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Leveraging HCP transparency insights to drive future customer investments

EFPIA’s disclosure requirements present an opportunity to assess strategy and effectiveness

EY Joanne Henderson Richard MatthewsMost companies should now be in the final stages of preparation to disclose HCP transfer of value under the EFPIA Disclosure Code by 30 June. Many will have found the process to complete the reporting onerous and challenging. As a result, the potential value and insights that could be derived from the data collated have not yet featured on most commercial agendas.

A positive by-product of this compliance requirement is that pharma will now have ready access to a wealth of granular level detail on financial interactions with HCPs and HCOs, and will have visibility of the same from competitors. In theory, having the data can drive insight, but without action, it will remain a missed opportunity. How do you therefore use this insight to inform and shape your strategy for future investment in HCPs/HCOs?

Extract maximum value from the data set - parallels with consumer goods 
The Consumer Packaged Goods (CPG) industry faces increased scrutiny from analysts and investors to demonstrate the value derived from their customer investments. Zero Based Budgeting (ZBB) and other cost-cutting approaches have penetrated the 'cost base' as far as the revenue lines, so revenue management is increasingly being considered as the next frontier of shareholder value creation.

Promotional trade spend plays the dominant role in the marketing mix in CPG, representing around 20% of sales. Investors and analysts are increasingly urging global CPG companies to identify unproductive trade spend, use it more wisely or return it to shareholders. The challenge is that trade spend has become the most complex and opaque P&L line in most CPG companies, driven largely by the complexities of modern trade and the dynamics of changing pricing.

It may seem like an easy fix to simply reduce trade spend, but it drives customer sales and margins, so simply cutting trade spend without firstly understanding its impact and effectiveness will likely have a negative market share and volume impact, eroding medium- and long-term profitable growth.

The key to effective trade spend management in CPG has been to understand, at a very granular level, the return on investment of trade spend allocated. Having consistent and systematic processes in place to keep track of this on an ongoing basis has been recognised as critical for long-term management. The leading CPG companies who have conducted multiphase initiatives (using analytics) to understand and optimise their trade spend have increased profitability by more than 10%.

With the detailed information becoming publicly available concerning individual pharma company investment in HCPs/HCOs and some leading companies' decisions to stop HCP promotional spend, the industry could find itself facing external pressure, like the CPG industry has, to justify the investments in HCP activities, both promotional and non-promotional.

Immediate challenges in realising value
Before effectively exploiting the value of the EFPIA reporting data set, the underlying capabilities must be in place, ie sustainable systems and processes to manage and interpret the large volumes of data collected, reconciling that data and reporting for EFPIA disclosure. The data collection process is demanding, as it spans medical, sales, marketing, R&D and finance, as well as external partners and transcends geographic borders.

One tactic for making the transition from initial disclosure to ongoing collection and submission less arduous is to have clear business accountability to avoid duplication, errors and inefficiencies on a functional level. Intuitively, it may seem that Legal & Compliance or Finance should own this process, but a more value-based approach would be the ownership driven by who can actually derive the most business benefit from the data, while still meeting regulatory obligations.

Will disclosure represent the first stage of evolution in justifying HCP investments?
If you do not understand the value attributed to your HCP/HCO investments in the context of your overall commercial and customer engagement strategy, the information will shortly be available to allow other interested parties to analyse, make competitive comparisons and reach conclusions themselves about the effective use of your resources. So what can pharma do practically to manage the complexities and capitalise on the opportunity?

Three good steps pharma can take to evolve
Through our experience across the HCP spectrum (from compliance to customer engagement strategy), we have found three key steps that companies can take to improve their understanding and management of HCP investments:

1. Simplify the systems and data landscape
Capture data using existing systems, don't add more. The priority is the data, and the execution of a master data strategy across the business areas, embedding clear ownership and accountability. 

2. Have clear compliance thresholds and approval processes
Governance is key - enhance standard operating procedures to include audit checks at data capture sources. Focus on the creation of meaningful categories of spend as an output to enable more effective decision-making.

3. Use the requirements as a catalyst to understand customer investment strategy 
Change approach and adopt a 'Zero Based Budgeting' (ZBB) mindset to facilitate collaboration around investments. Above all, continue to invest in helping HCPs to provide the best experience and outcomes for their patients and payers.

As pharma companies increasingly find themselves in cost-constrained environments, perhaps the most significant learning from the CPG industry is that the early adopters who have embarked on initiatives to optimise customer spend have delivered a tangible P&L upside and they are realising those benefits now.

Joanne Henderson is is an executive director and Richard Matthews is a director in EY's Life Sciences practice

In association with EY

8th June 2016

From: Sales



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