Authored by John Finan
Pharmaceutical and life sciences manufacturers face the realities of major changes to the healthcare environment and care-delivery payment practices. In particular, a shifting multi-customer environment with divergent demands for achieving clinical and economic outcomes and a movement from fee for service to risk sharing cost models is creating havoc on the effectiveness of commercial operations.
In order for life sciences companies to profitably address these challenges, remain competitive and optimize growth in the emerging healthcare marketplace, companies should consider evolving their business model to better secure and scale market share, revenue and profitability. Evolution requires a new strategic focus to better understand the market trends and create a competencies-driven basis to execute and address customers’ needs and wants.
Such evolution is happening with leading edge pharmaceutical and life sciences companies. These companies are assessing their traditional product-focused commercial operations processes and addressing how to best evolve to a customer-focused business-to-business (B2B) model that optimizes growth objectives through provision of care-treatment solutions for systems-of-care customers. They are modeling B2B customer experiences after those developed by leading business-to-consumer (B2C) brands like Amazon.
We believe that such wholesale transformation can provide companies with a multi-faceted value story and justification for their product outcomes, care costs and income.
Peter Fader, author of Customer Centricity: Focus on the Right Customers for Strategic Advantage states, “Customer centricity is a strategy that aligns a company’s development and delivery of its products and services with the current and future needs of a select set of customers in order to maximize their long term financial value to the firm.”
A customer centricity strategy establishes a life sciences organization’s focus to fundamentally align its’ commercial operations, brands and services with the needs and wants of their most valuable customers. In pharma, this means an evolution from a product focused strategy to one focused on how to best create solutions that assist customers in meeting their operational challenges. A customer centric strategy also requires numerous subject matter experts to address specific needs of the multiple decision makers within a company.
Consider pharma’s traditional two-pronged customer approach model:
- Creating demand with individual prescribing physicians
- Negotiating access and discounts with Pharmacy Benefits Managers (PBMs)
This push-strategy to “sell pills” belies the manufacturer to be at the mercy of their customers without much control over access and utilization of their brands. On the other hand, a customer centric model that includes becoming a care-management partner with physicians, provider organizations and payers allows the company to employ a pull strategy with more control over securing product access and NAD utilization. The pull strategy can also deliver solutions that enhance effective care management and hold all stakeholders accountable for improved outcomes, cost management and profitability.
Rather than being a supplier of drugs, pharma, through its proprietary product portfolio and array of clinical, economic and educational competencies and assets, offers today’s drug utilization decision makers a plethora of resources and assets to address all customer needs and wants. This creates a shift to a more consumer and/or B2B- like model, producing solutions that address customer needs and wants. Successfully addressing these needs, in turn, drives product demand, market share and revenue.
Implications for pharma companies
A customer centric strategy will address both the external dynamics affecting pharmaceutical performance and the internal executive stakeholders who want commercial to do more with less. The company’s portfolio can be positioned for growth by:
- Identifying the highest fiscal value customers based on lifetime value to the company
- Working with customers to create solutions that involve the brand portfolio to address their specific challenges, needs and wants
Embedded in the evolution to a customer centric model is the evolution in how companies design and deploy field assets and customer engagement teams. For many, this means a move from a large force of individual sales reps with a spray paint sales focus to a customer account team approach that addresses all customer issues.
Today’s market environment is no longer receptive to the traditional model of high volume unit sales, gaining access through PBM contracting and bombarding the marketplace with promotion and noise. Leading companies must adapt their sales model to these new new customer organizations comprised of multiple professionals that require expertise in each specialty area. Today’s customers are demanding that their service providers have the appropriate specialties. The old model with a single sales representative as the only point of contact is evaporating in this new environment.
The new customer organizations, including hospital networks and systems of care, are more important than ever to pharmaceutical companies, as they are now the nucleus of care delivery with treatment protocols and formularies. This new customer landscape requires the deployment of account teams with broad-knowledge account managers to coordinate the organization’s resources for the benefit of the customer.
As the healthcare landscape evolves, pharmaceutical manufacturers must change to keep pace with the emerging, seismic changing landscape. Leading companies are reorganizing their operating model to do so. And while the commercial model will operate in a different manner than it has in the past, the objective remains the same –to create and deliver cutting edge medical treatment and bring life-saving solutions to healthcare consumers.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.
Fader, Peter. (2012) Customer Centricity: Focus on the Right Customers for Strategic Advantage. Philadelphia, PA: Wharton Digital Press.