The case for advanced analytics
By Patrick Homer
The traditional commercial model for pharmaceutical companies – an army of sales reps backed by extensive mass marketing – is under siege. Sales forces are shrinking, salesforce spending is flat, and sales reps get less time than ever with busy physicians. Furthermore, a large sales force has less impact in an era of managed care.
With fewer dollars to invest in marketing, the mix of channels and messages has to be right. With fewer sales reps on the street, the choice of which physicians to target must be more finely honed. With the brand being lauded or lambasted on social media, communication efforts must be coordinated and cohesive across channels. With payers having more influence over prescribing patterns, pharmas have to carefully manage those relationships. All signs point to one conclusion: It is time for pharmas to apply more sophisticated methods for understanding, predicting and optimizing their sales and marketing investments.
"If they want to not only survive but also thrive, pharmaceutical companies need to build analytical capabilities for the business. What worked in the past is not going to work in the future. We have to do things differently; we have to make data-based decisions – and more and better ones than we did in the past."
—Charlotte Sibley, Senior VP, Business Management, Shire Pharmaceuticals
"This is not hype," says Scott Evangelista, principal at Deloitte Consulting. "When will senior management truly adopt, embrace and demand robust predictive analytics in decision making? It is still an open question, and it is happening slower than I would have expected, given the enormous pressure on spending."
Other industries – retail, telecom and financial services, to name a few – long ago developed analytic capabilities for sales and marketing programs. Why has the high-stakes pharmaceutical industry been so late to the game? Advanced analytics do figure prominently on the science and manufacturing side of the business. Analytics enable pharmaceutical companies to quickly transform biomedical data into clinical insights, accelerate drug discovery and development processes, and analyze the supply chain to manage production efficiencies and risk. Why not apply the power of business analytics to make commercialization programs even more successful?
"Pharmaceutical companies have been late because the burning platform has not been there," Evangelista says. "They've been flush with cash. They've been very profitable. The more profitable companies are, the less they look for the pennies and the minor tweaks and twists that would boost efficiency and return on investment. With the expected impacts from health care reform, their margins are going to shrink – we're already seeing that in the market. This has ignited the platform, and the flames are getting closer."
Analytics in Action – Three Prime Applications
Historically, pharmaceutical companies have targeted the physicians who prescribed highly in the past, on the assumption that these physicians would continue to prescribe highly in the future. But this "top-decile" approach gives no consideration for physicians whose prescribing has peaked and is on the decline – nor does it recognize for low-decile physicians who have potential to become high prescribers of the target brand.
Predictive analytics look at all the variables that come into play to create not just a list but a behavioral profile of high-value physicians. Then you can go back into the universe of other physicians and find those who have the same characteristics. These physicians – the ones with high potential but untapped value – represent the most productive ones to target for promotional contacts.
Using predictive analytics instead of a conventional, top-decile approach, a midsized company delivered a 15 percent lift in prescribing potential – an additional $132 million – across its product portfolio. A top-five pharma company released 24 percent of additional prescribing potential worth $77 million on one brand alone. Another company discovered that results for the launch phase of its new product in a new market could have been 37 percent higher if an analytically detailed target list had been used.
"It is ironic that when analytical techniques are applied on the medical side, they are seen as innovations, the necessary tools for developing our products. But if you want to apply the same techniques to figuring out the business and how to better communicate the value of our products, it's seen as a black box – which turns into a black hole, because nothing gets done."
—Daniel Feldman*, Past President of the Pharmaceutical Management Science Association (PMSA) and Director of Oncology Market Research at Bristol-Myers Squibb
Marketing Mix Optimization
Predictive marketing mix analysis provides forward-looking insights for finance and senior management. Push a button to automatically run analyses that optimize expenditures across geography and media channels. What-if analysis simulates what would happen when a variable in the marketing mix is changed.
Which mix of marketing channels will yield the best return? Where is the saturation point for a particular channel? Being able to answer these questions is nothing new, but it has typically been figured out at the end of a campaign. Predictive analytics enable you to look at an upcoming campaign and make predictions about the best course of action.
Managed Care Contract Rebate Optimization
Necessity, not luxury
Bio: Patrick Homer is a thought leader in the field of transformational analytics in commercial pharma. He currently leads the global commercial pharma practice at SAS and has been involved with both strategy and development of SAS solutions in this area.
*Note: Statements from Daniel Feldman quoted in this document reflect his personal views, not those of Bristol-Myers Squibb or its affiliates.