Organization of the Pricing andMarket Access FunctionSuccess factors for organizational set-up, operational effectiveness, and talent management,including specifics for German affiliatesStephan Schurz und Maximilian Rödder

Simon-Kucher & Partners, Bonn and Cologne

Abstract

As the pharmaceutical industry faces price pressure and achallenging payer environment, realizing the full value of adrug becomes an ever more challenging endeavour. In order tosucceed in this environment, pharmaceutical executives andmanagers are looking to shape effective and efficientorganizations. In this article, the authors focus on the optimalorganization of the Pricing and Market Access (P&MA)function. They highlight success factors for organizational set-up, operational effectiveness, and talent management for theP&MA function in general and also discuss specifics forP&MA teams in German affiliates.

Zusammenfassung

Organisation der Pricing- und Market-Access-Funk-tion: Erfolgsfaktoren für Organisationsstruktur, Zu-sammenarbeit und Abläufe sowie TalententwicklungAngesichts des steigenden Preisdrucks und der wachsendenAnforderungen vonseiten der Kostenträger stellt die Rea-lisierung des wirtschaftlichen Potenzials innovativer Arznei-mittel eine immer größere Herausforderung dar. Um indiesem Umfeld erfolgreich zu sein, bedarf es einer effektivenund effizienten Pricing- und Market-Access(P&MA)-Funktion.In diesem Artikel wird ein strukturierter Ansatz zurOptimierung der P&MA-Funktion vorgestellt. Die Autorenbeleuchten Erfolgsfaktoren für die Organisationsstruktur,Zusammenarbeit und Abläufe sowie Talententwicklung.Neben generellen Erfolgsfaktoren werden auch Spezifika fürP&MA-Teams in Deutschland betrachtet.

Introduction

The Pricing and Market Access(P&MA) function plays a criticalrole throughout a drug’s lifecycle.During clinical development,P&MA input is crucial for prioritiz-ing drugs which deliver the highestvalue and for shaping clinical trialsbased on payer requirements. Fromearly development to beyond lossof exclusivity, the P&MA functionsupports optimal pricing and mar-ket access which lay the foundationfor patient access and commercialsuccess.

With pharmaceutical executivesand managers looking to optimizethe organization and operations ofthe P&MA function, fundamentalquestions emerge. Is the P&MAfunction set up in the right way? DoP&MA professionals focus on all rel-evant activities at the right time?

Are the required P&MA competen-cies covered and what is needed fora sustainable talent management inP&MA? These topics are outlined inthis article building on the experi-ence and expertise Simon-Kucher &Partners has developed through nu-merous projects in this area.

Throughout the article, theauthors highlight organizationalsuccess factors which are applic-able on the global, regional and lo-cal level. Since the introduction ofthe “Pharmaceuticals MarketReorganisation Act” in Germany(Arzneimittelmarktneuordnungsge-setz – AMNOG), P&MA has be-come an increasingly challengingand complex endeavour furtherraising the importance of organiza-tional excellence in German affili-ates. Consequently, specific bestpractices for P&MA teams in Ger-many are highlighted.

Pricing and Market AccessExcellence

P&MA Excellence rests on three pil-lars: organizational set-up, opera-tional effectiveness, and talent man-agement ( fig. 1).

n Organizational set-upThe organizational set-up of aP&MA function provides the foun-dation for P&MA activities on theglobal, regional, and affiliate level. Itis defined along the organizationaldimensions structure, reporting,and sizing.

Structure and reporting on theglobal and regional levelThe P&MA organization structuresin top 20 pharmaceutical compa-nies frequently combine elementsof functional and matrix design.Each structure is unique as its

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characteristics have evolved overtime driven by the company’s strat-egy, portfolio, corporate culture,and history of mergers and acquisi-tions ( fig. 2).

A variety of parameters can beused to assess the organizationalset-up of the P&MA function on theglobal and regional level.

Visibility and impact: The proxim-ity of the P&MA function to theCEO supports the elevation ofP&MA topics onto the executiveagenda. In many companies, thehighest P&MA representative is atleast three steps below the CEO asdepicted for “Company A” and“Company B”. Establishing an Ex-ecutive Vice President (EVP) who isresponsible for P&MA and is onlytwo steps below the CEO, as shownfor “Company C”, allows for in-creased visibility of P&MA-relatedbusiness questions.

P&MA capability development: Inmany successful companies allP&MA activities are overseen by onesenior executive. This approach al-lows for effective P&MA capabilitybuilding and minimizes redundan-cies in executed tasks. This set-upalso enables companies to leverageP&MA opportunities arising in thecontext of a broader product portfo-lio more easily.

Alignment of P&MA and evidencestrategy: Best-in-class companiesguarantee that P&MA and HealthEconomics and Outcomes Research(HEOR) work hand-in-hand to en-able payer-rationalized trial designwhich ultimately maximizes theP&MA potential of a drug. Conse-quently, companies such as “Com-pany C” establish a single Senior Ex-ecutive who oversees global P&MAas well as global HEOR. In cases inwhich HEOR has a different report-ing line, e. g., for “Company A”, it isparticularly important to institution-alize cross-functional collaborationbetween P&MA and HEOR to guar-antee that separate reporting linesdo not lead to misalignment be-tween evidence strategies andP&MA requirements.

Cooperation with company-inter-nal business partners: A businessunit driven set-up of P&MA teams,as shown for “Company B”, naturallylinks P&MA to the respective com-mercial teams. In case of a less insti-tutionalized link between P&MAand commercial teams, it is crucialto establish regular touch points be-tween both sides to avoid “silo men-talities”and the perception of P&MAbeing distant from the business.

Cooperation between P&MA teamson the global and regional level: Anoptimal organizational set-up be-tween P&MA teams on the globaland regional level enables alignmenton key objectives, a systematic ex-change of information as well assustainable talent managementacross both levels, including job ro-tations and succession manage-ment. Consequently, as shown for“Company C”, many successfulP&MA organizations establish adotted reporting line between re-gional and global P&MA.

While there is not one ideal or-ganizational structure for a P&MAfunction, optimal solutions exist ona company-individual level. Any so-lution should consider the statusquo of the organization as well asthe company’s strategy, portfolio,and corporate culture.

n Organizational structure andsizing for P&MA teams inGermanyIn German affiliates, five P&MAfunctional areas can frequently beidentified:• Market access and dossier devel-opment for The Institute for Qual-ity and Efficiency in Health Care(IQWiG) and The Federal JointCommittee (G-BA)

• Strategic pricing and price nego-tiations with The Head Organiza-tion of the Association of Statu-tory Health Insurances (GKV-SV)

• Operational pricing (includingprice management for establishedproducts)

n AUTHOR

Stephan Schurzis a Partner at Simon-Kucher & Partners andworks in the Life Science division at the compa-ny’s headquarters in Bonn, Germany.He specializes in the development of market int-roduction and competitive strategies, price opti-mization and value perception management forinnovative pharmaceutical products. In addition,he plays a leading role in Simon-Kucher’s marketaccess operational excellence activities.Stephan has worked on projects for a variety ofpharmaceutical and biotech companies. Over theyears, he has worked on projects covering nume-rous developed and emerging markets.Prior to joining Simon-Kucher & Partners in 2007,Stephan studied business administration with afocus on strategy, organization and marketing atthe University of Marburg, Germany.

n AUTHOR

Maximilian Rödderis a Manager in the Life Science division of Simon-Kucher & Partners in Cologne, Germany.While being at the firm, he has supported a num-ber of leading pharmaceutical and biotech compa-nies in various business capacities, includinglaunch and life-cycle pricing, value story develop-ment, early market potential assessment as wellas organizational excellence.Maximilian has worked in a wide variety of thera-peutic areas and has gained experience in a num-ber of healthcare markets including the EU-5 andthe US.Prior to joining the Simon-Kucher team in 2014,Maximilian earned a B.Sc. and a M.Sc. in businessadministration from the WHU – Otto BeisheimSchool of Management.

Pharm. Ind. 80, Nr. 4, 466-470 (2018)© ECV • Editio Cantor Verlag, Aulendorf (Germany) Schurz und Rödder • Pricing and Market Access Function 467

• Regional payer management (in-cluding individual sick fund con-tracting, physician associations)

• Hospital payer key account man-agement and contracting (includ-ing terms and conditions)

To ensure a consistent P&MA strat-egy and a seamless execution, mostbest-in-class companies locate all ofthese functional areas within one or-ganizational unit. Thus, the GermanP&MA leadership can manage allP&MA activities holistically – fromlist price to net price, from early de-velopment to beyond loss of exclu-sivity.

Some rules of thumb for the ap-propriate size as well as the degreeof specialization of affiliate P&MAteams can be deducted from busi-ness practice. As a general guide, acompany should employ about 5–6P&MA full time equivalents (FTEs)per 100 million Euro yearly revenuein Germany. This includes all P&MArelated jobs which range from mar-ket access to strategic and opera-tional pricing, contract manage-ment, and payer field force/payerkey account managers. For a com-pany with yearly revenue of 500 mil-lion Euros, this would lead to aP&MA team of 25–30 professionalswho would be capable of handlingall five functional areas. Such a spe-cialized set-up is favourable forcompanies which have several prod-ucts in their portfolio and a numberof product candidates in their pipe-

line. For smaller companies and(biotech) companies launching theirfirst product in Germany, a less spe-cialized set-up would be appropri-ate. In such a case, a variety of thesetasks is typically outsourced to ex-ternal service providers with the ne-cessary expertise and specializationin the respective P&MA field. None-theless, best-in-class companieswith a smaller P&MA presence inGermany still make sure to under-stand all payer requirements as earlyas possible and have a dedicatedteam with the appropriate overviewto steer the relevant P&MA activ-ities and therefore lay the founda-tion for successful price negotia-tions and commercialization.

Operational effectiveness

The key questions needing to beclarified to improve operational ef-fectiveness focus on the “What?”“When?” “How?” and “Who?” ofP&MA activities. Best-in-class com-panies clarify these questions for allareas of P&MA activities andthroughout the entire lifecycle of adrug – “from cradle to grave”.

n Activities“What?” relates to the scope ofP&MA activities that are necessaryfor successfully developing an assetfrom a P&MA perspective. It is cru-cial to make sure that resulting de-

liverables are aligned with expecta-tions from internal business part-ners. In fact, Simon-Kucherobserved that best-in-class compa-nies regularly assess whether allP&MA deliverables optimally con-tribute to commercial success and ifany gaps in terms of activities anddeliverables exist.

n Processes“When?” and “How?” deal with ap-proaches and processes that supportefficient task execution. Consistentapproaches to all activities warrantreliable, high-quality P&MA inputthroughout a drug’s lifecycle whilespecific how-to-guides and tem-plates ensure that materials are nolonger highly variable. A systematicuse of customized tools can also behelpful in this endeavour.

n Roles and responsibilities“Who?” relates to a transparent as-signment of roles and responsibilitiesto support effective task executionand decision-making. It should bedetermined which parties are re-sponsible, accountable, consulted,and informed (RACI) for each activ-ity. Furthermore, the clear definitionof the P&MA function’s role in keycommittees is advisable in order tocreate cross-functional touch pointsand support function visibility, e. g.,by ensuring that P&MA has a seat inall key clinical development andbrand strategy committees.

Since Germany is an example fora country with a relatively widerange of P&MA topics, it is crucialthat the representative of the Ger-man P&MA team in the brand strat-egy committee is able to speak to allP&MA topics which might be rele-vant for a given product at a givenpoint in its lifecycle. In theory, thiscan be achieved by appointing dif-ferent P&MA professionals depend-ing on the stage in the lifecycle, as-suming that the P&MA focus tendsto shift from dossier developmenttowards price negotiations withGKV-SV and hospital/regional payercontracting. In practice, a variety of

n Figure 1

Pricing and Market Access Excellence framework (Source: All figures were created bySimon-Kucher & Partners).

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P&MA topics can be relevant at anypoint in time. Therefore, best-in-class companies nominate P&MAprofessionals who have the requiredbreadth of experience and businesssense for this role. These companiesalso articulate the requirements forthis important role in a job descrip-tion.

All in all, summarizing the scopeof P&MA activities, processes, aswell as roles and responsibilities in atailor-made P&MA framework iswidely regarded as a success factorfor P&MA. Such a framework setsspecific expectations, establishes ac-countability for key activities, andfosters internal alignment. It en-courages cross-functional collabora-tion to guarantee that the P&MAperspective is considered through-out a drug’s lifecycle, starting inearly clinical development. To facili-tate smooth onboarding and consist-ency in task execution, key P&MAactivities can also be described in adetailed P&MA handbook.

n Pricing governanceWhen it comes to operational effec-tiveness, one topic of particular im-portance is pricing governance. Pric-ing governance is about systemati-

cally managing prices and establish-ing a framework to enable this pricemanagement – particularly to steer,implement, monitor, and report onpricing. Smart pricing governanceallows for effective and efficientprice control as it balances flexibil-ity for business optimization withsafeguarding target and floor prices.It aims at capturing a drug’s fullprice potential without stifling busi-ness opportunities or overwhelmingthe organization with internal priceapprovals. Consequently, escalationprocesses for price decisions areclearly defined.

Three types of price approvalworkflows can be differentiated:pricing strategies, launch pricerequests, and price change requests.It is important that list and netprices are both subject to pricinggovernance, since list prices impactinternational price referencing andnet prices impact profit. Anothersuccess factor is the increase of gov-ernance scrutiny with the commer-cial importance of each brand. Thetiering of products, e. g., based onlifecycle stage and/or annual reve-nue, can be key in this context. Thisapproach follows the principle ofoptimal pricing governance which is

to decentralize where possible andrequire only senior management ap-provals when needed to maintainoptimal prices.

Depending on the product portfo-lio, additional aspects need to beconsidered for developing optimalpricing governance. For example,biosimilars require a more pro-ac-tive approach and frequent reviewsas well as adjustments of price tar-gets and floors as this business ischaracterized by shorter negotiationcycles and the risk of a low-pricedcommodity market.

Talent management

The third pillar of P&MA Excellenceis talent management. SuccessfulP&MA professionals possess a com-bination of P&MA expertise, a goodbusiness sense and strong commu-nication skills.

On the one hand, specific P&MAexpertise is a prerequisite for devel-oping optimal P&MA strategies. InGerman affiliates, profound knowl-edge of IQWiG and G-BA require-ments as well as processes (e. g., G-BA early advice, G-BA hearing pro-cedure, etc.) is essential for success-

n Figure 2

Company A Company B

P&MA HEOR P&MA and HEOR

Company C

CEO

Commercial

EVP Marketing

VP P&MA

TA leads

Operational pricing

Heads of regions

Regional P&MA leads

Clinical

EVP HEOR

TA leads

Regional HEOR leads

Real world evidence

CEO

Commercial

Business unit 1

Business unit 2

Business unit 3

P&MA and

HEOR

P&MA and

HEOR

P&MA and

HEOR

CEO

Group president

x

P&MA

HEOR

Real world evidence

Heads of regions

X

P&MA

HEOR

EVP P&MA and HEOR

Regional P&MAHEOR leads

CEO: Chief Executive OfficerEVP: Executive Vice PresidentVP: Vice President

P&MA: Pricing and Market AccessTA: Therapeutic AreaHEOR: Health Economics and Outcomes Research

Organizational set-up: P&MA on the global and regional level.

Pharm. Ind. 80, Nr. 4, 466-470 (2018)© ECV • Editio Cantor Verlag, Aulendorf (Germany) Schurz und Rödder • Pricing and Market Access Function 469

ful dossier development. Moreover,in-depth expertise regarding theAMNOG process is of paramountimportance for P&MA teams to un-derstand the possible levers for aspecific product. Best-in-class com-panies also ensure that P&MA pro-fessionals negotiating with the GKV-SV possess strong negotiation skillsand are aware of the specifics ofthese negotiations compared toother types of negotiations (e. g., thenegotiation partner is in a “monopo-listic situation” and acting within aformal framework of regulationsspecifically set up for drug price ne-gotiations in Germany).

On the other hand, a good busi-ness sense and strong communica-tion skills are required for establish-ing successful relationships withpayer customers and with stake-holders across the organization(e. g., with Commercial/Marketing,Clinical/Medical, Governmental Af-fairs, Finance). These working rela-tionships provide the basis for pro-ductive cross-functional collabora-tion.

n CompetenciesMost successful P&MA functionsdetail necessary competencies byrole and level (e. g., entry, mid-man-agement, and leadership) to estab-lish clear expectations for all P&MAprofessionals. The creation of roleprofiles can help to define core re-sponsibilities, skills, and expertise.In this context, it is important toregularly assess required skills andcompetencies because they might

evolve as the company and the mar-ket environment change.

n ProgressionSecond, it is advisable to design ca-reer progression paths so that pro-fessionals regard P&MA as an at-tractive function for career develop-ment. Career progression pathsillustrate options of what prototypi-cal careers could look like in termsof sequential positions, roles, andstages. Such a path illustrates careeropportunities within the P&MAfunction as well as opportunities toswitch across functions includingtemporary job rotations. Since pric-ing and market access are criticaldrivers of future success, C-level ex-ecutives need to be familiar withthese topics. Ideally, this is reflectedin respective career paths which aredeveloped in cooperation with theHuman Resources department. As aresult, P&MA becomes a steppingstone to upper management posi-tions as it has been the case withother functions in the past.

At the same time, companiesneed to rely on a certain level of con-tinuity and a backbone of expertisefor which a retention program canbe supportive. Furthermore, a suc-cession management plan ensuresthe maintenance of the function’sperformance in case importantP&MA professionals leave.

n DevelopmentFinally, it is recommended to investin proper training and skill develop-ment to achieve continuous skill

growth in the P&MA function andto ensure that all P&MA profes-sionals possess the required skillsfor their current role. This can beimplemented in a comprehensive“Pricing and Market Access Acad-emy” which is regularly updated toprepare P&MA professionals for fu-ture challenges and opportunities.

Conclusion

The P&MA function plays a criticalrole throughout a drug’s lifecycle asit lays the foundation for patient ac-cess and commercial success. Con-sequently, optimizing the organiza-tion and operations of the P&MAfunction is a priority for any com-pany looking to succeed in a chal-lenging payer environment. Toachieve continued P&MA Excel-lence, successful companies ensurethat P&MA is a central and inte-grated part of the organizationwhich is reflected in its organiza-tional set-up, operations, and talentmanagement.

Correspondence:Stephan SchurzSimon-Kucher & PartnersWilly-Brandt-Allee 1353113 Bonn (Germany)e-mail:stephan.schurz@simon-kucher.com

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