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Pharma Sales Models Continue to Evolve

Over, the last several years, the pharmaceutical industry in the United States has changed substantially, particularly as it relates to the industry sales model. Increasing regulatory pressures, shifting market dynamics, and patent expirations have impacted both the methods used by sales representatives and the incentive structure employed by pharmaceutical firms.

As more blockbuster drugs begin to lose patent protection, pharmaceutical firms are investing in treatments for more specialized diseases and disorders. Over half of the new drugs approved by the FDA in the last five years have been developed to treat cancers and rare diseases. While the development costs of these drugs tend to be lower, the costs of these treatments can be fairly lucrative, particularly as the products distinguish themselves from others available in the market. These types of treatments are prescribed by specialists, so they don’t need to be promoted to a mass of primary care physicians. The move to more specialized treatments requires sales representatives to play more of an advisory role, educating physicians about their products rather than simply promoting or incentivizing their use.

As the healthcare industry implements the provisions of The Affordable Care Act, many companies are shifting their sales attention to payers, such as insurers and government entities, while also reconsidering how they engage medical professionals to promote products. GlaxoSmithKline recently announced that it intends to suspend a long-standing practice of compensating physicians to speak about products on its behalf. Over the past few months, several news sources, The New York Times, ProPublica, and FiercePharma, have reported that many companies are drastically reducing such promotional expenditures.

While the drop in expenses signals a shift in strategy, it may also indicate a level of discomfort on the part of physicians. As the Physician Payment Sunshine Act, part of the Affordable Care Act, is implemented later this year, patients and consumer advocacy groups may see this type of activity as a conflict of interest. On the other hand, some companies are reducing these types of expenses because they simply have less drugs to promote.

As the relationship between pharmaceutical firms and healthcare professionals evolves, companies will need to be mindful of how sales representatives are promoting their products and the effectiveness of their tactics.  Innovative strategies to garner the mind share of prescribers, and favorable agreements with payers, will be the key components to long-term profitability.