PHARMA'S NEW ECOSYSTEM

Key account management: Dual sales force or sales force duel?

By Evan Deal

Pharmaceuticals

Historically speaking, the pharmaceutical industry has not been known as a beacon of change or a champion of adaptation. For decades, pharma’s sales model remained the same: A rep visits a physician and speaks about the numerous benefits his company’s drug has to offer. That company’s competitors would also send reps to the same physician to proclaim the advantages of their companies’ products and explain why their drugs are best. While this system served its purpose admirably in past years, it is entirely inadequate to sell drugs in the modern pharma landscape.

Since the advent of healthcare reform, pharma companies have adopted new forms of selling, most notably key account management (KAM), in order to progress in the new pharmaceutical ecosystem. To inform decision-making on implementation of this new sales model, pharma companies have more data available than ever before. However, despite the plentiful opportunities for a data-backed, KAM-infused sales force, pharmaceutical manufacturers are yet to develop a comprehensive synergistic model that adopts the best parts of both account- and physician-based selling.

The Current State of Pharma

To properly comprehend the necessity of a dual sales force model, one must first understand the current pharmaceutical environment. Healthcare reform is based on two main tenets: reducing the cost of healthcare and increasing the quality of care for the patient. To comply with these objectives, healthcare providers (such as hospitals and physician practices) have become increasingly aligned with large health systems. These organizations, called integrated delivery networks (IDNs), provide holistic care and are composed of multiple hospitals, physician group practices and specialty centers. Recent years have witnessed an increasing amount of consolidation within the healthcare provider field, making IDNs a major focus for pharmaceutical manufacturers.

However, providers outside of IDNs are not without other means of alliance. For example, organizations such as Hospital Corporation of America – which is made up of only hospitals and surgical centers – maintain one type of healthcare site (in this case, hospitals). Groups of physicians have also collectivized, forming organizations known as Independent Physician Associations (IPAs), which allow MDs to come together and jointly purchase pharmaceuticals to obtain a better price.

The Introduction of KAM

In response to this mass concentration of healthcare providers, pharmaceutical companies have begun adoption of key account management sales practices over the course of the past several years. The actual implementation of KAM varies greatly by industry, but in general, the key account model focuses on identifying thought leaders and power players within an industry and developing specific strategies to target their organizations. In pharma, this sales approach well suits the consolidation of healthcare providers. In theory, with less individual entities to focus on, the pharmaceutical manufacturer should be able to focus sales efforts on the large healthcare networks at an organizational level and bypass the need to visit all the various hospitals and physicians that compose an entity. In reality, however, the situation is much more complex.

Pharmaceuticals represent one of the most heavily regulated industries in all of business. Pharma messaging strategies, rep interactions with doctors and all manner of media marketing have strict guidelines that must be followed. In the case of KAM, pharmaceutical companies are not allowed under law to promote their products at the administrative level within healthcare organizations. Thus, despite the buying power shifting within healthcare providers toward the corporate level, pharmaceutical manufacturers can only directly promote their products to organizations through the traditional rep-to-doctor method. Herein lies the problem facing pharma companies: how to construct a sales model that incorporates both the account targeting of KAM and the detailed rep interactions of the traditional model.

The Dual Sales Force Solution

This quandary has been answered by pharma companies with the implementation of two separate sales forces: the new account-focused KAM team and the continuance of the physician-based sales force. In this approach, the account managers focus on growing the market for the company’s basket of products while the reps continue to derive sales by individually meeting MDs to send samples and discuss drug benefits. In its present configuration, this sales model is not adequate to meet the needs of the current healthcare ecosystem. While the concept of a dual sales force model is definitely workable, pharma’s approach is lacking in several measures, the greatest of which being pharma’s incorrect definition of key account management.

KAM has been a buzzword in the industry for years, and thus account-based selling has become a somewhat mandated feature in pharma sales models. The problem with forcing usage of a broad concept such as KAM is that, if not implemented correctly, it will likely produce more harm than benefit. Key account management is a wholly engrossing, organization-defining concept that must be fully integrated into a sales model to truly produce favorable results. KAM is not a patch or a quick fix. It is not a brief addition, experiment or one-size-fits-all solution.

Proper KAM implementation takes years and a full revision of the sales model; however, KAM’s introduction into the pharma industry has not been treated this way. Rather, KAM has merely served as an addition on top of the sales force that already existed. Some pharma companies have even just relabeled a subset of their reps as “key account managers” and have continued on as before. To reiterate once more, KAM will not yield benefits under partial or incorrect implementation; rather, it must be woven into the very fabric of a complete combined sales force.

So, if adding KAM elements to the current sales model is not the correct approach, what is? Maintaining dual sales forces is, in itself, not wrong. The error is in viewing them as separate sales forces instead of two teams working together to achieve the same goal. This synchronization is the key to implementing KAM into the pharmaceutical industry. Synchronization does not mean that account-based sales managers and physician-based reps should both be part of the same direct reporting structure or that the KAM team should manage traditional reps. The correct method is to leverage the strengths from each approach and develop strategies within both sales teams that include elements from their counterparts.

Advantages of a Dual Sales Force

One inherent advantage of maintaining dual sales forces comes in the ability to reach multiple stakeholders within an organization. While traditional reps lay the groundwork with physicians in an account, the key account manager can talk to upper-level decision-makers in the corporate organization. This approach provides some measure of security for a pharmaceutical company’s relationship with the healthcare provider. By maintaining multiple touch points within an organization, the pharmaceutical company has a greater opportunity to make certain its messaging resonates with the healthcare provider. Additionally, some healthcare networks resist allowing sales reps to visit MDs. In such instances, KAM representatives play an even greater role in guaranteeing that the manufacturer’s message is getting through to the provider.

Dual sales forces also provide the opportunity to create multiple messaging strategies. While the KAM sales team cannot directly promote products, they can augment the brand-centric message that is conveyed by sales reps. Say, for example, that a pharmaceutical company has a major cardiac drug. Sales reps for that company would be showcasing the laurels of that drug to physicians, explaining its cost-effectiveness and exemplary clinical trial results. The KAM team would then supplement this message by driving the overall healthcare network toward a focus on cardiac health, thereby increasing the overall demand for the drug. In other words, reps can continue to focus on share among competitors, while the KAMs can grow the market as a whole.

In executing these tactics, the account- and physician-based sales forces can learn from each other and adopt practices to align with the modern healthcare ecosystem. Currently, healthcare sales are not solely account-based, nor are they only derived from physician visits. With this in mind, sales reps should embrace a new mindset when detailing physicians. Reps must understand that physicians in IDNs and other health networks are part of a massive interconnected system, in which the drug-purchasing power may not reside with the doctor whom they are meeting. Similarly, KAM executives must be cognizant that their current messaging privileges are quite limited, and that the bulk of product messaging rests on the shoulders of their physician-based counterparts. With these constraints in mind, pharma companies can more precisely define the roles and responsibilities of their sales forces.

Strategy Over Tactics

The advantages of a dual model are best implemented in a strategic, targeted manner. Creating a geography in which a key account manager is expected to cover every healthcare provider is an incorrect approach and a critical mistake if implemented. This method takes the “key” out of “key account management,” which misses the whole point. Account-based selling without proper targeting provides an ineffectual model.

When designing an effective accounts sales force, the prime mandate is to select only healthcare networks where KAM will make a noticeable difference. KAMs should not be created solely for the sake of having an account sales force. Pharmaceutical companies should instead identify those accounts that are of critical importance to their sales and send their KAM team to those locations. Above all, KAM is about building relationships, and if a pharma company overburdens their account managers with an exorbitant number of accounts to visit, the KAM will not be able to provide sufficient effort to the accounts that matter most. To put it succinctly, quality trumps quantity every time in key account management.

Similarly, the dual sales force model must be viewed as a long-term evolution of the pharmaceutical sales force. As stated above, KAM implementation will fail if it is viewed as an addendum or temporary measure. Therefore, developing an account team and strategy should not be a hasty process. True KAM synchronization requires deep analysis in identifying not only the top accounts for a pharmaceutical company but also who holds the purchasing power within those organizations. Analytics here play a key role in the development and implementation of KAM. Companies must study health systems and mine data to determine what characteristics drive sales in their top accounts. It is insufficient to merely list top accounts by sales; rather, the pharmaceutical manufacturer must also derive insights from industry data to identify why its sales are greater at its top accounts.

With the top accounts, buying power and account characteristics identified, pharma companies can then segment those accounts based on the relative profitability of introducing KAM at those locations. Once all of the economically viable accounts have been recognized, the manufacturer can then go on to decide how many key account managers they will need to build effective relationships with the healthcare networks. Following that, key account managers must be put in place and trained. Bearing in mind that the best sales reps do not necessarily make effective KAMs, oftentimes outside hiring must be enacted. Taking all of this analyzing, planning, hiring and training into consideration, a company should plan on KAM implementation taking months and even years.

In this age of sweeping healthcare reform, the pharma landscape has drastically changed. Account-based selling is no longer just a buzzword of future potential but is instead an imperative to survive in the new pharmaceutical ecosystem. The actual form of KAM implementation will vary drastically depending on the composition of the company and the type of drugs sold.

Despite this relative lack of clarity on the specific form of KAM inclusion, several rules hold true across organizations. KAM takes times to develop, so plan extensively and think through the ramifications of developing a second sales force. Remember that successful KAM introduction yields the benefits of reaching a diverse array of stakeholders, delivering complementary messaging strategies and developing synergies between two coalescing sales forces. KAM is a vital part of future pharmaceutical sales, but its success will depend primarily on the decisions of the companies that elect to implement it.

Evan Deal (Evan.Deal@mu-sigma.com) is an analyst at Mu Sigma, where he helps Fortune 500 customers in the pharmaceutical industry make informed, data-driven decisions.