Ground to a Halt: How COVID-19 is challenging and evolving the fundamentals of the Pharma G2M model

Holger Schmidt Partner, PwC Strategy& (Germany) GmbH 28/04/20

Introduction

COVID-19 has dramatically impacted the way in which the pharmaceutical and medical technology industry has been operating in 2020. Fast-tracked product development cycles, escalating demand for COVID-19 products and fully utilized production capabilities have significantly altered the focus of some organizations, as the industry plays its part in addressing this global pandemic. For others, especially those without COVID-19 related product portfolio, the pandemic has tremendous negative impact on their business. However, companies are equally impacted by the need to put staff health first, reduce exposure and find new ways of working to maintain productivity under new constraints.

No area has felt this more acutely than the sales force, where reduction of face to face engagement has effectively grounded a large proportion of sales activities in many organizations.

Despite the enormous uncertainty, the prolongation of mitigation measures appears to be the most likely scenario. Restricted access to hospitals and doctors could potentially continue post COVID-19, as part of a broader trend of tightening regulations. This is increasingly turning a spotlight on the preparedness of different sales forces to engage through digital channels – more prepared organizations are leveraging their advantage, whilst others are rapidly searching for innovative solutions to address the impact of reduced interactions on overall sales volumes.

The level of preparedness, however, also depends on the country-specific digital readiness. Given their level of investments, their available human capital or their technological infrastructures, countries like Singapore, Luxembourg or the US seem to be better prepared to leverage the opportunities brought by the digital transformation, while others, like Germany, France or Canada, still have to keep up the pace.

COVID-19 is challenging and accelerating the evolution of the Pharma G2M model. It also presents an opportunity to re-consider the fundamental ‘truths’ that define the traditional engagement model - to assess whether these ‘truths’ best support organizations now, and whether they should be evolved to drive success into the future.

Challenging the current model

The traditional engagement model in pharmaceuticals is underpinned by five widely accepted ‘truths’:

Adherence to these ‘truths’ specifies the current engagement model - it relies heavily on interpersonal contact as a method of establishing strong sales relationships and competitive advantage:

  • Sales representatives remain the central focus of the current model. Even though their numbers have come down in the past 10 years, 88% of sales and marketing expenditure is still spent on the sales force
  • Digital channels are an ancillary support to the field force, with volume share of digital contacts in major regions remaining below parity (EU5 (11%), US (21%), Japan (47%))

However, this model has become increasingly less fruitful, as regulations are tightening and the window to access doctors, pharmacists or clinical procurement managers is narrowing. In parallel, doctors are increasingly reaching out to alternate, more objective sources of information. Especially online resources providing access to other physicians, curated content on the newest developments in their field or medical education material are in great demand. This trend is likely to continue as the generational change in the medical profession – within the next decade 2 in 5 physicians in the US will be over 65 and likely to retire – will spawn a new generation of digitally-focused physicians.

COVID-19 has further exposed the issues in the current engagement model and accelerated its evolution, leading into a new, more digitally enabled future. In discussions with key industry stakeholders on this topic, Strategy& has identified that whilst not being obsolete yet, the five ‘truths’ have evolved to better serve and define the modern engagement model:

Evolve - achieve through modern platforms

  • SOV remains relevant for supporting doctor’s prescriptions of drugs, but recent studies have indicated that its impact is lower than previously thought
  • Transition to new methods of obtaining treatment advice (Google, WebMD, Coliquio, Esanum) are lowering the impact of traditional SOV methods – investment in SOV maintenance should therefore be well thought out to ensure acceptable ROI
  • New platforms (Medscape, Doximity, 49med) offer potentially increased access to doctors at a lower cost - especially true in the current situation as networks, such as Coliquio, a dominant German doctors’ network, are seeing a steep climb in membership numbers. Presence on these platforms is therefore essential to complement traditional channels in order to grow SOV

Evolve - rebalance, to provide increased pull channels

  • As identified in industry interviews and increasingly in empirical evidence, doctors are actively searching for information on new platforms to find best practices and pursue trainings in order to receive their required CME points
  • Push-only engagement models should therefore be rebalanced, to provide sufficient pull channels for doctors to request advice, information and training
  • Pull channel options include content marketing, educational content, sales reps on request and chat bots. However, the objectivity of provided information will be crucial as the content on most platforms is curated and focuses solely on the value-add for the HCP

Extinct - in person engagement increasingly inefficient

  • With rising cost per detail and decreasing availability of doctors, in person engagement is becoming an increasingly inefficient channel
  • In parallel, doctors are becoming increasingly digitally enabled. In the UK, for example, 92.6% of doctors owning a smartphone use it to perform clinical tasks, while more than 60% exchange patient-related clinical information with their colleagues using SMS
  •  Heightened digital affinity has been further evidenced during COVID-19, both with HCPs seeking to engage online with other practitioners, as the examples of Coliquio and other platforms have shown, and doctors easily transitioning to digital appointments – a recent PwC study demonstrated an up to 10x increase in virtual health visits for doctors 
  • Under this pressure, the sales representative role requires redefinition – with more focus on higher value-add tasks (product launch, new doctor acquisition), and on digitization of low-value tasks. Sales force teams will therefore be maintained, but the total number will decrease in accordance with their redefined roles

Validated - targeted selection more relevant than ever

  • A thorough understanding of the target audience and its careful segmentation will be critical for defining target-specific approaches:
    • Segmentation evolving into more advanced versions (e.g. digital fingerprint of each target) informing content and reflecting commercial strategy (e.g. acquisition vs. share of wallet)
    • Integration across channels is critical to form a complete picture of the target audience, leveraging different points of engagement to improve timing and type of content 
  • With an increasing volume of digital information provided to doctors, it will be critical to ensure content is customized, well communicated and impactful in order to drive engagement

Evolve - digital to become a primary channel

  • The current multi-channel model is here to stay – and will broaden even more with new engagement platforms being established
  • However, the model will shift from digital channels being supplementary to primary – evidenced by continued high growth in digital marketing spend (12.7% YoY growth by Pharma in 2018) 
  • Key in successfully implementing a more digitally focused marketing mix will be its alignment between channels. Clear roles and interfaces between channels are needed to ensure a seamless customer experience

Implications

What should we take away from these observations? Based on a reassessment of the current pharmaceutical G2M model, Strategy& has identified 6 key takeaways:

  1. 2020s will be the decade of digital channels
    Through the decreasing appetite for face-to-face engagement, a narrowing window of access to doctors and ever improving online resources, the 2020s are the beginning of the digital channel prominence. This does not mean the sales force is obsolete yet, however an incomplete digital presence will impact future competitive advantage and curtail SOV for organizations. A clear vision of how digital channels can be leveraged in an organization’s G2M model must be established. Companies like Roche have taken up this challenge. In its Diagnostics business, the pharma company is extending its portfolio beyond traditional products providing applications to healthcare professionals in order to help them increase their effectiveness and simultaneously leverage the generated data to better understand and improve the patient journey.
  2. Current digital strategies are not sufficient
    With the requirement for an evolved G2M model being evident, many companies need a review of their digital strategy. Key questions must be answered: How should sales and marketing spend be invested? What channels are most important? How should the roles of the underpinning functions be defined? What are the critical data requirements and capabilities to drive success? A structured approach will be required to successfully define the required digital strategy.
  3. Sales force will refocus
    Sales force teams will continue to play a critical role in future engagement models, particularly to drive product launches and customer acquisition. However, with the in-person push model becoming increasingly inefficient, the role of the sales force requires needs to be reviewed. The focus should shift to defining how the sales force can support a company’s transformation combining face-to-face engagements with digital interactions to create a more personalized customer journey. An engagement model combining both ways of interaction is expected to lower cost of interaction and significantly increase sales growth (~15%) as compared to traditional (~9%) or stand-alone digital (~3%) models.
  4. Channel integration
    New offerings (Coliquio, 49med, Esanum) are providing alternate ways to reach the target audience and must be pursued to maintain SOV and competitive advantage. However, independent channel strategies will limit the ultimate value created from a company’s G2M model. Understanding the different role each channel is playing, mapping customer journeys across channels and clearly defining hand-offs will enable a greater traction with doctors and ensure the overall model does not remain salesperson-centric.
  5. Operating model evolution
    Redefining the G2M model, digital strategy and channel mix will all have cascading effects. New functions will be required, roles will need to be redefined, incentive structures will require adjustment and new tools will be needed to drive the strategy to completion. Companies like Pfizer or Takeda have been investing in digital resources establishing new functions that provide high-quality medical education tailored to specialists, while further down the value chain sales teams need to adapt to the new G2M model building up multi-channel capabilities. As a result of these changes, a company’s operating model must evolve in accordance with its G2M approach, whilst balancing alignment between models and impact of continued change.
  6. Culture
    Evolving a G2M approach is complex and challenging. First iterations are unlikely to bring fully satisfactory results. It will be critical though to establish the appropriate underlying culture to encourage elements that work, learn from failure and continue to evolve solutions to develop competitive advantage. This is particularly true for digital solutions such as digital customer fingerprints – an agile, iterative approach will be key to find solutions that last.

Edward Hamer has also contributed to this article.

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Holger Schmidt

Holger Schmidt

Partner, PwC Strategy& (Germany) GmbH

Claudia Palme

Claudia Palme

Senior Executive Advisor, PwC Strategy& (Germany) GmbH

Ralf Schönfeld

Ralf Schönfeld

Senior Manager, PwC Strategy& (Germany) GmbH

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