News and Insights
The Three Critical Steps Needed for Building a New Commercial Model
Driven by new reimbursement requirements from CMS (and echoed by private payers), healthcare delivery organizations are facing an unprecedented increase in their accountability for the quality and cost of care. This has profound implications for the commercial approach that manufacturers take to the market.
One clear consequence of this increased pressure has been a spike in consolidation among providers. Hospitals and systems are merging or affiliating at record rates; and these new entities are buying up physician practices to enhance their negotiating power through greater market share. The result is increased pricing pressure for suppliers – but that’s not all.
These larger delivery organizations are fundamentally changing the way that drug purchase decisions are made. Realizing that clinical-decision making is the biggest factor in both the cost and quality of care, delivery organizations are institutionalizing decisions once left to individual physicians. Joint administrative and clinical teams are evaluating product purchase decisions based on clinical and economic evidence – the result will be better outcomes and/ or lower costs. And macro treatment decisions will increasingly be guided by standardized care paths that may limit or exclude classes of products completely. As this dynamic continues to evolve, it’s clear that the traditional product-based commercial model focused on features and benefits will be insufficient to ensure market success.
Manufacturers need to adapt by building a new commercial model. These are three key steps an organization must follow for success:
1. Demonstrate economic and clinical value.
Product success requires the ability to tell a compelling value story to each relevant stakeholder based upon both economic and clinical evidence. To ensure they have the necessary evidence, manufacturers cannot wait until product commercialization to think about outcomes; they must begin thinking about the outcomes that will resonate with each stakeholder earlier in the product development process. Institutional decision makers want to see data that shows how the product is better than the current standard of care, if it improves outcomes or lowers treatment costs, and how it compares to the competition. Without this kind of evidence, a product risks being commoditized or even excluded from consideration.
2. Redefine segmentation and targets.
As organizations consolidate and shift decision-making away from the physician, manufacturers will need to rethink their approach to targeting and segmentation. It’s necessary to understand a system’s business drivers, identify its key decision makers, and discern its current risk profile. Using these insights, manufacturers can prioritize each account based on its potential and then identify the additional resources required to optimize the value of the account.
3. Restructure and re-skill the sales force.
With fewer, larger accounts and more centralized decision making, manufacturers will no longer require the extensive reach of a large sales force. This leaner sales force will need expanded capabilities to succeed in a new, more complex sales process. Representatives will need to have the ability to engage key decision makers with sophisticated scientific understanding of their products and the financial benefits they offer. In addition, new performance metrics will be needed to measure the quality of account management rather than just the volume of sales.