Pharma In The Brave New World Of Corporatized Care

Still transforming their organizations to deal with the waning influence of the individual prescriber, pharma commercial leaders now face a new challenge: the growth of the corporate model of care, as large numbers of US physicians exchange the independence of physician-ownership for the predictability of working as employees in larger organizations. Corporate models of care, characterized by more centralized decision making, add a new dimension of customer complexity in an already tough environment.

Pharmaceutical companies are refining their commercial models to meet the diverse needs of a new type of customer: the corporatized provider.

By David Quigley, Bhawana Malhotra, Nicholas Mills, and Laura Moran

Corporate models of care, characterized by more centralized decision making, are challenging commercial organizations by adding a new dimension of customer complexity in an already tough environment.

Some commercial organizations are aggressively engaging with medical group customers to identify and understand customer needs and adopting best practices in B2B/account management, thereby maintaining a distinctive edge over competitors.

Regardless of whether companies adopt a top-down or localized approach, pharmaco commercial leaders should consider reviewing their organizations' engagement with medical groups a top priority, as first movers will have a competitive advantage.

Still transforming their organizations to deal with the waning influence of the individual prescriber, pharma commercial leaders now face a new challenge: the growth of the "corporate" model of care, as large numbers of US physicians exchange the independence of physician-ownership for the predictability of working as employees in larger organizations. ( See Exhibit 1.)

This change has gathered momentum, driven not only by payor pressure and the erosion of physician practice economics, but also by a shift in MD preferences to embrace more "salaried" models. Physicians are consolidating their individual practices into medical groups (practices with greater than five physicians), and medical groups in turn are consolidating into large multi-specialty medical groups and even integrated delivery networks (IDNs), with both inpatient and outpatient facilities. Some 40%-50% of medical groups are incorporated or owned by corporations, and more than 25% of medical groups are now affiliated with integrated health systems.

The most "corporatized" IDNs and medical groups are integrating with payors, and a small minority is assuming financial risk by forming Accountable Care Organizations, which link reimbursement to quality-of-care metrics and reduction in total cost of care. ( See "Brookings, Dartmouth, Create Accountable Care Organization Toolkit," "The Pink Sheet" DAILY, February 7, 2011 (Also see "Brookings, Dartmouth Create Accountable Care Organization Toolkit" - Pink Sheet, 7 Feb, 2011.) and "Physicians Have Bigger Stake In Patients' Total Care Under Medicare ACOs," IN VIVO, April 2011 (Also see "Physicians Have Bigger Stake In Patients' Total Care Under Medicare ACOs" - In Vivo, 1 Apr, 2011.).) These groups come together to achieve scale, improved practice economics, and better quality in treatment practices. They also develop talent through competitive incentives and top notch educational/development programs.

To maximize these benefits, many groups recognize that they need to build consistency in the practice patterns of their physicians, including increasing "efficiency" and lower-cost treatment options.

The impact of physician consolidation on the traditional pharmaceutical commercial detailing model is profound. Yet, each medical group evolves on its own path, with no single model of corporatized health care dominating. As a result, pharmacos need to adopt different strategies and skill sets to serve and sell to these new kinds of customer-clients.

New Commercial Models

Specifically, traditional methods of delivering efficacy and safety data to an individual physician are becoming ineffective in this setting. In a corporate-care environment, the current pharmaco commercial model is almost always less effective because centralized control of treatment decision making limits the individual physician's autonomy.

Increased group control can consist of both formal measures, such as formularies, preferred drug lists, and generic pay-for-performance guidelines, and less formal initiatives, such as influence networks within groups. "No see" or other restrictive policies that decrease reps' access to physicians also lessen the ability of pharmacos to make a commercial impact using traditional strategies. At the same time, having widely diverse stakeholders within groups increases the complexity of interactions far beyond the traditional rep-physician relationship. Varied group-level strategic priorities (e.g., quality metrics, utilization targets, merger and acquisition plans, etc.) that influence or dictate practice patterns, and the variety of group values also contribute to the complexity of relationships.

As a result, in 30%-40% of groups, the individual physician is no longer the key target customer for the pharmaceutical commercial organization. Rather, the new target customer is the entire medical group entity, and the key points of contact are a range of stakeholders within the group, such as the vice president or director of quality, office manager, or the chief medical officer.

To better serve these organizations and develop a workable commercial approach, pharma commercial organizations must act on a handful of dimensions, all imperative:

Know the customer: Develop deep, credible insights about group and physician affiliations, behaviors, and needs;

Embrace B2B selling: Deploy a business-to-business-to-physician (B2B2P) collaborative selling approach, which delivers value to the diverse group stakeholder from C-suite executives to practicing physicians and other health care providers;

Build a team: Broaden the set of field-based functions beyond sales to include outcomes experts, medical account managers, for example, and institute a team-based, cross-functional selling model as "the sum of the whole is greater than the parts;"

Use account plans: Build (and adhere to) a strategic account planning process to coordinate activities across several field-based functions;

Bring something distinctive to the table: Equip field personnel with a menu of value propositions that resonate with different types of groups and their individual stakeholders. The menu is customized and shouldn't be the same for each group.

Know Your Customer Inside Out

All efforts to better understand and meet the needs of the integrated customer must rest on a solid base of facts, which directs field deployment and allocation of marketing resources.

Many pharmacos have built "one-off" analyses or even distinct group-based segmentation data sets to help affiliate individual physicians to their medical group. Some go another step and extract insights about the group, rather than just the individual physician. The gold standard, however, is more comprehensive and involves creating a dynamic data set that integrates information about individual physicians and their associated groups and evolves along with shifts in medical group dynamics.

To leverage these data sets, companies often struggle with off-the-shelf solutions, which either contain inaccurate or incomplete information about physician affiliations with groups, and / or are not able to identify the business insights or "so whats" in the data.

These pitfalls can be addressed. The dynamic nature of the data set makes real-time accuracy difficult. Off-the-shelf data, therefore, is best used only as a starting point, which field staff (i.e., all customer-facing personnel, not just the sales team) can routinely help to refine or update. This is commonly done with a simple affiliation tool (taking a field member no more than one hour to complete the first time, and typically only 15 minutes or less from then on).

Furthermore, "analysis paralysis" persists in many organizations, likely due to the availability of ever-more sophisticated market data analytics. Simplicity, therefore, is important for developing insights. Rather than compiling every data point available, companies should start with the "basics": a verified record of current sales performance in each provider group; a description of the level of field access for the provider group as a whole; and an assessment of the degree of "control" a group exerts over an individual physician's prescribing practices. This can be calculated using the "degree of difference" analysis, which identifies the differences between the prescribing practices of individual physicians versus the average prescribing of the medical group, allowing for assessment of group level of "control" on prescribing.

Embrace B2B Selling

The second critical element involves tackling the field deployment model and supporting roles and capabilities. Such a structure must enable a B2B2P team-based selling approach that addresses appropriate stakeholders at all levels of corporatized provider organizations.

No single solution for optimal deployment exists against integrated providers, so the right deployment model must be highly customized to each medical group targeted. This deployment approach is a far cry from the traditional uniform reach-and-frequency model. Instead, it is tailored to fit critical factors such as current market share performance or degree of office access at the medical group, as mentioned earlier.

Two examples show the effectiveness of this approach. In the first – in a certain high-control group, a key account manager (KAM) only called on the so-called carpeted areas (i.e., the administrative offices) and was the most effective field member in influencing prescribing decisions. However, to really make this critical relationship work, the KAM, through personal influence and leadership support, put a stop to the "parking lot details" by other ambitious field members. Over time, this medical group recognized the value of the KAM and re-opened its doors to representatives from that pharmaco (and not its competitors because they had not demonstrated the same value-add as the KAM approach).

In another situation, one West Coast IDN put a major pharmaco's top product on formulary ahead of four other branded competitors after two years of a KAM-led account team effort. Prior to this effort, the pharmaco, like its competitors, had been locked out of the facilities and excluded from the formulary for most of its products (a range of primary care and specialty brands). The pharmaco put a talented leader (the regional sales force manager) on point, made a formulary victory for the company's leading brand his top performance metric, and gave him latitude to call in resources from across the organization.

The most significant element of this success? Patience. The commercial and field leaders knew the relationship would not turn around quickly, but also believed that competitors were less willing to invest for so long, and this worked to their advantage. The medical group's leadership, for their part, was convinced of the pharmaco-economic benefits of the product and allowed the company's representatives access (albeit highly monitored access) to educate physicians on the product, while the competition was largely left struggling to gain audience with physicians and key stakeholders.

While there have been speedbumps (e.g., the medical group issued a warning to the company when a rep, en route to an authorized call, stopped by another doctor's office to share baby photos) the pharmaco has enjoyed strong market share and growth. In both examples, the amount and type of resources deployed to bring in the group were significantly different from their earlier reach and frequency model, and had to evolve over time.

Deploy A Cross-Functional Team

Those two examples underscore a characteristic common to many successful group deployment models – the fundamental shift from individual to team-based selling, and the necessity for cross-functional collaboration. One sales leader described team-based selling as "anathema" to the company's culture, a reaction that is consistent across many organizations in the industry. Common fears are "free riders" and "the best reps [getting] bogged down by a team of average performers."

However, no one should expect even the best rep, alone, to effectively influence a group of more than 2,500 physicians. To mitigate the fears, companies can deploy 360 degree feedback, a mix of team and individual incentives, and an "up or out" performance policy. This team-based, multi-disciplinary approach also allows "best practices" to be shared more quickly across functions, as well as a "step-up" opportunity for the best reps to begin to lead these field-based teams. The strategic account planning process also helps, as it defines clear roles and accountability.

Commit To Strategic Account Plans

A core enabler of the cross-functional, team-based selling approach to medical groups is adoption of a strategic account planning process. Account planning is not a unique concept in pharmaco commercial organizations; the capability exists in many managed markets organizations and in some hospital sales functions, as well as other areas. However, the cross-functional nature of the teams (which because of their mission must integrate skill sets from managed markets, institutional sales, primary care and specialty sales, etc.) and the need for distinct profiling (e.g., mix of "control" profiling, identification and characterization of key stakeholders, and overall group priorities) requires more effort and investment in new capabilities for field-based organizations. The key success factors for medical group account planning processes include 1) clarity of roles and strong process; 2) an easy-to-use tool; and 3) follow-through and management of execution.

The account planning process, of course, is not self-actualizing. Regardless of deployment model, we find that identifying a single account "quarterback" (or point person) to own the strategic planning process is critical. ( See Exhibit 2.) This quarterback is accountable for the overall plan as well as process management and can come from a variety of places within the commercial organization (e.g., stellar reps / district managers, institutional reps, managed markets account managers, etc.).

The account plan can and should become a central tool for the quarterback to organize account goals and develop customer insights, as well as disseminate tactical plans and chart progress across all "core team" and 'extended team" members.

The most successful account teams build a system around the plan by coordinating calendars across the team, identifying clear and distinct relationship "owners" across the team, and fostering a collaborative, focused environment. One very good quarterback we've met was successful in part because of his knowledge of his cross-functional team. He understood the relationships that the account team members had with key stakeholders, and was able to pull in the right team member at the right time to build alignment across the provider group, resulting in improved access to key stakeholders.

The tool should include both a strategic description of the account and a clear tactical plan to execute the vision. The key strategic components include the level and type of provider group control, strategic priorities, and key stakeholders. Tactically, the tool should contain near-term activities and responsibilities as well as a longer-term interaction model. Both elements should be reviewed regularly. One of the strongest account teams we know runs a formal review by the next-level field manager once a quarter: for mature products or markets once or twice a year might be sufficient.

Distinctive Value Propositions

Even with the right talent in the field, and strategic and tactical plans in place for each account, those closest to the customer must be armed with an impactful value proposition geared to a group's particular needs. Clinically oriented groups focus on quality metrics and standards of care, as should the value propositions created for them, while economically oriented groups remain laser focused on the bottom line. ( See Exhibit 3.) Value propositions should reflect each group's orientation.

For commercial organizations that have not formally reviewed their provider group value propositions, the critical first step is to catalog the potential suite of messages that will be most relevant for particular medical groups, in order to create a menu to consider. One idea for creating the menu of the most relevant materials is to hold a series of cross-functional workshops to gain input of personnel from different customer-facing functions (e.g., managed markets, sales, medical). This diverse team can also help create a simple key for the field force to help identify the appropriate offerings or messages for each audience within medical groups (as defined in the strategic account plan).

After building a solid menu of value propositions, the next step is to identify gaps that prevent the company from delivering a compelling case for its products. For example, one pharma brand team had a non-branded, general disease state and burden of illness value proposition. The field representative had delivered related messages and materials to a certain medical group's C-suite and vice president of quality. While the message was well-received at this level, this interaction was insufficient to drive prescribing behavior more broadly within the medical group, frustrating both the group's leadership and the pharmaco.

Once the pharmaco's account manager team started working with the medical group's site leaders to help identify potential interventions (e.g., tools and training) to increase treatment of the disease, patient outcomes improved (as measured by the provider group) and overall cost of care was lowered. These programs, such as the dissemination of clinical care and diagnosis guidelines, were collaboratively instituted (driven largely by the pharmaco) throughout the many different locations across the provider group. These benefits improved brand sales performance within the provider group over the ensuing months.

Transforming The Commercial Model

While no company has yet gotten it right across all dimensions, examples of success exist in specific provider groups and geographies in which pharmacos were able to increase efficiency and effectiveness. Increased efficiency and return on investment (ROI) in field-based activities for an account, relative to market share and total sales, can be driven by:

Decreased footprint at the rep level due to identification of "centrally driven" groups (a ~3% reduction in traditional field resources is possible with many "low access, high control" provider groups);

More targeted marketing efforts in geographies heavily populated with controlling groups, which tend to also be concentrated in geographies with high "payor control." This change results in a model that is consistent with the regionalized models that have become more common in the recent past.

Some teams have achieved increased effectiveness in delivering on customer needs and improving pharmaco performance by:

Developing partnerships with medical groups, targeting specific programs or disease states (as much as 15% total market share increase across products / TAs)

Achieving broader company personnel access

Serving as a true discussion partner for medical groups at critical junctures in their decision process. Examples of such decisions include adherence programs for chronic diseases with high cost burden, electronic medical records (EMR) adoption or access policies.

In addition to these specific tactics, pharmacos can also take at least two paths to try to meet the needs of the group customer and improve product performance. Each path has a different definition of "good."

The first path can be thought of as full-scale implementation, involving a unified national approach to address all major medical group customers. This approach requires several capabilities: large-scale deployment to address many groups even where local concentration is limited, the analytical ability to identify and address integrated segments across all physicians / groups, deep KAM capabilities throughout the organization, and organizational commitment to endure the long selling cycle and create systems and processes to enable a holistic approach.

The second path involves implementation for provider groups in key geographies where performance is significantly below expectations or regional benchmarks, and groups are heavily concentrated. Many of the early movers in the industry chose this path to respond to the corporatization trend. This approach allows more flexibility to react to changes in medical group environments, and usually is accompanied by a measured process of "test and learn" to ensure continued roll-out.

In the past few years, this approach may have had less risk, as the customers were still evolving and lessons learned were incorporated at a lower cost to the commercial organization and less disruption to its field personnel. However, the timing and scale of impact were very slow. Now, however, this path is no longer as low-risk as it used to be. The risk of not acting today is much higher than it was even two to three years ago, as the market has evolved and medical groups are now a significant portion of business in many locales, and the groups have become more sophisticated and challenging.

Regardless of the path chosen, all pharmaceutical commercial organizations must understand their current performance and the business impact that consolidated groups have on their sales. Corporatization has not impacted all specialties to the same degree, so the right level of response and investment for one pharmaco's portfolio may be very different from others. However, all sources point to an increasing prevalence of medical group consolidation throughout the health care industry and clearly, as seen with the "first movers," building a holistic approach for dealing with these integrated customers can be a source of competitive advantage not only today, but certainly well into the future.

Bhawana Malhotra is an Associate Principal in McKinsey & Co.'s New Jersey office, Nicholas Mills is an Engagement Manager in the New Jersey office, Laura Moran is an Associate Principal in the New Jersey Office and head of the Pharmaceutical Sales Practice in North America. David Quigley is a Director in the New York office and head of the McKinsey Global Pharmaceutical Commercial Practice. E-mail [email protected].