effective sales and marketing with reduced costs 10.12.09

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1/13Making an Impact: Effective Sales and Marketing with Reduced Costs Page 1 of 1

Making an Impact:Effective Sales and Marketing With Reduced CoLeveraging offshore resources to do more with less

Manish Gupta, BTech, MBA

Director, Indegene Lifesystems

Rajesh Nair, MBBS, MBA

President and CEO, Indegene Inc.



Background

The pharmaceutical industry relies heavily on the sales and marketing functito maximize organizational returns. Over the last few years, the existing saleand marketing model, especially in developed markets, is under tremendouspressure due to:

Absence of blockbusters9

Patent expiries and competition from generics9

Stricter regulatory environment9

Changing customer/market dynamics9

Challenges in managed care and reimbursement9

To add to the woes, pharmaceutical companies are being compelled to reducthe sales and marketing spends while trying to maintain the same effectivenedeliver historical levels of pro tability. On one hand, a dif cult and more comarketplace is increasingly demanding sharper strategies and smarter tacticson the other reduced budgets continue to make execution dif cult.

The last 10 years have seen a seismic shift in the dynamics of pharmaceuticasales and marketing. The return on investment in sales force expansion is shrcausing almost all major pharmaceutical companies to reduce their head couFurther, it is increasingly evident that the market and regulators are interestenew therapies that address an unmet need rather than yet another product in existing class of molecules with little or no clinical or economic bene t.

This paper explores how pharmaceutical companies, as part of their restructusales and marketing partnership model, can leverage the advantages of offshdelivery to ensure sales and marketing effectiveness and meet reduced budgetargets, while maintaining existing levels of service quality and ef ciency.

PharmaceuticalSales andMarketing New Market Realities

Call for New Operating Models



Variable Annual Spending1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Direct-to Consumer advertising

Total spending (millions of $) 985 1,301 1,578 2,166 2,798 2,954 2,864 3,478 4,160 4Percentage of sales 1.2 1.5 1.6 1.8 2.1 2.0 1.9 2.2 2.5 2.6

Professional promotion

Total spending (millions of $)

Detailing 3,747 4,093 4,861 5,064 5,447 6,055 6,731 7,364 7,585 6,7

Journal advertising 571 621 597 551 549 469 474 476 516 429

Percentage of sales 5.4 5.4 5.6 4.7 4.6 4.5 4.8 5.0 4.9 4.4

Free samples

Total retail value (millions of $) 6,104 7,358 7,910 8,476 9,021 11,539 12,928 14,362 16,404 1


Total promotion

Total spending (millions of $) 11,407 13,373 14,946 16,257 17,815 21,018 22,997 25,680 28,664 2


*Data on promotional spending are from IMS Health (www.imshealth.com); data on sales are from phRMAs annual report. All data were adjusted to 2005 dollars, according to the Consumer PSpending on free samples for 2005 was estimated on the basis of growth and spending rates from previous 3 years.

Table 1. Annual Spending on Direct-to-Consumer Advertising and Promotion to Health Professionals, 1996-2005. (Source: Donohue JM, Cevasco M, Rosenthal MB. A ddirect-to-consumer advertising of prescription drugs.N Engl J Med . 2007 ;357:673-681. http://content.nejm.org/cgi/content/full/357/7/673. Accessed September 18, 2009.)

The Changing Scenario

Between 1996 to 2005, the total pharmaceutical promotion spend increased fUSD 11.4 billion to USD 29.9 billion.1 During the same period, the strength of sales force increased from 35,000 to 100,000.2 The total promotional spend, as apercentage of sales, increased from 14.2 to 18.2 during the same period (Tab

The rapid increase in promotional spending as a percenage of sales wasaccompanied by distortions across processes, structures, and mind-sets, whicadversely impacted cost structures and operational ef ciencies. Some exampinclude:

Decoupling of sales and marketing from R&D. Relatively few inpu9the market went into the R&D process, leading to increased late-sattritions, suboptimal labels vis--vis competitor products, and longperiods of data-gaps, severely impacting promotional effectiveneThe success of the blockbuster model covered up not only theinef ciencies but also the lack of market feedback process betweenmarketing and R&D.

Increase in sales force numbers. The reduction in physician free tim9due to increasing paperwork and managed-care regulations, challenthe efforts of companies to have more rep visits. Although doctors sperceiving less value from rep visits, the direct sales spend continuto increase.

Inef cient market sourcing with large pharmaceutical companies ha9

upwards of 50 service agencies providing the same service, and indbrand teams working with agency/agencies they were more comforwith. Duplication of efforts, strategies working at cross purposes, ahighly variable cost structures were tolerated since the return on theactivities justi ed all operational inef ciencies.



Weak pipelines, patent expiries of agship products, increased FDA vigilancreimbursement challenges, and formulary issues have been adding pressure opharmaceutical companies revenues and pro tability. What started in 2005 trickle of early adopters looking to explore options to preserve margins throureducing sales and marketing budgets have recently morphed into a powerfurush of top 20 companies striving to fundamentally transform the sales andmarketing model.

It is expected that around USD 81.5 billion worth of branded products will goff-patent between 2009 and 2015 (Figure 1). This impending patent cliff istranslating to an even higher pressure on pharmaceutical companies to reduccosts in the next couple of years.

(in billions)

$9.3

2009

$6.5

2010

$20.9

2012

$18.5

2011

$7.3

2013

$15.0

2014

$4.0

2015

Figure 1.Top Brands That Will Go Off-patent Between 2009 and 2015 (Source: Prescription for in sales. Feb 19, 2007;85(8). Chemical & Engineering News.)

2009: Adderall, Prevacid, Topamax, Valtrex

2010: Effexor XR, Flomax, Cozaar, Hyzaar

2011: Lipitor, Actos, Protonix, Zyprexa, Levaqun, Aricept

2012: Plavix, Singulair, Seroquel, Lexapro, Diovan, Avandia

2013: Cymbalta, Celebrex, Aciphex2014: Nexium, Vytorin, Zetia, Lyrica, Nasonex

2015: Abilify



The pharmaceutical industry has started responding positively tothese challenges by:

Integrating market feedback and competitive realities into the R&D9process. Different companies are achieving this through differentstructures, but the end goal is to pull-in the market early throughknowledge management and other systems to share insights on unmclinical needs, competitive strategies, competitive claims, as well asunderstanding of doctor and patient behavior.

Effecting signi cant reduction in force. As per a ZS Associates pred9the number of pharma sales reps would reduce to 75,000 in 2012, dfrom 102,000 in 2007.

Exploring alternate sales and marketing models and channels by9integrating online closed-loop marketing, sales force activities, as wnonpersonal promotions to enhance physician coverage.

Sourcing optimization and vendor rationalization. Service provider9being optimized through structured processes to drive ef ciencies oand guarantee optimal pricing.

While these activities are important steps toward reducing costs by enhancinoperational rigor, the quantum of bene ts and the time period in which thesebene ts can be achieved may be accelerated dramatically by leveraging theoffshore delivery model.



The New Model

Compared with other industries, the pharmaceutical sector has been a bit lateto the offshoring and global resourcing game. Globalization has developed omultiple waves, with focus shifting from raw material and intermediate sourmanufacturing, and clinical trials offshoring before focusing on sales and maactivities and budgets.

While it is an interesting conundrum that sales and marketing teams, despite

tremendous budget pressures, have been the slowest to adopt and take advanof offshoring as a business practice, there may be many reasons for this scen

Local touch-and-feel: This is critical for promotional medical educati A.strategic communication programs. Tight integration between strategy aexecution and the need for multiple iterations demand local presence.

Lost-in-translation issues: Many brand teams feel that a pure productiB.approach by remote teams working thousands of miles away may miss tforest for the trees and will end up sacri cing creativity, innovation, andimpact. A constant refrain is how will these people understand my uniqmarket challenges?

Local regulatory, medicolegal, managed care, and creative guidelines:C.It takes tremendous efforts to bring an agency up-to-speed on the brandstrategy, tactics, and trajectory. A simple offshore production approach mdo justice to the complex web of iterative interactions that is so much a todays promotional program execution process.

In spite of the above received wisdom, there are a few early adopter compathat have driven offshoring for sales and marketing activities quite aggressivWithin these companies, multiple functional groups including strategic markcommercialization, brand management, product management, and sales trainteams are increasingly recognizing and gaining the bene ts of offshoring.

Today,the bene ts of offshoring gomuch beyond apure cost model,

enabling Pharma companies tocompete more effectively in the

marketplace.



Function Type of Activities

Brand andtherapy teams

Promotional medical education programs, online interactiveplatforms for physician engagement, patient adherence program

e-Marketing programs.

Medical affairs

Scienti c communications, publication support and editorial semedical information management, augmentation of medical serliaisons (MSLs) for engaging with physicians, and assisting inmedicolegal reviews.

TrainingLaunch and ongoing product and disease training programs,managing and repurposing training/digital assets for multiple markets.

Competitive

intelligence

Deeper understanding of competitors goals and strategiesthrough secondary research and analysis, brand surveillance,medical meetings/conference coverage and analysis, war-gaminpreparation, online patient and physician blog monitoring, and kopinion leader research and analysis.

Market researchand analytics

Online market research, message recall, physician decisionmapping, qualitative market research, positioning, sales, forecasales force excellence, and market assessments.

Pricing andreimbursement

PRO research, global dossiers, epidemiologic assessment,compliance and persistence analysis, burden of disease evaluaticost-effectiveness model support.

The typical bene ts of using an offshore delivery model include:

Cost reduction in the range of 40% to 60%.9

Resource availability and quick ramp-up. Ability to build in produc9buffers to cater for peak loads without adversely impacting theoverall budget.

The exibility to run programs currently not budgeted or with low b9Critical initiatives for risk reduction, revenue enhancement, or highof voice in the marketplace currently sacri ced or triaged due to wabudget can be resurrected through the offshore model.

Signi cant knowledge capture and learnings within the dedicated o9team that quickly mitigate the initial apprehensions regarding the abthe team to understand strategic and tactical nuances.

Several activities under the sales and marketing budget have been successfuloffshored. Some examples of the types of activities are shown in Table 2.

Table 2.Examples of Offshored Sales and Marketing Activities Organized by Function



While companies typically approach offshoring initially from cost-bene t pethe true offshore dividend goes beyond cost. There are different evolutionaryfor offshoring that provide a range of cost and other important strategic beneshown below.

Predominantly Productionbased WorkCreative production9

Content development9

Database management9

Program and platform management9

Training and e-learning programs9

Medical information management9

Marketing support: dashboard9creation, presentation support,scienti c and KOL

Phase I: Cost Bene ts

Increasing Integration andIdenti cation of Value

Global asset managements and9waste minimization via focusedcontent repurposing

Strategizing and conceptualizing9brand plans, intelligence needs,etc integrated with execution

Integrated global MedEd9programs leveraging

resources worldwideGlobal insight teams integrated9with onsite activities surveillance, benchmarking, etc.

Phase II: Value Addition

True Offshore DividendInnovative software tools to solve9critical challenges

Alternate sales and marketing9models and channels for physicians/patient engagement.

Global patient adherence programs9

Transformational platforms9integrated with services for

end-to-end life cycle management

Innovation

The New Model: How Does It Work?

There is indeed a true offshore dividend, a scenario where the industry canon innovations, ef ciency, and pro tability by taking advantage of proven glmodels to fundamentally transform the sales and market activities.

Many companies have tried multiple approaches starting from shifting over cost-saving production work to offshore vendors to setting up dedicated captcenters that aim to replicate in-house teams.

Some of these activities have been delivered through a direct execution mowhere all the resources are offshore-based, while other more complex initiatilike executing integrated MedEd programs and operating CoEs for multiplestakeholders require a hybrid delivery model that includes both local and odelivery components.

A hybrid global delivery model comprising local teams in combination with teams, when executed well, results in improvement of overall ef ciency and

satisfaction. There are always activities that need to be executed locally, whithere are others that can be offshored. By harmoniously balancing the onshooffshore components as a seamless process, substantial cost bene ts, operatiscalability, and client satisfaction can be guaranteed.

Managing this distributed execution requires strong program management skand process rigor. Best practices and success stories from a host of industriesand functions are readily available to be successfully leveraged by thepharmaceutical industry.



There are some activities that could be completely offshored, and companiesgain signi cant advantages by leveraging the model (Case Study 1).

A midsized biopharmaceutical company, with rst-in-class therapeutics ana rich research pipeline, acquired a pharmaceutical rm, which focused on

specialized areas such as Oncology and Critical Care. As part of integratinand streamlining the sales training process, the company wanted to evaluatits current sales training materials and periodically assess the new sales foracross multiple countries. This was a signi cantly complex task, requiringexperience and expertise for developing training curricula, managing learnplatforms, and running assessment programs on a global basis.

With postacquisition savings and synergy goals in place, the company decito explore an offshore model for delivering this work. The focus of thismodel was to

Evaluate the existing training materials, identify gaps vis--vis th9latest scienti c developments and update them, and launch the ncurricula on a user-friendly hosted learning platform.

Develop an Internet-based solution for the periodic assessment of9eld force based in 5 EU countries.

Develop reporting capabilities in the platform to evaluate perform9by geography, language, and topic.

The net result of the offshore strategy was that the company got the platforup and running in a period of 7 months and at costs that were 50% lower ththose of the local service providers.

Case Study 1: Evaluating and Designing Sales TrainingCurricula for a Mid-sized Biopharmaceutical Company


10/13Making an Impact: Effective Sales and Marketing with Reduced Costs Page 10 of

There are other activities where a combination of offshore and onsite resourcthe best option, primarily to avoid any communication risks as well as to macontinuity. In this case, besides direct communication with stakeholders in thpharmaceutical company, the onsite resources also do similar work as the offresources (Case Study 2).

A global top-tier US-based pharmaceutical company had undertaken asigni cant cost rationalization initiative and had reduced internal staff. Thevarious brands within the company had an ongoing need for a series of deliverables throughout the year including congress coverage, competitor and landscape analysis, pipeline surveillance and ad hoc projects. Reducinthe internal staff risked sacri cing the level of services needed by the interteams and missing key market information. Furthermore, the company hadclear corporate mandate to manage on tight budgets. Given this scenario, thcompany decided to explore the offshore model for competitive intelligencthe strategic marketing groups.

The offshore partner was required to have professionals with deep oncologexpertise with experience across multiple tumor types and in various otherareas, including desktop research, congress coverage, clinical surveillancebenchmarking of new launches.

A dedicated center of excellence (CoE) composed of a multidisciplinary tewith the right mix of clinical and pharmaceutical marketing expertise and astrong understanding of oncology was set up. It addressed all competitiveintelligence requests from the clients oncology franchise and maintainedinternal platforms, libraries, and global congress intelligence. Given the larnumber of stakeholders, there was an onsite program manager working outthe companys of ce to maintain communication, channel requests, and requickly to very short turnaround requests. The focus of the engagement wa

Deliver clinical and marketing insights relevant to companys ass9a costeffective way

Provide an accurate perspective of emerging targets, treatment9modalities, KOLs, and practice guidelines in oncology

Suggest areas of scienti c and business analytics based on9emerging data

The company was able to set up a team of 15 specialists with deep oncologexpertise within 60 days and save both costs (benchmarked at approximate$1 million) as well as gain signi cant service ef ciency.

Case Study 2 : Dedicated CoE for Oncology Intelligence ProvScienti c and Competitive Intelligence Across a Portfolio of B



There are other complex activities like running promotional MedEd programsa combination of offshore and onsite resources is critical. In these cases, thercertain roles the onsite resources have to execute, which cannot be done offshOrganizing meetings, participating in medico-legal reviews, and interacting aworking with KOLs are responsibilities onsite resources have to manage besenabling seamless communication and providing comfort to sponsors (Case S

Case Study 3 : Design and Development of an Innovative VirtCenter for Sustained Physician Engagement for a Specialty Br

A global top-tier pharmaceutical company wanted to counter serious threatfrom a competing brand, which was about to be launched in the market. Thcompany identi ed compelling education and high impact alternate engagemodels and activities as essential elements to expand access and use of thebrand. In order to do so, an innovative virtual education center was designserve as the nucleus of a multi-year alternate engagement model for physicand other healthcare stakeholders.

Given the competitive scenario as well as the cutting edge nature of theinitiative, the company had to roll out this ambitious platform within tighttimelines while working under tight budgetary limitations. The companydecided to accomplish this by taking advantage of the hybrid global model

The development of the virtual center involved the following activities:

Conceptualize the platform and build the overall technology and9content architecture.

Create a KOL advisory panel to understand physician needs, follo9which the companys existing assets had to be audited to identify map content gaps. To bridge this gap, a series of value-added cont

assets such as interactive cases, KOL videos, and patient educatiomaterials had to be created.

Integrate the overall platform within the constraints of the medico9review requirements as well as corporate IT guidelines.

While the KOL meetings, brand strategizing and brainstorming as well ascoordination and logistics had to be done locally, content development,technology, and creative development were done using a mix of onsite andoffshore resources. This required strong program management processes asystems.

The nal product was built at less than 40% of the normal local costs, resuin savings of more than $1 million in a short turnaround period of 9 monthThe service provider also proved to be a one-stop-shop, drastically reducinvendor management time which would have been high if the project elemewere handled by multiple vendors.



Conclusion

The pharmaceutical sales and marketing leadership has been rather slow inembracing the advantages of offshoring. However, driven by cost consideratmore companies have started experimenting with offshoring. Increasing marpressures and initial successes are enabling them to rapidly move to the nextglobal execution where they are starting to offshore work that is likely to prowith signi cant competitive advantage.

Early movers among the pharmaceutical companies as well as service providhave acquired signi cant learning and experience on the execution model to risks. This is likely to translate into a sustainable competitive advantage in thcoming years.

The pharmaceutical industry at large can take advantage of this window of opportunity to leverage these learnings and quickly internalize the mantra more with less.

References

1. Donohue JM, Cevasco M, Rosenthal MB. A decade of direct-to-consumer advertising of prescription drugs. N Engl J Med. 200;357:673-681. http://content.nejm.org/cgi/content/full/357/7/673. AccessSeptember 18, 2009.

2. Prescription for success in sales. Feb 19, 2007;85(8).Chemical & Engineering News.

Offshoring helpspharmaceuticalcompanies ensure that their

sales and marketingteams meetbudgetary reduction targets while

maintaining existing levels of service quality and ef ciency.

Rajesh has more than 15 years of experience in clinical medicine and in the global pharmaceutical industry.He started his career as a physician, working across primary as well as tertiary care settings before becomingthe rst doctor in India to graduate from the Indian Institute of Management (IIM), Ahmedabad. He has heldpositions in corporate and marketing strategy, market research, mergers and acquisitions, and general manageRajesh is the President and CEO of Indegene.

Manish has more than a decade of experience in managing operations and large teams in various industriesincluding banking and nancial services, and software and pharmaceutical services. Manish has a BTech degMechanical Engineering from IT BHU, Varanasi and an MBA from the Indian Institute of Management (IIM)Manish was the head of a project team in engineering services in Infosys Technologies. At Indegene, he is resfor general management, nance, HR, strategy, and M&A initiatives.

Rajesh Nair, MBBS, MBA

About the authors

Manish Gupta, BTech, MBA

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