Pharmaceutical companies would improve sales revenue by investing in commercial operations that promote business innovation, employee engagement, organization alignment, and ensure a reasonable ratio between district sales managers and frontline sales representatives, according to Fox School of Business research.
The study was commissioned by TGaS Advisors, a benchmarking and advisory services firm, and division of KnowledgePoint360®, a global leader in communications, information and workflow services to healthcare professionals and the pharmaceutical and biotechnology industries.
“We focused on factors likely to impact pharmaceutical sales because data for this area are more robust, but the value of investments in sales operations should be read as a proxy for a broad range of commercial operation functions,” said George Chressanthis, the professor of healthcare management and marketing at the Fox School of Business who led the study team with Eric Eisenstein, assistant professor of marketing, and Fox PhD student Patrick Barbro.
According to Chressanthis, this is the first such independent research study on the effects of qualitative versus quantitative measures of commercial operation functions on business performance. Internally reported data from 26 pharmaceutical companies were analyzed for the period 2005-2011 and was complemented with qualitative survey data on commercial operations’ cultural attributes assessed by strategic account executives at TGaS Advisors.
The research team was given complete access to their database, with all analyses, findings, and recommendations independently developed of TGaS Advisors. All company specific data elements and names in the research were kept confidential, in keeping with contractual obligations, but did not affect the course the analysis.
The research showed that three factors within a company’s commercial operations organization are particularly important in determining U.S. business performance:
- Commercial operations’ cultural attributes, specifically innovativeness and responsiveness, which drive employee engagement and organizational alignment, are critical. These attributes are most powerful in affecting sales when working synergistically and in concert with quantitative investments in commercial operations support.
- Company scale and spending to support sales professionals that allow for more products to sell and leverage specialized commercial operations functional support for sales representatives to be more effective in their role.
- The number of sales representatives whom district sales managers supervise has a direct bearing on their ability to provide necessary levels of sales force effectiveness activities such as coaching, mentoring, on-the-job training, and managerial support to representatives, which in turn has a quantifiable impact on business performance.
The findings suggest that executives can significantly improve commercial performance by investing resources to:
- Create stronger alignment between functions and foster a culture of commercial innovation, organizational alignment, agility, and urgency. Quantitative investments in commercial operations will yield sub-optimal returns without the right structure of cultural attributes to support these business activities.
- Support improvements in sales professionals (i.e., through information, systems, business processes, training, etc.).
- Ensure an optimal number of sales representatives reporting to each first-line sales manager.
The Fox School research team has presented study findings at the following conferences: Pharmaceutical Management Science Association Annual Conference in May 2013 (Bonita Springs, Fla.), International Health Economics Association 9th World Congress in July 2013 (Sydney, Australia), and the American Marketing Association Summer Marketing Educators’ Conference in August 2013 (Boston).
Further insights from the study can be found by reading, “What Aspects of Commercial Operations Impact Pharmaceutical Company Business Performance?” and TGaS Advisors’ “Reflections on a Research Study Conducted by the Temple University Fox School of Business,” both available at www.tgas.com.
Over the past 20+ years, drug productivity from R&D pharmaceutical pipelines has been on the decline. Spending on R&D by the pharmaceutical industry has been on the decline since 2008 though biotech has increased to make up for this decline. The US-based pharmaceutical industry is shedding a significant number of well-paying jobs, with many talented people leaving the industry altogether. Furthermore, U.S. public health policy has been increasingly hostile against the industry as seen in proposed and enacted legislation. Almost 85% of dispensed prescriptions in the U.S. are now generics, with public policy and managed care plans aggressively pushing generic drugs. Drug shortages are being increasingly faced by patients with life-threatening conditions, reaching an alarming level never before seen by hospitals and physicians. As 75% of the world’s growth in the global pharmaceutical market is happening outside the U.S. and other developed markets placing the U.S. industry at risk. This module will report on current industry trends and propose how this vital industry to our national well-being will address these trends at perhaps its most critical juncture in history.
After years of reducing their contact with pharmaceutical sales representatives, physicians now risk an unintended consequence: Doctors who rarely meet with pharmaceutical sales representatives — or who do not meet with them — are much slower to drop medicines with the Food and Drug Administration’s “black box” warnings and to adopt first-in-class therapies.
According to a study published May 21 in The Journal of Clinical Hypertension, doctors whose access to pharmaceutical sales representatives is limited can take more than four times longer to change prescriptions based on new information than their peers who have more frequent contact. This longer response time holds true whether the physicians are responding to “positive news” related to an innovative therapy or “negative news” related to a newly discovered medicine risk.
George Chressanthis, professor of healthcare management and marketing and acting director for the Center for Healthcare Research and Management at Temple University’s Fox School of Business, led the study in collaboration with ZS Associates, a global sales and marketing consulting firm with a very deep presence in the health care industry.
“This study analyzed for the first time — and on a large scale — what happens to physicians’ prescription decisions when you decrease the access that pharmaceutical sales reps have to doctors,” Chressanthis said. “We saw that increasing access restrictions affect physician decision-making in ways not anticipated by those at health care systems or large group practices who created these policies.”
Chressanthis, his research team and ZS consultants began to measure the behavior of primary care physicians and specialists in 2008 when Chressanthis was at AstraZeneca
Pharmaceuticals LP. They drew from ZS’ annual AccessMonitor™ report, which since 2006 has tracked how frequently 300,000 physicians and other prescribers meet with pharmaceutical sales reps. According to AccessMonitor™, the number of doctors willing to see reps has declined about 20 percent since 2008. In 2010, about 11 percent of American physicians had “severe” or “no-see” restrictions on rep access, while 34 percent had “some” restrictions.
The study measured prescription activity and behavior by primary care physicians and specialists from 2006-2008 as it related to the following three major product events:
1) The October 2006 launch of a first-in-class drug to treat Type 2 diabetes (sitagliptin) (physician sample size: 65,088);
2) the August 2007 issue of a black box warning (i.e., the FDA’s most serious medication warning) for a drug (rosiglitazone) used to treat Type 2 diabetes (physician sample size: 58,647); and,
3) the January 2008 release of a negative outcome associated with a therapy that combined a cholesterol-lowering drug (simvastatin) and another medicine (ezetimbe) to treat dyslipidemia (physician sample size: 72,114).
In the case of sitagliptin, physicians with a “very low” level of sales rep access took up to 4.6 times longer to introduce the new drug to patients than physicians who employed a “medium” level of access. For the black box warning, physicians with “very low” access were up to four times slower to reduce their use of this treatment than physicians with “low” access. In the clinical trial involving the negative outcomes of a lipid therapy prescription, physicians who limited sales rep access showed “significantly less” response in changing their patients’ prescriptions than did physicians in less restrictive offices.
ZS managing principal Pratap Khedkar, co-author of the study, said the research demonstrated that most physicians should seek to balance their information sources.
“Though health care professionals work hard to minimize distractions and maximize the time they spend with patients, it’s clear that sales rep access restrictions imposed by well-meaning physicians and group practice leaders can result in serious information gaps,” Khedkar said. “Even though pharmaceutical sales representatives are not the only source of information, they do help physicians stay current on therapy developments. These findings should be carefully considered by those who set policy — whether it’s at the physician group practice level or on the national stage.”
The study also showed primary care physicians rely more heavily on sales reps for drug information than do specialists. “When primary care physicians reduce or eliminate contact with these reps, it impairs their ability to stay current and affects their prescription behavior,” Khedkar said. “Because specialists concentrate in a narrow field, they can stay current by other means, including conferences, online forums, podcasts and academic journals. Thus, the updates they receive from reps have less impact on their prescribing abilities.”
Chressanthis provides these final notes about the importance of this study. “Our study affirms simple intuition that when physicians have to make decisions involving complex issues with less than complete information available to them, and where the consequence of a wrong decision is significant as seen often in healthcare, unintended consequences are likely to appear,” he said. “Policies that promote physician ignorance of new medical information resulting from access limits runs counter to protecting patient health.”
Beside Chressanthis and Khedkar, the report authors also include Nitin Jain, ZS principal; Prashant Poddar, ZS consultant; and Michael Seiders, formerly Director of Strategic Public Policy Planning at AstraZeneca. Lead author Chressanthis was employed at AstraZeneca from 2000-2009. He still retains stock grants in AstraZeneca. The research was funded by AstraZeneca Pharmaceuticals LP.
The full article is available here