Tuesday, December 05, 2006

Oversold

Charlie Green, at Trusted Advisor, had a good post yesterday on the "trust factor" between doctors and pharmaceutical sales people.  His post was prompted by Pfizer's decision to make deep sales force cuts.  He attributes the necessity for these cuts to the fact that many/most doctors don't trust the pharmaceutical sales reps because they're all about the sale, and not about "doing the right thing."  Over time, this has backfired into lower revenues.

Rep sales forces, through an array of complex short-term measurements tied to incentive schemes, and deep behavioral training on how to maximize seller impact at the transaction level, have come to be managed as engines of revenue to the sellers, rather than trusted advisors to the physicians.

The result, paradoxically, is lower revenue.

It’s always that way when the paradox is violated. If you want to sell, stop trying to sell. If you want to make money, stop trying to make money. If you drop those as overt objectives at the transactional level, and instead focus on serving the true needs and wants of your clients at the relationship level, you will—paradoxically—end up selling a lot, and making a lot of money. But only if you don’t set out to do so.

Profit is a byproduct of great customer focus—not the purpose itself. If you subordinate focus to profit, you get neither. The physicians know this, and have voted.

Of course, it's note just a matter of trust in the pharma world. I've spent most of my career in "enterprise technology" (software and/or services), generally working with premium priced products.  And generally the premium price was a reflection of our over-engineered products (that went far beyond what the bulk of the market could afford or use) and/or an out of whack cost structure that required us to overprice our products.

The result was we had to overmarket and oversell. Come the end of the quarter, we'd be pressing prospects to sign, convincing them that someday, somehow, they'd need what our product offered when the best piece of advice we could have offered them was to buy from a lower-priced, generally lower-featured (but frankly not always!) competitor.

Since we were not malicious or evil people, we always spent the rest of our relationship with the oversold customer providing them with costly services (consulting and support) to get the product to work better, to make it easier, to hole their hand, to do their work for them.... Last quarter's triumphant sale turned into ongoing costs that contributed to our out of whack costs, that contributed to our having to charge higher prices than everyone else.....("There's a hole in the bucket, dear Liza, dear Liza.") We also ended up with some brutally unhappy customers, when we could have had happy non-customers who would keep us in mind in the future, provide word of mouth references, etc.

Needless to say, these companies have gone by the wayside. But the lesson is there: if you're not doing the right thing by your prospects - and sometimes that means walking away - you're not doing the right thing by your company, either. Even though the big sale may look really good at the time, if it's not right it will backfire on you.

2 comments:

Charles H. Green said...

Maureen,thanks for pointing out the analogy in the world of high tech. It looks a lot like what happens too in management consulting; and in auto suppliers; and on and on.

As you point out, when we try to sell what isn't needed, it's not from maliciousness; or even bad intentions, to some extent. We convince ourselves always that we're trying to help, and within a certain framework, that's true.

But the framework somehow always seems to involve our company and ourselves. Back in my dating days, I would hardly have recommended a friend in lieu of myself to a lady I fancied! Nor would I have expected a friend to do so for me. It was every man for himself!

But even in that world, the truth is, not everyone is right for everyone. Standing in the way of what other people want isn't helpful at all. Helping other people get what they want always generates good buzz, and sometimes even turns the results around. Doing things to help people is a pretty good strategy--you just don't always know where the payoff is going to come from, or when.

Anonymous said...

While the pharmaceutical industry’s image and reputation has suffered, and has been complicated with their declining profits due to a few reasons, these companies still apparently insist on keeping most of their gift- givers on board. Known presently as simply drug reps today, this job has become a vocation void of a sense of accomplishment, which will be described below.

So they may be named at times in different ways, these promoters will be referred to as drug reps, which number close to 100,000 in the U.S. presently, it is believed. The cost to the pharmaceutical industry of these employees is around 5 billion dollars a year. Income for each rep grosses close to or above 100,000 grand a year on average, along with great benefits and a company car, as well as stock options as they gladly work from their homes.

The main function these days of drug reps, I believe, is primarily to offer doctors various types of inducements of a certain value. The drug sampling of doctors may be considered an inducement, and a rather valuable one for the drug rep, as many believe that these samples are what ultimately influence the doctor’s prescribing habits over anything else, including statements from drug reps. This may be why the drug industry spends around 20 billion every year on samples.
While historically drug reps have used their persuasive abilities to influence the prescribing habits of doctors in an honest and ethical manner. However presently, most health care providers now simply refuse to speak with them, or have banned all drug reps permanently from their practices for a number of reasons, including the recommendations from their colleagues. It is possible that this may be due to the following reasons:

1. The doctors lose money. Doctors are normally busy, so their time is valuable. As a drug rep, you are a waste of their time. Yet they will accept your samples still. The credibility you possibly have as a rep is not considered anymore to be present in your vocation due to various controversies associated with the pharmaceutical industry, it is speculated.

2. Most drug reps in the U.S. are hired for their looks and their personality. As a result, many are somewhat ignorant in regards to anything that is clinically relevant to a medical practice, so doctors seem to know this and have responded in such ways. Most drug reps have college degrees that do not correlate with their profession as a drug rep, which is to say that the clinical training of drug reps is limited. In fact, many consider this of such a serious nature that an Act is presently being considered called the SafeRx Act that would certify pharmaceutical reps, and this would be mandatory. One main reason would be to ensure personal accountability for their tactics and statements, I believe, which may improve the quality and safety of their function in the medical community.

3. Many drug reps, it is believed, are void of any ethical considerations due to ignorance of what they are coerced to do or say to prescribers by their employer, and this allows them to embellish the benefits of their promoted products at times in addition to offering inducements to doctors. This is usually due to the rep being unaware of the consequences of their actions at times, yet at other times what reps say is with premeditated intent for potential financial gain for such a drug rep. Worse yet, due to pressure to keep their high-paying jobs, they always are anxious to please their superiors, who require them to offer various types of inducements to physicians that are designated targets of a particular drug company. Such tactics are especially true with the larger drug companies. These reps are in fact coerced to spend these individual promotional budgets assigned to them by their employer. While legally risky, the drug companies continue to dispense to their reps these large budgets reps have been forced to be responsible for dispensing, and are required to spend these budgets. In fact, so much emphasis is placed on this promotional spending, there seems to be an association between the money a rep spends and the progression that occurs with their career working for their pharmaceutical employer. Disclosure laws are being considered presently to mandate the release of all funds dispensed from pharmaceutical companies, which is to say to allow others to see where their money goes and who it goes to, as it is presently very secretive, overall. It is not unusual for a big drug rep to spend 50 thousand dollars a year for clinic lunches alone. In addition, drug reps hire doctors as speakers for certain disease states, and they find many other ways to spend this money they are required to spend.

4. Another issue is what is referred to as data mining. The American Medical Association sells this prescribing data on individual doctors to pharmaceutical companies, which allows them to track the scripts a doctor writes, and the data is free of the patient names. Yet the names the products prescribed are well illustrated and available to the drug reps. This allows reps to tailor their tactical approach with any given doctor, if they see the doctor at all during an office visit. Worse yet, doctors who greatly support the promoted products determined by this data allow reps to reward those doctors who favor the rep’s products that they promote, and this could be considered a form of quid pro quo. Laws are being considered presently to prevent this practice of allowing reps to have this data. Doctors are opposed to the data the reps have as well about them for privacy and deceptive reasons, so they say.

5. Overall, reps can be best described as far as their function goes with their profession is to, whenever possible, manipulate doctors with remuneration or other forms of inducements, as they also continue to sample such doctors along with others their promoted meds. Also, frequent lunches are in fact bought often for doctors’ offices and their staff as a method of access, primarily, as stated earlier with the money reps spend earlier for this type of function. Essentially, because of the income and benefits the drug reps receive that they would likely not be able to obtain with any other job, they are compelled to do such unethical if not illegal tactics mentioned earlier that they perhaps normally would not do in another setting. Usually these drug reps rarely refuse to implement such tactics encouraged to them by their employers.

6. Samples keep the prescriber from selecting what may be their preferred choice of med due to cost savings from samples left with a medical office by a drug rep. In addition, doctors are now being paid by prescription providers, which are called pharmacy benefit managers (PBMs) that are typically owned by a managed care company to have a doctor switch their patients to generic substitutes, if they exist, and this is often not disclosed to such patients. Apparently, these PBM companies are doing this in response to the activities of the branded drug companies, as they continue pay doctors often for various reasons, which are questionable in themselves.

It is likely that most drug reps are good and intelligent people who unfortunately are coerced to do things that may be considered corruptive to others in order to maintain their employment, ultimately. It seems that external regulation is necessary to prevent the drug companies from allowing the autonomy of drug reps that exists, with their encouragement, which forces the reps to do the wrong thing for the medical community, possibly. Clearly, greed has replaced ethics with this element of the health care system, which is the pharmaceutical industry, as illustrated with what occurs within these companies. However, reversing this misguided focus of drug companies is not impossible if the right action is taken for the benefit of public health. Likely, if there are no drug reps, there is no one to employ such tactics mentioned earlier. Because authentically educating doctors does not appear to be the reason for their vocation. This is far from being the responsibility of a pharmaceutical sales representative.

“What you don’t do can be a destructive force.” --- Eleanor Roosevelt

Dan Abshear
Veteran ex big pharma rep