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Distribution of Sales and Marketing Spend Must Change
In recent years, pharma companies have reduced their cost base in response to decreasing revenues due in part to patent expirations and thin pipelines. Companies have taken the budget axe to both their R&D and Sales organizations, often drastically reorganizing R&D in an effort to generate improved productivity. While considerable effort has gone into reshaping the structure of R&D, commercial organizations have not given parallel attention to the assumptions and structure underlying sales and commercialization processes. This article will discuss how changing customer demands call for the commercial organization to adopt a new model — one that should further reduce the existing cost base. There is clearly room to do so; one study conservatively estimated the U.S. pharmaceutical industry spent 24.4% of revenues on promotion1, compared to R&D activity, which accounts for approximately 13%.
The main cost centers within the commercial organization have been the sales force, marketing and market access. The current commercial model is based on years of improving the means of influencing physicians as decision-makers. This resulted in the well-documented arms race for sales reps. “Sales calls to doctors’ offices were the most powerful tool for driving new prescriptions,” said a Vice President of Marketing. It also led to large promotional expenditures dedicated to a variety of activities such as conferences, CME training, disease management programs, samples, couponing, journal articles and DTC advertising. These promotional activities were also aimed at educating and influencing a physician’s decision-making. Market access in this environment was the third leg of the stool but often deployed in a tactical manner to negotiate price and reimbursement late in the launch process.Read More
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