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Made to order

Challenging market conditions require that CSOs bring secondary care solutions to the table

Arm holding silver plateThe concept of contract sales grew in an era when the first pharmaceutical blockbusters were coming to market. The environment was such that the more trained reps a company had out there speaking to doctors, the greater its market share. Contract sales organisations (CSOs) offered the perfect mechanism to bolster sales revenue – a flexible, dedicated team of sales professionals focused on a product portfolio that could support in-house resources; increasing exposure when a new product was launched, or sustaining share when a competitor came to market.

But the world of pharma has changed radically. Big primary care blockbuster products are coming off patent, the number of new product launches has fallen and there is increased pressure on pricing and re-imbursement. The NHS has altered its requirements, and the implementation of practice-based commissioning – Primary Care Trusts (PCTs) and Strategic Health Authorities (SHAs) with their own targets – has forced pharma to reconsider its one-size-fits-all model where share of voice was king. Added to this is the general economic downturn, which has seen marketing departments experience significant cutbacks. So just what does this all mean for the future of CSOs?

The economy
As opposed to biotech companies, which have relied heavily on cheap debt and are now struggling to raise cash and fund sales, pharma's position in the current financial crisis is positive. This is because the industry is cash rich and has not undertaken significant borrowing, according to Dr Sandra Reynolds, pharmaceutical strategy senior analyst at Datamonitor.

"Pharma companies will increase outsourcing sales regardless of the credit-crunch," says Dr Reynolds. “In the last two years, firms have either announced or implemented job cuts – of which the hardest hit have been sales and marketing – and increasingly outsourced sales operations to CSOs. This trend is set to intensify, with tightening purse strings across individual in-house departments and the industry in general.”

The sentiment is echoed in a recent study by Beth Rogers, published in the Journal of Medical Marketing, (volume 8, number 1, January 2008), in which the author claims that CSOs still have a number of advantages for pharmaceutical companies large and small, and manage a growing proportion of the sales in the sector. Rogers concludes that while CSOs have a history of providing tactical services, their flexibility and speed can also help clients to achieve strategic change in difficult market conditions.

The benefits of CSOs
Jon Bolter, managing director at Innovex, UK, believes that in these challenging times pharma needs to be able to flex an increasing percentage of its promotional resource. “But why fix an overhead?” he asks. “Why not mitigate potential lack of productivity and return over time by applying an increasing percentage of flex into your overhead?” 

Outsourcing offers pharma the opportunity to convert fixed costs into variable costs, something that sits well with shareholders, says Andy Holgate, business unit director, Ashfield In2Focus. “With growth in Europe limited, companies are seeking better returns from emerging markets and the still attractive US market, so the UK is suffering from a reticence to invest too heavily. The recent PPRS settlement, while arguably better than expected, was still a further unjustified cut. This has led to two key dynamics: a change in the size and shape of sales teams as a result of variable opportunities caused by different approaches in the local health economies, and a 'reverse arms race' where, as competitors take noise out of a therapeutic area, there is licence for all players in that space to reduce their own resource.”

All this uncertainty, says Holgate, reinforces the view that utilising a CSO is potentially the safest way to respond to these dynamics.

“The objective of outsourcing has always been to vary the resource that pharma requires, and that has not changed,” says Nigel Mansford, MD of Pharmexx UK. “There is still a place for the traditional services, especially after recent downsizing, which means some brands in the portfolio will be sub-optimally resourced and only supported by a small number of key account people. Market conditions and expectations now exceed the provision of sales staff only; they call for contract solutions. CSOs must be creative and take a proactive stance, bringing new solutions to the table and driving change.”

Meeting market needs
So what does pharma think?

“There are a number of capabilities that stand out among the most successful contact sales organisations,” says Sue Webb, head of general medicines for Novartis Pharmaceuticals, UK.

“As there are regional variations within the NHS, CSOs should be able to adapt their services to work with different customers in specific regions and territories across the UK. To meet the demands of companies with expanding speciality medicine portfolios, CSOs should offer in-depth knowledge and expertise in secondary care and the configuration of related NHS services. Above all, CSOs must be able to move fast and flex their offering to deliver on sales strategies that evolve just as quickly as the NHS.”

The Association of the British Pharmaceutical Industry (ABPI) believes that CSOs have successfully responded to the changing pharma landscape by recognising the need to diversify their services and support clients who are operating within a changed NHS. “The UK is now a series of regional markets. By responding to this changing marketplace, CSOs can provide a flexible workforce to fit each region. For example, if a medicine fails to receive SMC approval in Scotland, yet gains approval in Wales, using the services of a CSO will ensure that a team of reps can be in the right place at the right time, without the complications caused by relocating an in-house team,” an ABPI spokesperson said.

Delivering RoI
With this greater portion of sales responsibility for CSOs comes even greater pressure to prove a good return on investment (RoI).

“A targeted and flexible approach is required in the new economic world going forward,” says Bolter. “Resources need to be flexed based on demand at the PCT level – both in terms of numbers and competencies and roles as traditional primary care and secondary care representatives metamorphose into one type of key account manager/specialist resource. This is the principle way that a pharma company can maximise the returns on what continues to be its most expensive resource within the promotional mix – the salesforce.”

To meet the changing needs of its clients effectively, Holgate says that CSOs are having more conversations with pharma earlier in their planning cycle and discussing a variety of potential service offerings. “The trend is to engage with us in far more of a partnership mentality, and to seek ideas and suggestions for supporting the brand(s). Historically, CSOs were really only engaged to provide resource in a traditional primary care model. However, these days we're asked whether we can source a variety of different promotional and non-promotional individuals. We are able to provide clients with the facility to pilot new business models, and to reconfigure such models speedily and effectively to take advantage of market opportunities.”

The next wave – home care
Current market opportunities include the potential to address the Department of Health's (DH) call for the delivery of local, bespoke services, ie nurse visits to patient homes. Unable to provide this service itself due to limited budget, the DH has put the ball squarely into pharma's court. “Pharma is already servicing patients to a certain degree,” says Dr Reynolds from Datamonitor. “For example, during the tender process where pharma bids to gain hospital contracts, their offers cover not only their price discount, but also the services they provide such as nurse visits to patients' homes to assist in education regarding the appropriate use of their medication. This strategy is already employed by Janssen-Cilag and Roche in its supply of epoetin alpha (epoetin); a hospital-dispensed biologic.”

Pharma, however, is limited in the service that it can provide to patients directly due to legislative restrictions on direct-to-consumer marketing. The window of opportunity thus exists for CSOs, as third-party vendors, to bridge the gap between what the DH wants and what pharma can provide. Through the provision of supplementary services such as nurse advisors equipped with manufacturer-branded product-support kits, CSOs can provide patient support solutions, dealing with issues that could lead to a physician switching drugs and addressing compliance concerns.

The potential for a win–win solution, where people follow their prescriptions like they are supposed to, and where doctors have more confidence and patients a better experience, provides further justification for pharma to spend money on outsourcing in an increasingly regulated and cost-conscious market.

However, Nigel Mansford cautions CSOs looking to enter the care-at-home arena as stand-alone providers to consider the viability and benefits of doing this carefully. He points out that, while there is a significant business opportunity here for CSOs to maximise on their competency and product knowledge, and align their services with what the DH wants, the provision of nurse advisors is only one element of the home-care equation.

“There are also huge logistics requirements such as dispensing and cold-chain distribution.” He suggests that CSOs moving beyond their traditional brief and adding home-care to their service offering consider partnering with organisations that provide these core competencies. As part of Celesio AG, with its three divisions: Celesio wholesale, Celesio pharmacies (which includes Lloyds Pharmacies in the UK) and Celesio solutions, Mansford believes Pharmexx is well placed to play its part in taking on the challenges of providing such solutions.

Conclusion
Despite the challenging market conditions facing the industry, there is a promising future for CSOs with sufficient secondary care expertise and the flexibility to adapt in line with rapid NHS changes.

It is not a case of the CSO model changing – one game is not replacing another – rather it is a case of the adaptation of services to suit what pharma needs to best meet the DH requirements.

In terms of leveraging wider capabilities, successful CSOs are those that have been at the forefront of industry developments and built partnerships with pharma to proactively drive innovation and change.

Despite maintaining a positive position through the credit-crunch, pharma is still cost-conscious due to the challenging industry dynamics. Despite being more expensive than in-house resources on the face of it, the fact that CSOs can offer an unfixed overhead of targeted, specialist personnel – ready for deployment where and when they are required – provides strong incentive to outsource now.

It seems the trick is that if everyone is saving, save better than anyone else.

The Author
Natalie Uhlarz is editor of Pharmaceutical Marketing
To comment on this article, email pm@pmlive.com

26th November 2008

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