Major cuts coming to Pharma's business-side workforce

Nearly everyone reading this who lives in the Philly metro area has a family member, friend or neighbor that works for pharma. A substantial number of pharma employees live in Montgomery, lower Bucks and Chester counties.  But a major change now taking place means that within a decade, most of the industry's business-side positions will be gone and those communities will look altogether different, at least as far as the occupations of their residents.

Pharma has historically conducted its business based on the fact that its customers are varying segments of 400,000 U.S. physicians and their counterparts in the rest of the world. That's because as long as anyone can remember, physicians have made the decisions about usage and selection of prescription drugs. As a result every pharma company tries to influence physicians' prescription writing in a way that favors their own brands.

The work of every brand manager, sales rep, medical science liaison, marketing researcher, meeting planner, and medical affairs person consists of this one central task: driving the behavior of physicians and other professionals who are legally empowered to prescribe medications.

The change currently taking place is that all of this effort to sway physicians will soon become a contemporary version of making the best buggy whips in town. Individual physicians will no longer remain the major decision makers about which medications to use and when to use them. That role will be taken over by payers, provider networks and integrated provider-payers.

Market features such as the ramp-up of launch-year sales, penetration, market growth and share will be decided on the basis of deals between the pharma companies and a few hundred payers/providers (and their hybrids) across the country. Physicians, increasingly practicing as either full-time or contract employees of provider networks, will follow their organization's outpatient formulary in much the same way they've long complied with hospital formularies for inpatients.

Marketing to individual physicians in this age of managed markets will be as unproductive and wasteful as a finance manager or accountant who performs all her arithmetic functions with a paper and pencil.

Pharmaceutical marketing and sales will continue to exist, but as a business-to-business (BTB) function instead of the mass operation that now prevails. That means most of the jobs currently dedicated to influencing physicians' behavior will disappear. The descriptions of those few remaining positions, and the skills of people needed to fill them, will be vastly different from those of current employees.

In marketing research, for example, most currently used skills will become irrelevant. When large provider-payer networks decide which patients get what meds, there remains little need to segment physicians, position products to them, or closely assess their needs and attitudes. Electronic medical records are already starting to reveal the actual prescribing behavior of physicians and the marketing research methods now in common use provide only minimal insight into why physicians act one way or another. More effective methods do not require the marketing research legions that today conduct surveys and interviews.

As sales reps outnumber marketing researchers by a factor of more than a hundred to one, the change there will cause even more dislocation. The work of pharma BTB reps calling on customers in integrated delivery networks will bear no resemblance to what territory reps, specialty reps or district managers now do in doctors' offices. In management-speak terms, BTB reps will need to become matrix managers who can pull together people and skills from several of their company's departments to work with a customer account. BTB sales will require very different skills than what today's pharma reps possess and a company's entire sales force will employ only a tiny fraction of the reps that now camp out in doctors' waiting rooms.

Currently most pharmaceutical companies maintain both approaches to running their business:  the old pattern of physicians-as-customers and the emerging one of managed markets. Pharma companies, however, still devote the larger share of their marketing-sales budgets to the physician-as-customer pattern. That will change more rapidly than most people realize.

As pharma moves to make most of its money from specialty products, drug costs will rise steeply. That will arouse payers and provider organizations to more actively contain those costs because trends in the health care market, together with legislation, make the revenues of both sectors dependent on reining in costs. At the same time, hospital-based networks keep buying medical practices, thereby increasing the percentage of physicians who work as employees and subcontractors. The combination of these factors will fundamentally change the way pharma's business side has to operate, thereby greatly reducing the number of pharma jobs across the region.

This is the developing scene the industry has to address and it would useful to hear from people now working at these jobs inside the pharma companies. Are the trends noted here becoming more apparent over the weeks and months? How are readers' own companies responding? What are the personal plans of current employees for staying ahead of the wave?

As pharma undergoes some significant changes, so too will the neighborhoods in Bucks, Montgomery and Chester countries.

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