Authored by Peggy Cleary, Associate Managing Director, The Pangaea Group

Globally, over 60% of pharmaceutical industry growth can be attributed to specialty care brands. These are high-priced, specialized, predominantly biopharmaceutical molecules that have limited patient and prescriber populations, high annual treatment costs, and restrictions on access and use, and reimbursement.  The industry pipeline includes more than 100 such products in Phase II or higher level of development, for about 165 indications. Pangaea recently interviewed a cross-range of executives in specialty and primary care pharmaceutical markets to understand:


• how this market differs from the traditional primary care market
• what it takes to be a success on this challenging frontier
• how the HR function can help ensure that success

Our interviewees included leaders in marketing, medical/scientific, finance, purchasing, distribution and human resources, and were drawn from various types of companies:


• Primary care driven organizations, with a number of specialty products
• Primary care driven organizations with a number of specialty products in the pipeline, but none on the market currently
• Biotechs with only specialty products
• A variety of service providers to specialty companies with specialty care brands

We’ll tell you up front what the bottom line is: everything you thought you needed for primary care markets, you need in spades for specialty markets.

1. Skills and Competencies for this Market

To state the obvious, the specialty market place is different than primary care markets and the implications for how you resource and manage specialty businesses are considerable.

The prescriber universe is much smaller and the Key Opinion Leader (KOL) is a much different customer than a GP. They have a higher expectation of the specialty care company employees when it comes to scientific knowledge and service level. This means that everyone who deals with them must have multiple sets of competencies:


• Stellar scientific and medical knowledge and personal confidence and credibility in presenting that knowledge
• Outstanding relationship building and customer service skills – one KOL relationship can make or break a specialty business and these “customers” require high level, extremely professional service
• Sophisticated political and organizational acumen to understand the world in which KOLs operate
  You need the right selection criteria, competency models and developmental focus to ensure marketers, scientific liaisons, sales people and others have all of these critical skills.

2. The Necessary Approach

The tight KOL universe, small patient numbers, and barriers to entry (high development cost, intensity of competition, threat of substitution) mean that a team approach is imperative. As is the need for value-added services that enable prescribers and patients to access and sustain treatment. These services are as vital to successfully commercializing the brand as the effectiveness of the drug itself.

Specialty businesses tend to operate as small, close knit, matrixed teams. If there is a whiff of functional silos, it doesn’t work. No function can take precedence. Marketers need to be able to function in a medical/scientific way; medical/scientific people need to have a commercial orientation. Everybody needs to be able to roll up their sleeves and dig into the data. Everyone needs to understand the complexities of reimbursement. Most functions need to be at the table and be paid attention to like never before:


• The sooner Market Access is at the table, the more likely successful pricing and reimbursement strategies are to be realized. With the high cost of many specialty products the stakes on market access are extremely high.
• Having Purchasing/Finance there early means that the best choices are made about crucial vendor services such as agencies, patient care programs, and reimbursement programs.
• With Distribution at the table, the special logistics and distribution requirements and shelf life considerations of specialty products are factored into brand plans and conversations occur early about things like “How can our supply chain be a competitive advantage?”

This style of operating means the ability to collaborate, understand the big picture, lead or be an effective team member are as important as the competencies cited above. Specialty teams must be high performance teams and team members need to be skilled at operating in a matrix. Some of our clients actually provide a “cheat sheet” of who does what in the matrix.

3. Leadership

Getting everybody on the same page is the key to success in all businesses, but arguably more so in specialty pharmaceutical businesses. The team approach described above requires enlightened leaders who know how to create environments with high employee engagement. Dr. Jack Wiley, a noted researcher on employee engagement, cites the four top global drivers of engagement as set out below. These resonate with what our interviewees told us about the important attributes of leaders in specialty.

• Leaders who inspire confidence in the future – having a vision based on the nuanced reality of specialty markets, together with excitement about how the products improve the lives of patients and furthers scientific understanding is crucial to the success of these businesses.

• Managers who respect and recognize employees – nothing less creates the team environment and integrated approach so crucial to these businesses.

• Exciting work that employees know how to do – specialty businesses offer this in spades. The focus for leaders is ensuring employee development and talent management strategies drive the business and that they develop a culture that values and fosters high performance.
• Organizations that demonstrate a genuine responsibility to employees and communities – nothing less generates the extra effort from employees, going the extra mile that’s needed in these businesses. This is what makes marketing strategy coherent, decisions on priorities supportable and day to day work worthwhile.

Leaders in this business understand the importance of alignment not only locally, but globally. Because specialty businesses are areas for growth for most organizations and potentially extremely profitable, Canadian businesses play their part in a global strategy. What happens with Canadian KOLs has a global impact. More than a few Canadian specialists are considered global thought leaders in their therapeutic areas.

Conversely, leaders in specialty aren’t remote or hierarchical, but quite hands on. They need to be able to pick up the phone and speak to a KOL about current issues, opportunities, such as possible future research investments in their centers, and what’s important to that specialist. With client intimacy so high, KOLs expect senior management to visit them on a regular basis.

4. Medical and Marketing – No Longer Strange Bedfellows

We’re not talking about holding hands and singing Kumbaya, but Medical and Marketing efforts must be tightly integrated. With the need to seed the market with Phase III trials and/or Special Access Programs, that integration needs to be present from the start. There must be a strong willingness and ability to collaborate. Medical needs to not only ensure that the science is credible, but that it advances commercial needs – it needs to be applied evidence-based science, not academic science. Of course, there is an ethical line between scientific activity and marketing activity and there can be conflict over just where that line falls. There needs to be explicit discussion about it and a clear and agreed understanding of the boundaries and opportunities for each function.

Having an effective and targeted medical/science liaison team is crucial for success, but there is the also thorny question of what to do with pre-market Science Liaison people after a product is launched. In the best of all possible worlds, there are additional indications or other products in the pipeline that Science Liaisons can support. Whatever happens, transition of KOLs from the aegis of Medical to that of Marketing/Sales needs to be carefully planned and executed. Typically, Science Liaisons remain on the brand team, and in contact with the KOL, but at less frequent intervals. Their role becomes one of support and knowledge resource to sales representatives. One organization has taken the interesting step of having only Science Liaison people in the field, and no sales representatives – that will be a space to watch.

One notable indicator of the cross-functional influence of Medical and Marketing is that Science Liaisons are now considered viable candidates for product management positions.

After launch and indeed for the lifecycle of the product, Medical may remain extensively involved with the products because of the need for direct involvement in treatment administration and education. Often such non-sales field forces report to Medical function but are integral to the success of the brand.


5. Marketing

The role of the marketing manager is significantly different in specialty businesses. The most significant difference is in the perspective the manager can take. With a customer audience of 100 to 150 physician influencers, it is possible to conceptualize the marketing of a product at an individual customer level. Each customer should have an individual marketing plan, and a tactical plan that is customized to the customer’s specific value drivers. To do this, marketing managers must have intimate relationships with the customers as well as with the sales representatives who have the primary relationship and knowledge of the customer. Coordinating cross-functional activity to make individual customer plans succeed is crucial.

To facilitate the level and kind of data collection and analysis that is required, companies need a different and fresh approach to research. Because of the small customer base, where each customer can have a significant effect on sales, traditional marketing research based on a small sample size of physicians is irrelevant to decision making. In specialty markets, each individual physician’s opinion is important in and of itself, but may not be relevant to the way other physicians are approached.

6. The Salesforce

Specialty sales representatives, most often called Area Business Managers, tend to be more highly educated often holding medical qualifications and having the capacity to master complex scientific and medical information. This is coupled with the ability to develop strong and mutually beneficial relationships with KOLs. You won’t find any rookies in specialty sales. In fact, KOLs expect a rep who can be viewed as a peer. They quickly determine if the rep is not knowledgeable enough to debate issues and advance the science of treatment.

Specialty representatives also have an orientation to high value service and a high level of business acumen. The later is where the level of success is really determined. As specialty markets become more competitive, representatives will need to become better analysts, decision makers, and negotiators. Because syndicated market and customer data is not readily available, representatives must be able to uncover and discover ways of estimating patient loads and product usage in order to determine both forecasts and investment levels. All of this needs to be done in close concert with the marketing managers who are preparing both strategy and tactics from a national perspective.

Specialty sales forces tend to be very small, not more than 10 to 12 representatives and sometimes as few as 6. If coming in from the primary care market, they would have a successful background in hospital or specialist driven brands, such as oncology. Even with that background, the estimate is 6 to 12 months to become productive in a specialty business.

Specialty companies struggle with how to measure the effectiveness of representatives. For instance, call averages are out the window. Measures tend to be more qualitatively driven, than quantitative, such as acquiring direct feedback from customers. The intimate nature of relationships with key specialists should enable a sales director or manager to pick up the phone or call on customers and ask, “How are we doing?” They may or may not tell you about problems if they aren’t asked, but they will be quite candid, and generally pleased that the company has shown that degree of interest. This will be a far more accurate performance measure than calls conducted ‘with managers’. Specialists have more time challenges and are less tolerant of sales training or management exercises.

In some cases there is a stronger relationship between customers and senior medical or clinical staff. In these cases, specialists might respond even more candidly to performance enquiries from a medical director who is willing to assist. In the requisite Team approach we’ve discussed previously, this type of measurement is not unusual. Regardless of the approach used, representatives should be aware that these types of performance ‘audits’ may be part of their overall assessment and are in the interest of overall team performance.

7. Structure

We asked interviewees about the best organizational structure for specialty businesses, and the answer: it depends. On the number of products in the portfolio, on product lifecycle, market potential for new products, on the level of development of the organization, on whether it’s a primary care organization with some specialty products, or a biotech with all specialty products.

Primary care driven organizations just getting into the specialty market run the risk of considering specialty businesses with their special handling and patient support requirements, complex market dynamics, higher knowledge based employees, as difficult businesses to manage because they need too many resources and attention. Education is needed on the strategic importance of these businesses and the potential and high profitability of these markets.

In organizations that have both primary care and specialty businesses, sometimes the latter can be insular. The leaders of these organizations need to use their well-developed team skills to draw in the larger organization and engage them in the excitement of their markets.

With therapeutic business unit structures, the issue is often whether dedicated Medical/Scientific/Clinical and Regulatory people report into the unit head or to the larger organizational functional unit. The advantage if they report to the business unit is a tighter team. However, there is a risk that technical people can be co-opted by the Marketing agenda and their priorities may not receive the same consideration, energy or focus. This is an issue that needs to be explicitly managed as indicated in Section 4 above.

Whatever the structure, it needs to be customer-centric in its design with particular attention to ensuring as much decision making authority as possible is vested with those closest to customers.

8. Human Resource Practices

Attraction

By now you are seeing that getting the right people on the bus, especially leaders, is imperative in specialty businesses. This means having impeccable recruitment profiles highly tailored to the business especially when it comes to scientific knowledge, together with sophisticated assessment methods and high selection standards. If you are considering candidates from mainstream pharma, you must be sure they understand the difference between primary care and specialty markets, and that they have a demonstrated track record of the competencies needed for success in specialty.

Compensation

As with performance management systems (below), salary increases, bonuses and incentives all need to be tied to overall strategy and achievement of organizational goals. The base salaries in specialty are generally higher than primary care because of the advanced scientific, medical or therapeutic knowledge base typically required.

While the principles behind bonus and incentive portions of compensation are the same as any other business, there is a heavier emphasis on qualitative vs. quantitative measures than you see in primary care, particularly with field forces. There are also strong components for team results in an effort to drive desired team behaviors described in Section 2. Where the business is just moving into the market and wants to establish itself as a key, long term player there is more emphasis on strategic activity in both the short and long term incentive structure.

Performance Management

For years a static process, Performance Management systems are now used as one of the principle tools to achieve collective goals by linking performance goals to organizational strategy and cascading strategic and operational goals down to ensure every person knows and executes their part of the plan. Annual appraisals are being replaced by full time performance management involving more frequent but less onerous informal meetings, with dialogue and coaching about tracking to plan and achieving goals. In the war for talent, employees want to be appreciated and developed. More frequent reviews achieve both those ends. Specialty businesses with their high knowledge workers are particularly suited to benefit from this kind of performance management system that reduces turnover and pointedly drives outcomes for the business.

Employee and Leadership Development/Talent Management

The cold reality about the pharmaceutical business in Canada is that the products are not invented here, pricing and market access is not under our control, and to some extent strategy and financial objectives come down from on high. Often, the only variable in market success of local organizations is the people, and it is imperative that they be a strategic asset and competitive advantage. Specialty businesses need a people strategy to match their business strategy in order to ensure:


• Employees have the talent needed to not only meet current business challenges but also the challenges of the future
• Training and Development has a direct business impact
• High performing employees achieve potential and are retained
• Decisions about people are made with the same rigor, logic and confidence as decisions about money, customers, products and technology
• Strategy and goals are achieved

High Performance Culture

Corporate culture at its most basic level is the sum of an organization’s behaviours and practices. It is there whether you have deliberately shaped it or not. It reveals itself in big and small decisions as well as daily practices (“how we do things around here”) that tend to perpetuate themselves. Culture often goes unnoticed by employees, like the air you breathe, yet a healthy culture like clean air is essential to a healthy organization. It’s potentially the most powerful engagement tool at your disposal. If you get culture right, it provides a foundation for high engagement that can sustain your organization through good times and bad.

Much has been written about high performance cultures and how you get them. The most important thing to know is that you can get the culture you want and need but it takes a thoughtful, deliberate and managed effort. HR can provide the support you need to shape that effort and ensure it is successful.

Retention

The per capita productivity in these businesses is very high, as is the cost of employee development and training. This makes retention doubly important. The loss of even one representative or Science Liaison can have a huge impact on results. The entire suite of people practices is key in attracting and retaining employees. These include the right compensation, strategic performance management, a relevant and meaningful employee development program, and a high performance culture where employees feel valued, empowered and able to reach their potential. A significant part of success in the specialty marketplace depends on getting the right movement of each of these levers.

Conclusion

If you haven’t got all of this in place, it may be because you haven’t paid enough attention to your people practices and we suspect that HR is not at the strategy table. Our research has led us to the conclusion that specialty businesses are, well, special. Your HR practices must be as well.

Get in touch with us to find out how Pangaea can help you with your organization and leadership development initiatives.

Originally published as a 3 part series in The Chronicle of Healthcare Marketing, Part 1 HR Practices key is specialty markets Aug. 31, 2009, Part 2 _ Developing marketing and sales for specialty markets_ Oct. 31, 2009, Part 3 Organizational structure for specialty markets Dec 31, 2009

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