Even with all the changes ricocheting within the pharma industry, one constant is the process of distributing samples to physicians and other prescribers. It’s time to examine this process to see if any of the efficiencies coming from outsourcing and other practices apply.
Regardless of the marketing strategy employed, drug samples need to get in the hands of practitioners so they can be prescribed, dispensed, and translated into prescriptions—i.e., revenue. It is, ultimately, about the bottom line. And in today’s market and economy, biopharma companies need the greatest flexibility possible to achieve that end result.
One area that has seen clear and dramatic change involves product launch sample distribution strategy. It’s worth keeping in mind that sample distribution is a $16-billion/year activity by U.S. biopharma industry, and represents one of the largest single parts of the pharma sales & marketing function. Hundreds of millions, to billions, of dollars of assets are tied up in sample programs.
Large pharmaceuticals have made headline news with the dramatic downsizing of their sales organizations. Additionally they are sharply focusing their research efforts and, through strategic alliances, are gaining greater economies of scale. Increasingly the direct sales organization has been realigned while marketing and sales work to balance direct-to-consumer marketing with direct-to-physician and traditional rep carry sampling models.
Smaller companies are already operating with lean resources, and routinely seek alliances with either large pharma manufacturers or contract sales organizations (CSOs) that can help them gain mind and market share. Meanwhile, the need to get product into physicians’ hands remains unchanged and their limited resources are challenged to define cost-effective approaches.
The sample distribution process itself has evolved. Here is a list of just some of the services now in common use:
- Warehousing and transportation (to reps)
- Rep-carry sample fulfillment
- Direct-to-practitioner (DTP) fulfillment
- Trade distribution
- Sample accountability
- Field audits and inventory management
- Rep closeouts
As this list has grown over time, many pharma companies have addressed new needs by bringing in additional service providers. But now, it’s time consider whether multiple providers are necessary, or whether some or all of these services can be consolidated with one provider.
Here are some questions to consider in evaluating this idea:
Are there multiple warehousing and fulfillment contracts, one in support of sales representatives and the other managing practitioners?
Based on the capabilities of the vendor that was initially engaged by the pharmaceutical manufacturer at a particular time, there are often multiple contracts with various service providers.
Does this translate to the most cost-effective solution?
Not necessarily, in particular to sample distribution activity. There are certainly benefits to be gained by warehousing product for multiple distribution services under one roof rather then in multiple locations with various service providers. At the most basic level, many providers would likely consider reduced charges with increased volume. These economies of scale translate into bottom-line savings for the pharmaceutical company. Transportation costs can also be reduced as product shipments can be consolidated to a single location.
Just as important are the soft dollar costs that often go unnoticed by using a multi-vendor process. Consider the internal staffing impacts of adding resources to manage multiple vendors and points of contact, negotiating numerous contracts and rates, building multiple system interfaces, managing multiple vendor audits. These costs are significant and add up quickly. With pharmaceutical companies minimizing support staff resources is a must.
When does it make sense to consolidate multiple distribution activities?
Identify a provider that operates within their core area of expertise, and is not providing services just for the sake of offering a one-stop-shop approach appealing to perceived needs within the industry. For example, a CSO might provide an outstanding service that includes advanced market analysis, sales force automation and outbound telemarketing. But is this organization equally qualified to manage complex distribution needs? Are the required systems in place to provide detailed tracking, ensure a secure chain of custody, and deliver responsive and compliant management of redirects or returns? The regulatory issues associated with managing sample product are significant and require stringent controls. Service providers must be deeply committed to standard operating procedures that optimize rather than compromise compliance. The requirements are complex, and demand experienced staffing that is trained not just in client-specific procedures, but also in the regulatory issues that impact the process.
Does a consolidated strategy provide the greatest flexibility?
Large or small, it provides any size pharmaceutical company with exceptional flexibility. It enables turning the dial in one direction or the other relative to sample distribution methodology. This can be done at any given time, without having to ship inventory from current location to new destination, dramatically compressing the time required to make the switch. Pharmaceutical companies gain the operational flexibility to change their model and shift the business direction to meet changing market demands. In today’s marketplace, changing operational strategy to support sales and marketing efforts is a vital need, and will be essential for many organizations over the next 5 to 10 years.
The flexibility of this mix creates the opportunity to service practitioners, their offices and staff according to their needs and those of their practice; this is increasingly important considering the rise in “no see” offices and healthcare facilities across the nation. A carefully blended approach can also ensure that product always remains available to the practitioner between their routine call cycle or representative visits. For companies that manufacturer controlled-substance (Schedule C) products with additional compliance concerns, this provides the additional flexibility of providing samples for practitioners to dispense while removing representatives’ need to physically handle the product with the associated burden of compliance concerns.
When a business decision leads to a realignment of sales territories, how easy is it to shift from a rep carry to a direct-to-practitioner strategy?
This is all relative to the scope of the shift and the scalability of the service provider. For vendor organizations that are intentionally designed to support this business model the shift is a relatively easy one to accomplish, especially if both distribution models are supported under one roof. They are essentially shifting how the product gets to the intended locations, while adhering to the compliance requirements to do so.
Consideration must be given to the direction of the shift and the mechanisms required in support of the change. For example, when shifting from a rep-carry to a sample-send model, many of the compliance issues associated with reps carrying product are alleviated but do not go away entirely. If the goal is to shift back and forth, there needs to be a mechanism to support certain sample accountability and compliance needs for the period of time that product is physically handled by the field sales force. Conversely, when shifting back to direct send, there must be an appropriate close-out.
How quickly can new distribution channels be started or stopped?
To support certain business needs any model must support instant on and off within an acceptable scope. An example of this is incorporating DTP sample practices to support the needs of vacant territories that can go vacant at any given moment and be filled again at any given time thereafter. Other examples include the support of short-term, seasonally dependent targeted sampling programs, or targeting practitioners outside a rep’s geographic territory for limited or specific periods of time. Assuming both distribution models are already operational and managed by a single provider, such a switch can take place within a few days minimizing exposure and maximizing coverage.
What are the benefits of a single outsourced relationship for sample distribution?
Larger pharmaceutical companies continue to realign their field sales organizations. With a single call to their service provider, they can manage the reallocation of samples between sales representatives and practitioners. Working from a single shared inventory, they can adjust between channels enabling them to downsize/realign their field sales organization without downsizing samples to practitioners. Through a single relationship sample accountability/inventory is simplified, accuracy is increased and efficiencies are gained. Flexibility is optimized while risk is managed and, through economies of scale (e.g. consolidated inventory, improved transportation buying power), costs are reduced.
Mid-tier and emerging companies simply lack the internal resources required to manage a complex network of outsourced services. Typically the task rests with an individual who must wear multiple hats, and understanding the subtle pros and cons of the range of available offerings is challenging at best. Working with a qualified outsourced provider/partner brings tremendous benefit to smaller organizations. The partner serves as a consultant because they are up-to-date on the latest industry news, happenings and trends. Additionally, they provide the compliance expertise smaller companies may not be as familiar with but definitely require.
As the industry continues to evolve, marketing and sales management needs to be nimble to gain competitive advantage. At the end of the day the need is fairly basic – companies need to maximize flexibility.
Whether through direct sales representatives, direct to practitioners or through evolving patient-assistance programs, samples need to move from inventory through multiple channels to the physician and consumer. This process needs to be tightly managed, ensuring regulatory compliance, while providing companies the greatest possible flexibility to adjust strategies according to market demands. Consolidating these services with qualified providers achieves this result while managing costs. PC
ABOUT THE AUTHORS
Tim McClatchy is Director of Sales, Life Sciences Div., at Priority Solutions (www.prioritysolutions.com). Tim is responsible for the development of Priority Solutions’ Life Science Division, with a particular focus on customizing supply chain solutions to reach customer’s goals.
Brian Rice is Director of Business Development at Priority. Brian has over 20 years transportation and logistics experience, and has developed custom outbound, reverse logistics and recall solutions for pharmaceutical manufacturers for nearly 10 years. His particular specialty is creating solutions customized to meet exact customer needs which are built within regulatory guidelines.
Brian Bauer is Vice President, Sampling Solutions, at Priority. Brian is specifically responsible for the Direct-to-Practitioner program at Priority Solutions. He has 18 years pharmaceutical experience in sales, alternative sampling strategies and sample compliance, and is considered an industry expert in alternative sampling strategies, PDMA compliance and sample accountability solutions.