Barriers in promotional regulations and their implications on your business model - Poland’s learnings on sales force promotion - Milevcic Nikola, GM IMS

Barriers in promotional regulations and their implications on your business model- Poland’s learnings on sales force promotion -

Milevcic Nikola, GM IMS Healths Russia/CIS

Russia Business Briefing Meeting • 9th December, 2009

Agenda

• Regulatory changes in Poland - characteristics

• Short- and long-term market reaction

• Key take-aways


On 21st November 2008 new, stricter promotional regulations were introduced in Poland

2006 2007 20082006 2007 2008 1 XII 08 2009 2010 2011+2009 2010 2011+1.XII.2008

Promotion to general public:

− Stricter regulations regarding warning info included in the commercial

− More detailed and stricter restrictions on the shape, length and size of the info warnings

− Promotion in pharmacies limited to defined areas, not influencing the every day ‘usual’ operations of the pharmacy

Promotion to prescribers:

− ZOZ Management approval for detailing

− Appointment booked in advance

− Appointment outside physician’s working hours

Source: IMS Health analysis


As usually, the letter of law was not completely clear for the practitioners

Intentions behind the regulation

Questions and uncertainties arising

Management’s approval for detailing necessary

•In order to control the overall amount of detailing and pharmacos’ activities

•Who is responsible for authorisation?•How often are approvals needed?•What’s the escalation process?

The need to book appointment in advance

•In order to prevent excessive number of calls in a day limiting the standard of doctors performance

•How much ‘advance’ is needed?•Is it in advance to the first visit or to all of them?

Appointment outside physician’s working hours

•In order to prevent the reps from ‘stealing’ the time dedicated to patients

•How should ‘working hours’ be defined? By strict hours brackets, whole ‘on premises’ time or is ‘between patients’ allowed?•Is the lunch break within working hours?


Promotion to prescribers regulations


Uncertainty has led to serious anxiety on the market, typical in the ‘hard to predict’ environment

If the doctor cannot meet the rep within his office hours, why should he ask his management for approval for private time activities then? – inquires Tomasz Korkosz, press officer of the Physicians Council

„We adjust to this new situation” – says Krzysztof Jakubiak from Polpharma. „In order to support the relations with the doctors we utilise our own telemarketing centre, with the capacity of a few hundred calls per day”

„The number of calls per specialist especially from large clinical hospitals decreased significantly. Maintaining relations there became hard, sometimes impossible” - said Jerzy Garlicki, Astra Zeneca president

„Approx. one out of ten sales force workers has been laid off already among 3-4 thousand employed in pharma industry” – anonymous pharma company employee

„(…) it can be concluded that restrictions on access hold only in the time which doctor dedicates usually to patient. Between these periods doctor could, assuming management approval, host rep’s visits in the medical centre” - Katarzyna Bondaryk, Hogan & Hartson Partner, responsible for pharmaceutical law and biotechnology

This law, despite original positive motivation, hinders building clear and professional relation between pharma industry and the physicians. It praises private meeting outside working hours with less formality and rules employed - Paweł Sztwiertnia general director of Infarma

Reps must apply in advance for call opportunity. In most of the cases the meetings are organised in the afternoon - Jerzy Sokołowski, Zespół Publicznych Zakładów Zdrowia in Otwock vice Director

Source: Press search by IMS Health


In the short term, pharma companies have undertaken a number of “corrective” actions to their promotional strategies

Strategy 1Instead of ‘promoting’reps perform other

duties e.g. gather information

on side effects

Strategy 2One joint management

approval for all appointments

and reps

Strategy 3Reps relocated from

physicians’ offices to pharmacies

Strategy 4New regulations stay „on paper”, no changes to every day practices of

the market

Strategy 1• Risk of hostile reaction of the

physicians/ patients/ ZOZ Management

• Extended monitoring requirements towards

IT systems

Strategy 2• Will of ZOZ

Management needed• Problem of ban

on detailing within doctor’s working

hours still unsolved

Strategy 3• Limits of business

justification• Competency fit as a challenge

Strategy 4• Constant risk of

regulator’s reaction - administrative

fines

Short-term

strategies

Requirements

and risks

Hybrid modelIncorporating all Strategies’ elements


Pharma companies focused on the operational excellence

• No matter which market scenario prevails – operational excellence brings positive results

• If the regulatory changes were to prove temporary or stay theoretical only – the company would benefit anyway

• If the access restrictions were to be imposed strictly – operational excellence actions would facilitate choosing the best pharmacies and doctors and balancing representatives’ territories

• Companies realized that any loss of contact with the prescribers favours ‘top of minds’ and limits their chances to influence the status quo - targeting was usually the first step of the optimisation process, followed by territory alignments

• IT/ new media initiatives have been another venue: reporting/ monitoring systems on one hand and tools for alternative physicians access on the other

• Uncertainty and anxiety has not caused dramatic sales force cuts – despite limited number of calls a ‘stay through’ approach dominated and reps were kept busy getting the paper work done

Operational improvement in focus



Source: IMS PromoTrack 11/2009, Calls Main; 20 corporations

Following a significant drop in promotional activity in the early days of the new regulations, it bounces back as of late second quarter 2009

Number of calls Short term adjustment period

• Short term promo strategies adjustments• ‘Paper work’ preparation• Waiting for the dust to settle

• New regulations around the corner• Increased interest in New Commercial Models

Operations coming ‘back to normal’

„We were so busy adjusting to the new situation and getting all the paper work done across country that we haven’t had time to cut the salesforce. And glad we are, as for now as we have all the papers filed, it seems business is back to normal for good” Top 5 copany, an IMS client for the NCM work


Changes in number of Representatives: Q4 2008, Q1 2009, Q3 2009

Number of representatives - Q4 2008

Sales force sizes haven’t been impacted and reasons for changes have been otherwise

(+/-) SFS: Q4 2008 – Q3 2009

(+/-) SFS: Q4 2008 – Q1 2009

Changes observed in the last year do not differ from the standard annual adjustements


Despite little lasting effect of the regulatory changes to date, there is an anticipation for another implementation attempt following the general trend for stricter regulations of the market

Restrictions already in place:• Advertisement directed to general public must contain warning regulated by law

• People of medical profession (or perceived as such by public) cannot star advertisement

• It is forbidden to add new wholesale activity to retail or the other way round

• Medical devices stores have to be staffed with trained personnel and the whole range of products reimbursed by NFZ has to be stored on site

Planned restrictions:• Any form of vertical integration is forbidden, even within capital group

• Fixed wholesale and retail margin instead of maximal margins

• Total ban on pharmacies advertisement

• „Doctors access #2”• … ?

Despite differences in restrictions level and type across countries – changes in Poland fit well into international trendSource: IMS Health analysis


Lessons from other European countries prove that although further restrictions on access can be expected – significant decrease of the doctors should stay in focus

Countries

Restriction level

low

high

Relevance of institutional customers & decision makers

Economic mindset of

decision maker

weak

strong

low high

Restrictions level on access to physicians

Significance of decision makers other than physicians



Decision-makers matrix - Europe

existing new

weak

powerful

Payers

Physicians

Distribution(incl. pharmacies)

Patients

Players

Significance

Companies increasingly realize that physicians’ influence in decision making process decreases

Decision-makers matrix – Poland

Source: IMS Health analysis on the basis of IMS Global Promo.Track

existing new

weak

powerful

Physicians

Distribution(incl. pharmacies)

Patients

Players

Significance

Payers


To some extent the Swedish lesson could serve as an example of what happens when the access limitations are seen through

1. Each meeting of the physician and the rep has to be pre-approved by medical centre management

2. Invitation for training/conference is directed to the management which points the most suitable doctor to attend

3. Group meetings prevail. Individual meeting with the physician requires special justification

4. All the training/conference etc has to be co-financed by the doctor (50% minimum)

5. Cap on gratification for consultancy, clinical research and all other cooperation forms has been set

(reforms were introduced in 2004/05)

Rules regulating contacts between pharma industry and the physicians Pharmaceutical industry actions

• Gradual sales force size reduction – partially lay-offs, partially departments re-shuffle

• Reps with established relationship keep visiting doctors during lunch breaks (1-2 daily maximum)

• Establishing the „rules of conduct” with the key medical centres management

• Increasing significance of the tools such as: e-learning, mailing, educational programmes

• Shifting balance from promotional activity to relationship sustaining



Patients

Politicians

Wholesale

HospitalsPatients

associationsNFZ

Doctors

The companies in Poland have begun to notice wider spectrum of the system stakeholders…

…therefore new commercial models started being considered

Producer/ importer

Limited access to physicians

Further limitations planned

Increasing substitution

More educated patients

Influencing doctors’ decisions

Pharmacies



PayorDistribution

PatientProducer/ importer

One integrated commercial strategy, addressing all decision chain elements, will be the most appropriate answer to the market changes in the long term

• Which doctors to target?

• What promotional mix is optimal?

• How should sales be organised?

• How to reach key decision makers in each group?

• What rep number will be optimal in the medium- and long-term?

Physician



What are the lessons learnt for the industry on the basis of the Polish case?

In the short term rapid actions (reductions) are not recommended

Operational improvements and adjustments are good to focus on

Go beyond the immediate regulatory challenge and understand the underlying market trends

Anticipate the actual power shifts and get ready for the future changes reshaping the industry

In the long term it is advisable to reconsider the commercial model


Documents

Barriers in promotional regulations and their implications on your business model - Poland’s learnings on sales force promotion - Milevcic Nikola, GM IMS