MARKETING INSIDER

Responding to the Crisis Backward
By E. M. (Mick) Kolassa, PhD
The economic crisis, for the first time in memory, has hit the pharmaceutical industry pretty hard. Budget cuts and downsizing are the norm as accountants decide what is best for companies. I wish I could provide a survival guide for marketers during these times, but I have few answers and only limited advice for those being squeezed by the guys in green eyeshades. I can, however, provide some advice to the bean counters and senior managers who are following their advice: Stop! You’ve got it backward!

Companies, typically, have embarked on the parallel paths of reducing “unnecessary” spending and attempting to gain more favorable formulary coverage for their products with various payers. Although the overall reasoning may be sound, the execution is similar to the old medical practice of bloodletting—bleeding patients until they improve. We all know how well that works.

Cutting unnecessary spending is always wise, but look at what is being cut: training, marketing research, and personal promotion. These areas aren’t luxuries; they are necessities for a functioning and profitable company in turbulent times. Conditions in the marketplace are changing so rapidly and dramatically that old “knowledge” is pretty well useless and old assumptions are absolutely invalid. As the business worlds and the livelihoods of different customers are shifting, the old approaches to the market are bound to be wrong. Training that covers these changes and new ways to address them is essential—but impossible without budgets.

Physician practices are changing abruptly because so many patients cannot afford typical treatments, and clinicians are adjusting to this and to the fact that their compensation will be greatly reduced. I was recently in a clinic filled with patients suffering from sore throats, where the receptionist insisted on collecting the co-pay or full payment before a patient was seen. At the end of the examination, the physician, who stated there wasn’t enough time or money to perform throat cultures, informed the patient of three treatment options: an antibiotic taken four times a day for ten days at a cost of $5, one taken once a day for three days for $50, or a single injection for $75. The physician involved said he had just instituted this practice, but it was his only option.

New Skills Are Required
Pharmacies and hospitals are instituting similar changes, and the world of the payer is being turned upside down as customers cut back. These and other changes in the marketplace can all be addressed by sales and marketing personnel—but only if they are aware of them and learn new skills and techniques. Without training in these and other emerging areas, attempts to “do more with less” will only result in doing a lot less! Performance (sales) will suffer greatly unless sales and marketing personnel are equipped to address changes, and training is the most effective way to do this.

Old Knowledge Is Useless
There is perhaps no more valuable asset to a marketing operation than marketing research, yet those budgets are being hacked to death in the current environment. In an environment of rapid change, every decision has new and higher risk, and the principal purpose of marketing research is to reduce the risk of decision making. Cutting back on MR during these times is absolutely the wrong thing to do. Markets in crisis don’t forgive mistakes, and making big decisions with less information, for the sake of saving a few dollars, is the epitome of being penny-wise and pound-foolish. What we used to know doesn’t matter, and what we need to know isn’t easy to divine without solid marketing research. Our industry is currently a lot like our military: well equipped to fight a war that will never happen but ill prepared for the wars we are facing. Training and information will equip the industry for these new challenges, but only if they are budgeted and given high priority.

Personal Relationships Pay Off
Detailing expenses are being lowered by reducing sales personnel, but if personal promotion ever had value, why would cutting back on it during hard times be a wise move? More important, when combined with new contracting activities with payers that provide deeper discounts in exchange for better formulary status, decreasing personal selling is doubly misguided; without sales representative “pull through,” formulary status is virtually irrelevant. Second-tier medicines don’t sell themselves, and payers aren’t embarking on campaigns to inform prescribers of the least costly alternatives; they simply accept your discount and hope for savings in their budgets. Having a co-pay advantage over competitors is no advantage at all if prescribers aren’t aware of and responsive to it. Many companies apparently believe that lower co-pays automatically lead to higher sales, which is patently false.

These Areas Are Critical
My advice to companies follows.
1.Training
Increase your budgets for training, and make sure you are getting what you pay for. Generic training from business school faculty with no idea of how healthcare markets work is worse than no training at all. Insist that all sales and marketing personnel learn about the changes in the marketplace and take steps to incorporate those changes into their plans.

2.Marketing Research
Increase MR funding, and focus on understanding the changes in the marketplace. This is critical. Asking the wrong questions of the wrong people is always a bad idea, but the chances of doing this have increased dramatically. The studies you did last year need to be updated because they are unlikely to remain valid. Focus research on the clinician in the trenches, not in the ivory towers—your thought leaders are protected from what is going on in the real world. Now, more than ever, you need to focus on clinicians with their feet on the street.

3.Sales Force
Think seriously before cutting more sales personnel. It is more difficult to regain a lost customer than to get a new one, and the likelihood of current clinicians wanting to meet with unknown sales representatives declines every day. Current representative-prescriber relationships are important, now and in the long run. And don’t provide deeper discounts to payers in the hope of higher, or even stable, sales. Without sales force pull through, the discounts are worthless. Unless you’re sure your reimbursement status is a problem (which can be determined only through marketing research), you may be fixing a nonexistent problem at a very high cost.

Where would the money to follow my advice come from? Some funds should come from reducing discounts, others from vastly reducing (or even eliminating) direct-to-consumer advertising for drugs that treat asymptomatic diseases (such as high cholesterol and hypertension). Making the case for these budgetary moves is the subject for another article, but cutting back on areas critical to a company’s functioning and performance—training, marketing research, and personal promotion—is not the answer, it’s getting it backward.

Mick Kolassa is Chairman and Managing Partner at Medical Marketing Economics (www.m2econ.com). He can be reached at mkolassa@m2econ.com