Business Strategies forPharma/Bio Success

Biotech and specialty pharmaceutical companies present many challenges to conventional pharma marketing. Some biotech products have become widely distributed blockbusters in their own right, just like the biggest small-molecule products of recent years. But many more biotech products are (or will soon be) products with limited distribution, requiring specialized handling and distribution. These specialty products also require complex marketing processes involving specialist physicians, managed care organizations (MCOs) and insurers plus a complicated patient follow-up.

The same-old sales force automation (SFA) systems commonly used for customer relationship management in high-volume drug pharmaceutical organizations simply won’t cut it anymore. In the recent past, pharma companies acquired pharma-specific, client/server CRM systems and deployed them to thousands of salespeople across an enterprise. These systems have been powerful, but rigid, difficult to use, and expensive to maintain. Now, many of these large pharma companies are struggling to uncover exactly how to efficiently manage the specialty drug microcosm of their business while upstarts are searching for an affordable way to bring highly specialized products to market.

The search is daunting, and the specialty reps are hurting. To date, none of the traditional CRM vendors have tackled this problem head-on—the cost is just too great. That’s because specialty drug selling is as different from the traditional primary care business model as plastic surgeons from pediatricians. In addition, today’s pharma industry is moving away from large armies of salespeople to smaller, more focused sales teams. The entire selling process (indeed, the entire industry) is under pressure to perform more effectively with fewer people, better

Reprinted from the January/February 2008 issue of Pharmaceutical Commerce

Specialty Pharma Reps Are Hurting for Specialty Pharma ToolsThe Software as a Service (SaaS) IT platform has advantages for specialty pharma sales teamsBy Matt Wallach, Verticals onDemand

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CRM systems, and lower infrastructure overhead costs. The coming CRM systems need to be flexible (to handle a wide range of selling situations), more user-friendly, and much more cost-effective to deploy to small groups of users.

All of these issues can be addressed by moving away from the client/server pharma CRM systems of the past and toward the software-as-a-service (SaaS) systems now being offered by the IT industry. SaaS systems are a form of outsourced IT capabilities, but with key differences from the hosted, client/server solutions of the past (see box). When properly designed, a SaaS system can be configured by the user to do exactly what the user requires with little difficulty, thus dramatically lowering system maintenance costs and increasing usability.

sFa economicsOne of the basic problems of client/

server CRM systems is that their economics are justified mostly for large sales forces — several hundred to several thousand users. Sales and marketing organizations in pharma and biotech can be grouped as follows:

Small—up to 100 usersMedium—up to 1,000 usersLarge—1,000 and over

Traditional CRM systems have made sense economically only for the large organizations. Let’s look at a 20-person specialty team at a major pharmaceutical company that uses the corporate CRM system – a system designed to supports 3,000 primary care reps. For those 20 specialty sales reps to gain the unique functionality that will enable them to do their jobs effectively and efficiently, the entire system would need to be upgraded, enterprise-wide. Now, a 20-person project costs the company five million dollars or more – not exactly the kind of expenditure that helps stock prices or profit margins. Similarly, a brand new company with 20 reps coming on board would have to spend upwards of $500,000 to try to deploy and maintain a traditional client/server system from one of the past market leaders. This is precisely why all these 10, 20, 50, and even 150-person

sales teams have been under served for so long—it just didn’t make financial sense.

But, it’s not just about money – it’s also about wasted money. Because even with large organizations, their CRM systems have not been customizable to handle other marketing-oriented groups besides salespeople calling on primary care physicians. For example, medical science liaisons (MSLs), trade relation managers for MCOs, and specialty sales reps have not been supported by systems catered to their unique needs. These ancillary sales groups are forced to use the traditional client/server CRM systems designed to support the large team of primary

Reprinted from the January/February 2008 issue of Pharmaceutical Commerce

Specialty Pharma Reps Are Hurting for Specialty Pharma Tools

What’s all the Buzz aBout saas?

Software as a service (SaaS) is a software application delivery model where a software vendor develops a web-native software application, and hosts and operates (either independently or through a third-party) the application for use by its customers over the Internet. Customers pay not for owning the software itself but for using it. The term SaaS has become the industry preferred term, generally replacing the earlier terms Application Service Provider (ASP) and “utility computing.”

Also known as “on-demand” computing, SaaS makes the development of highly specialized products affordable to the mass market. For true SaaS capabilities, the software code must be written for “multitenantcy” principles—enabling multiple users to interact with a single system installation. In addition, to provide all of SaaS’s potential for ease of customization and use, the code should be written to separate the underlying infrastructure from the “metadata” with which users tailor the system to their own needs. In this fashion, the system can support many user interfaces, and the underlying code can be updated or revised without affecting those interfaces.

Finally, SaaS providers should be well-versed in the Web services model of interacting with data sources. In the case of Verticals onDemand, the VBioPharma Specialty Care edition is built on the Salesforce.com platform (as are all Verticals onDemand products) and has pre-built interfaces to data partners including Health Market Science (King of Prussia, PA) for healthcare-provider data, MediMedia Information Technologies (Yardley, PA) for formulary information, and The TerrAlign Group (Ashburn, VA) for geographic territory-planning data.

SaaS applications are generally priced on a per-user basis, sometimes with a relatively small minimum number of users, and often with additional fees for extra bandwidth and storage. SaaS revenue streams to the vendor are therefore lower initially than traditional software license fees, but are also recurring, and therefore viewed as more predictable, much like maintenance fees for licensed software.

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care reps who are skilled at one-to-one physician selling. These CRM systems provide standard contact and account management functionality, activity reporting, and other important features and do a good job supporting the rep who makes eight+ calls a day. But this is not how a specialty care rep operates. Consequently, these reps, along with the other smaller sales groups, have simply given up on these systems and the company suffers from gross inefficiency.

One of the most important differences between primary care and specialty care selling can be seen right at the start of the sales process – customer targeting. Just like primary care reps, specialty reps need to determine who the most influential physicians are in their territories. This is easier said than done because, unlike in primary care where prescription data clearly ranking physicians by their prescription volume is easily attainable, there is no single data source that gives specialty reps all the information they need.

Instead of resorting to inefficient tactics, specialty care reps need tailored technology that will automatically assemble multiple sources of reliable data into a single repository that is easy to understand and is accessible from anywhere. They need a system that provides them with a complete 360-degree view of the customer – from patient volumes to order status, from sphere of influence to touchpoints with primary care reps, from reimbursement rates to formulary status. All of this is important not just to improve efficiency when targeting physicians, but also to help the specialty care rep better support physicians once they become customers.

Unlike primary care reps, specialty care reps need to engage in more of a physician-support process due to the complex nature of the product and/or the disease. For example, reps may need to guide customers through new product distribution processes or keep them abreast of pricing changes at specialty pharmacies. These reps, therefore, need richer, up-to-the-minute information including formulary data, reimbursement policies, practice management details and other types of information. Plus, the specialist doctors who are their customers are incredibly knowledgeable physicians who are incredibly difficult to pin down. In order to develop trusted relationships with these skeptical, overscheduled specialists, specialty care reps need a CRM systems that is as specialized as the drugs themselves.

Fortunately, the new SaaS model has fundamentally changed the economics of deploying a powerful yet tailored application to a small number of users. SaaS applications are built on a shared infrastructure, where all servers, networks, and functionality are managed from

a central location. The software is then accessible through any web browser. Think of the simplicity of Google. It also means that the host handles all maintenance and upgrades to the system so pharmaceutical companies’ IT organizations can focus on how to strategically add value to the business instead of wasting time on hardware and software maintenance.

The net result of operating a SaaS-based CRM application over a traditional client/server CRM application comes down to vastly increased effectiveness of the specialty sales force as well as vastly decreased IT financial drain – both up front and over time. Based on ROI analyses from Gartner, Forrester, Yankee Group, and Verticals onDemand, a traditional client/server CRM application can cost a major pharmaceutical company $5,800,000 in the first year versus only $2,075,000 for a SaaS-based application. Ongoing, the SaaS-based application will also be much less than the client/server application. See Figures 1 and 2 for feature and cost comparisons.

With a viable SaaS-based option, the executive management of sales forces can approach IT services from a radically new direction. The systems can be scaled down to a handful of sales and marketing people for specialized distribution of products, or scaled up to large sales forces of several thousand for conventional sales processes. In addition to being cost-effective for any size organization, the system is engineered to be incredibly flexible. New functionality, new users, new fields can all be added or modified ‘on the fly’ without calling in outside resources. In contrast, traditional client/server systems take as long as 3 or 4 months (and thousands of dollars) to make even small changes. Market data provided via Web services can be a standard part of the IT system, rather than an expensive, hard-to-integrate option. And management can expect higher rates of user acceptance to the system, due to its ease of use and rich customization. PC

aBout the authorMatt Wallach is VP, sales and marketing,

for Verticals onDemand, Inc. (Wayne, PA). He has over a decade of product management, marketing, and general management experience in both traditional enterprise software and Software as a Service (SaaS). Previously, he was Chief Marketing Officer at Health Market Science, a leading healthcare data-services company. Matt also spent six years at Siebel Systems, where he was the GM of the Pharmaceuticals & Biotechnology division. His MBA is from the Harvard Business School and his BA in Economics is from Yale University.

Specialty Pharma Reps Are Hurting for Specialty Pharma Tools

Reprinted from the January/February 2008 issue of Pharmaceutical Commerce