To identify and validate the factors that matter most in building successful relationships with hospitals and health systems, two studies evaluated 240 company relationships with health-system pharmacy executives and local-level hospital pharmacy directors.<sup>1</sup>
How Is Your Relationship?
Relationships between a manufacturer and an institutional customer can be categorized as one of five types: none, stressed, transactional, collaborative, or partner.
While stressed and transactional relationships are defined by limited—and often unproductive and unsatisfying—interactions, the collaborative and partner-level relationships are defined by frequent, mutually beneficial interactions that enhance the manufacturer’s profile and overall credibility.
Maintaining collaborative and partner-level relationships with hospitals and health systems offers strategic advantages for manufacturers. Yet most manufacturers’ relationships with their institutional customers are merely transactional—or, even worse, stressed (Figure 1, below).
Why Relationships Matter
Companies who can maintain collaborative and partner-level relationships with their institutional customers benefit from several advantages. In the short term, this includes preferred placement of products on hospital and health system formularies and increased drug utilization. Over the long haul, the benefits include an enhanced company image, more in-depth meetings with key decision makers, and more opportunities for collaboration.
One of the most significant benefits to having a partner-level relationship with customers over the long term is that it improves access to hospital and health system stakeholders, including affiliated providers (Figure 2). On the other hand, companies with merely transactional relationships experience fewer access advantages.
The Six Relationship Cornerstones
Research shows that six relationship cornerstones have the greatest potential for improving perceptions and strengthening relationships with institutional decision makers. They are:
- Company approach
- Sales representatives
- Account management
- Medical science liaisons
- Programs and support
Eighty percent of partner-level relationships are characterized by high performance on these six cornerstones.
To take their relationships with institutional customers to the partner-level, manufacturers build on these six cornerstones over the long term. Unfortunately, many companies seek short-term gains at the expense of long-term relationships with their institutional customers. Rather than focusing on quarter-to-quarter sales, pharmaceutical and biotech companies should look years ahead. Quality counts in the institutional channel—particularly when it comes to relationships. That’s especially true now, as the key institutional decision-makers look for guidance beyond the traditional physicians, to embrace the C-Suite and a growing coterie of pharmacy stakeholders (pharmacy directors, clinical pharmacists, hospitalists, etc.). Not surprisingly, evolving decision-maker influence puts pressure on companies to re-evaluate their fractured institutional relationships and question their entire approach to doing business in this segment.
1. Company Approach
Institutional customers value companies committed to improvements that benefit the relationship as a whole. They also appreciate manufacturers who are receptive to new ideas and business models, and demonstrate a strong commitment to their hospitals or health systems. What’s more, valued manufacturers understand the relationships hospitals and health systems have with their business partners and work to strengthen them.
- Develop a nontraditional sales approach
- Maintain a consistent commitment to the hospital or health system. Don’t show up only when you have a product launch.
- Minimize disconnects between sales, training, and marketing. Adopt a more vertical, coordinated sales approach across teams.
2. Sales Representatives
The best sales representatives provide balanced interactions and understand how patients flow through the institution’s system. They provide consistent messages and promptly notify their customers of product or labeling changes.
- Focus on aligning goals. Get your product used in a way that improves clinical outcomes, benefiting the institution.
- Communicate contract specifics so that sales representatives understand the terms and conditions. Coach representatives to stick to formulary decisions and avoid selling the drug through the “back door.”
- Train representatives to respect the institution’s vendor policies. Avoid having representatives banned for violations.
3. Account Management
Experience—it’s a critical characteristic of effective account managers. Institutional customers value account professionals who realize the importance of achieving mutual goals. Good account managers also possess negotiating skills and can provide access to senior management when necessary.
- Empower account managers to make decisions. Pharmacy directors resent having account managers go back to the company on every contract item.
- Retain effective account managers.
- Embrace seniority. The best account managers have been with the company for more than a decade.
4. Medical Science Liaisons (MSLs)
Effective MSLs possess deep clinical knowledge and use unbiased resources when communicating with institutional customers.
- Use MSLs with critical customers to cement credibility. Pharmacy directors see MSLs as peers, yet only 7 percent of the industry deploys MSLs.
- Overcome regulatory or training issues that slow deployment of MSLs.
- Train account managers to take advantage of MSLs.
5. Programs and Support
Scorned by biased, heavily branded programs in the past, some hospitals and health systems aren’t interested in manufacturer programs at all. Effective institutional programs offer value-added services and innovative solutions to support customer initiatives and goals (for example, a research tool that tracks drug utilization).
- Provide institutional customers with financial tools that achieve actual cost savings, such as lost-opportunity analyses and economic models.
- Offer unbranded tools geared toward improving patient care, or helping physicians, nurses, or pharmacists communicate more efficiently.
- Remember long-term relationship-development and provide measurable value.
6. Contracting Institutional customers rate manufacturers’ contracting performance the lowest of the areas evaluated. Straightforward processes and mutually beneficial negotiations win credibility. Specifically, institutions prefer simple contract terms with upfront pricing and customization, reflecting their ability to move market share. They dislike bundling and but will go for reasonable, tiered market-share goals. Companies that give their account managers more authority to negotiate and make changes to contracting terms will be more successful.
- Work with group purchasing organizations (GPOs). Companies that don’t—requiring hospitals to get products directly from the maker or through specialty pharmaceutical managers—don’t win institutional friends. Ninety-eight percent of health systems work with GPOs, and manufacturers should respect this relationship.
- Keep contract terms as simple as possible. Include simply stated, easily achievable terms rather than complex performance matrices that make it hard for institutions to know when they will receive discounts and rebates.
- Offer discounts instead of performance rebates…when possible. Most rebates are deposited in the general hospital account, not the pharmacy account.
By building upon these six validated cornerstones, companies can develop durable, meaningful interactions with institutional customers. The result will be more partner-level relationships, improving access to stakeholders and offering multiple valuable advantages over the long term.
1. Health Strategies Group, “Health System-Company Relationships and Performance.” (March 2011) and “Hospital-Company Relationships and Performance” (May 2011).