Model behaviour

In today’s dynamic global pharmaceutical market, adapting to change is essential. With the market expected to double in value to $US 1.3 trillion by 2020, companies must tailor and restructure their existing sales models to cope with increasing demand and changing population needs.

“Pharmaceutical companies face three drivers, which are influencing change in their sales models,” said Frank Wartenberg, Vice President, Management Consulting, at IMS Health. “Firstly, we are seeing radical changes in the healthcare environment driven by more and more economical mindset, especially from a funding perspective. And given this current pressure of healthcare expenditures, companies are looking for ways to maintain their return on investment.”

“Secondly, in response to market needs, pharmaceutical companies are experiencing a shift in their portfolios, moving away from traditional mass-market towards more specialty-care like oncology or CNS. A different structure is needed as a result.”

Thirdly, Wartenberg says that increasing costs are forcing companies to find alternative structures. “Companies are under pressure from a declining revenue base and so need to manage their costs more thoroughly to increase or maintain productivity.”  

Identifying the right model can be a challenge when all internal and external factors are considered. For example, the size of the company, its organisational structure, its business processes and available resources, all need to be considered.

According to Wartenberg, companies must deploy a model that best meets their specific requirements. Flexibility, he notes, is crucial. “Firms should examine scenarios and identify options that are robust and deploy models that are adaptable for the future.”

Restructuring is a three- to four-step process. The initial step is to examine current conditions and qualify the need for change. Next, is to enter a diagnostic phase to fully grasp how the competition and operating environment are changing, and identify resulting strengths, weaknesses, opportunities and threats.

The third step, according to Wartenberg, is to shape the new sales model. “Companies must consider what processes they should implement and the capabilities and competencies that are needed in different functions across the organisation.”

The most critical stage is the implementation of the new model. Typically, this requires companies to develop a transition plan and roadmap that identifies and aligns all activities and sub-projects needed to effect the transition from the existing to the new model.

Nowhere is the change more evident than in Germany. Wartenberg explains, “Germany exemplifies where the industry is heading. In the past few years, there have been a number of legislative actions designed to reshape the market, which of course, are impacting how the system functions.”

“For example, the ability to make contracts with sick funds on products means that pharmacies are effectively forced to dispense those contracted products. This means contracts are a new way for companies to access the market and indeed, block their competition – which, as a consequence, has among other things dramatically reduced the cost for generics.”

By contrast, innovative therapies are suffering from heightened scrutiny on their cost-benefit effectiveness.

So in addition to the contractual and traditional types of innovative and clinical-driven models, a third model has emerged – the integrated care model in which doctors, hospitals, pharmacists and sick funds partner to organise healthcare.