as part of a population health approach, providers will be making greater efforts to proactively reach out to patients, manage their conditions, and encourage their adherence to recommended drug regimens and other treatments. Sales could increase dramatically if yours are the products they recommend.

  • Greater focus on the comparative effectiveness of different medications and treatments. The health reform law allocates $10 billion in funding for the creation of the Patient-Centered Outcomes Research Institute (PCORI), which supports research into the impact of specific treatments on patients’ quality of life, daily functioning and long term survival. Though PCORI’s work is in its early days, the findings of this research may eventually have a significant influence on the drug purchasing decisions of both clinicians and consumers.

  • Industry-wide consolidation. Independent physician practices and community hospitals are increasingly joining large health systems, insurers are acquiring provider groups, and provider organizations are launching their own insurance products. This increase in vertical and horizontal integration means that many more physicians are working within health systems and payor-provider organizations that may mandate or encourage the use of drug formularies, clinical pathways or other protocols to guide treatment and prescribing decisions. Individual physicians working in such organizations are likely to have much less ability to influence pharmaceutical purchasing decisions.

    Integrated delivery systems that bring hospitals together with physicians and — in some cases, long-term care providers — will only grow bigger with consolidation. By some estimates, 100 to 200 large regional systems will dominate the landscape.4 This means that, going forward, pharmaceutical companies will need to build relationships with these systems, targeting their chief medical officers and other physician executives with purchasing power, as well as other key decision-makers, aiming to cultivate long-term relationships with them as part of their strategic selling approach. Pharmaceutical companies may also need to adjust to having as little as one contact per year.

  • Greater consumer involvement. More and more consumers are participating in the health care decision-making process. In addition, a greater proportion of the marketplace is comparing insurance options in the exchanges and joining wellness or other health-related programs led by insurers or providers. Many consumers are also purchasing health insurance products with high deductibles and/or high co-payments that make them very conscious of costs and more likely to select generic or other medications given preferential pricing under their health plans.

Accountable care organizations
•  There are more than 600 accountable care organizations (ACOs) across the country, founded on contracts with Medicare, Medicaid and private insurers.2
•  Under ACO contracts, hospitals, physician groups and other providers agree to work together to take responsibility for the total costs of care for a designated group of patients.3
•  In return, the providers take a share of any savings generated. To create savings, providers often focus on preventive care or better management of chronic conditions and look for opportunities to trim spending.
Opportunities at the regional level
One of the challenges for pharmaceutical companies attempting to adapt is that the changes are not happening to the same extent or at the same pace in all regions. Relationships among payors and providers in each market are different and can vary even within the same state. For example, in Cleveland, nearly all physicians are employed by health systems, with few independent practitioners remaining. But head southwest to Cincinnati, and you'll find that many doctors continue to work in private practice. In Southern California, most primary care physicians are organized into large independent physician associations, which tend to hold the most clout in the marketplace. As a result of such regional differences, pharma companies are encountering uniquely defined pharmaceutical sales channels in each potential market.

In those markets experiencing a high degree of consolidation, there will be greater incentives for providers and payors to bring down pharmaceutical spending by securing discounts or using formularies to encourage use of some drugs over others in a particular class. Geography matters, too. Large integrated delivery systems may be able to dominate in regions where populations live in well-defined geographic areas, but may have less control over health care planning for populations that sprawl over large areas.

There is also variation in the extent to which the new payment models and other ACA reforms have been adopted. For example, just 28 states plus Washington, D.C., have opted to expand their Medicaid programs, with expansion under consideration in others.5 In states that have expanded their programs, Medicaid managed care plans are putting pressure on providers to control costs, which are likely to rise considerably as new enrollees — many of whom may have previously lacked access to care — join the program.

In regions where ACOs are gaining a foothold, providers and payors have already begun to pay much more attention to managing chronic conditions and controlling costs. This is likely to lead to more standardization in the way providers deliver care. As health systems or ACOs start to evaluate how doctors are treating patient populations, they are going to push for convergence on leading practices based on evidence. Take, for example, the introduction of clinical pathways for cancer patients that define specific courses of treatment and use of chemotherapy regimens.

Developing a sales strategy that works
It’s clear that the days of pharmaceutical sales forces influencing prescribing habits simply by canvassing a region and building relationships with individual physicians may be nearing an end, at least in some markets.

Today’s pharmaceutical companies have to figure out the locus of decision-making. Ultimately, it might be better to have fewer experienced sales reps and more doctors on staff to target key influencers and buyers who are making the decisions. It may be possible, for example, to tie drug discounting arrangements to having a once-a-year meeting with committees of physicians setting clinical policies in health care systems.

To succeed in the emerging marketplace, drug companies must also consider other ways to add value. This might include finding ways to help providers proactively manage care for subgroups of patients and control costs or demonstrate how drugs will improve outcomes and lower costs over the long term. It may also be possible to strengthen customer relationships by offering clients data, tools and insights to augment their care management efforts and encourage patients to “own their disease.” Some of these may be wearable sensors or remote monitoring devices that relay important biometric measures to patients, caregivers and doctors so they can monitor patients after leaving the hospital and see whether new medications are helping or being forgotten. Other pharmaceutical companies are developing apps and social media tools to help more tech-savvy patients track their health conditions, detect patterns, and see the connections between behaviors and their health consequences.

One of the benefits of such devices and tools is that they generate actionable information for providers and pharmaceutical companies that are increasingly partnering to derive insights from anonymous or de-identified patient data — insights that can give companies a competitive edge by suggesting fertile areas for research.

Pharmaceutical companies can also add value by using their own data assets to mine for trends or patterns in population health that may be of interest to their clients. As an example, Pfizer used a large database of de-identified medical records and medical literature to create a tool to help clinicians identify patients who may be suffering from fibromyalgia, a chronic condition that causes pain, fatigue and cognitive problems but can be difficult to diagnose.6

Drug companies can also raise their standing with payors and providers by supplying tools that help them avoid common complications of care, such as the occurrence of sepsis. Drug companies that sell antibiotics for sepsis, which is very costly to treat and dangerous for patients, can add value by offering an algorithm to help providers identify patients who may be at risk. Pharmaceutical companies are also likely to see interest in drugs and treatments that help hospitals prevent certain conditions, because Medicare is now penalizing hospitals for avoidable adverse events occurring during hospital stays, such as pressure ulcers, pulmonary embolisms and certain types of health care-associated conditions.

Developing a population health market framework
Pharmaceutical companies can begin to tailor their sales approach to individual markets by assessing the relative importance of the following key factors:

  • The impact of ACA reforms on local rates of health insurance coverage and the extent to which managed care techniques are used locally to control costs
  • The use of health information exchanges, which enable providers to electronically exchange medical information
  • Population demographics and geographic density, and their influence on the market power of payors and providers
  • Current rates of utilization of health care services and opportunities for better care management to reduce hospital and emergency department use
  • The extent to which small, medium and large employers in the area are engaged in cost containment efforts
  • The market share of national retail pharmacy chains, and prevailing practices around pharmacy benefit design
  • The degree to which payors have introduced narrow provider networks, which drive down health care spending
  • The degree of consolidation among provider organizations, the financial health of providers, whether there is excess capacity that suggests more consolidation may be likely, and the geographic locations of health care settings
  • The extent to which providers are willing to accept risk for managing the quality and cost of caring for a designated population, and the maturity of those efforts
  • The relative clout of payors, health systems and physician groups in each regional market — and the key decision-makers within each of these groups

While this analysis will reveal that many markets are in flux, it is important to note that all markets are moving toward a value-based, population health approach, with some reaching it sooner than others.

To flourish in this new paradigm, pharmaceutical companies will need to be prepared to make a convincing case that their products can be part of the effort to bring down costs or achieve better outcomes.

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1 Blumenthal, D., and Collins, S. R. “Health Care Coverage Under the Affordable Care Act — A Progress Report,” The New England Journal of Medicine, published online July 2, 2014.
2 Tu, Tianna.
Bridging the Gap: Pharmacists in Accountable Care Organizations,” Leavitt Partners, June 24, 2014 and
3 ACO Shared Savings Program Quality Measures
4 Morrison, I. “The Future of Academic Medical Centers,” H&HN Daily, published Nov. 05, 2013.

5 The Commonwealth Fund, Medicaid Expansion Map, accessed 3/3/2015. See The Commonwealth Fund for details.
6 Germano, Geno, and Herper, Matthew. How Pfizer is using big data to power patient care, Forbes, Feb. 17, 2015. See for details.

Lisa Walkush
Principal, Advisory Services
National Leader, Life Sciences
T +1 215 814 4000

Stephen Thome
Senior Manager
Health Care Advisory Services
T +1 216 858 3553