Sales Excellence in the Pharmaceutical Industry

A Roland Berger Perspective

4th Annual Pharmaceutical Summit

Sales Force Effectiveness Europe 2006

Barcelona, Spain

March 13 – 15, 2006

1
Content Page

A. The need to change pharmaceutical sales and marketing 3

B. The comprehensive and modular Roland Berger approach 9

C. Why Roland Berger Strategy Consultants 23

2
A. The need to change pharmaceutical sales and marketing

6_01_04 Best sales master V03neu05012006.ppt 3

Though less fierce than in the US the arms race of sales forces in
Europe resulted in significant growth

Number of sales representatives, Europe

18,000
15,000
12,000
• Over 60% growth of European
pharma sales reps during last 5
years, especially in Spain and Italy

UK Germany France
• ≈100.000 sales reps in Europe
represent 80% of promotional spent
18

12 • UK, France and Germany have

11
Ratio physicians/ US:7 stagnant sales reps numbers
sales reps

UK Germany France

Source: press journals, market research; Roland Berger 4

Significant pharmaceutical downsizing due to challenges

Challenges and selected cost reductions of pharmaceutical companies

Weak product Generic 30% reduction in US primary

pipelines and competition sales force of 2,500 sales reps
few launches
Downsizing of its pharma
sales force in the US
Significant
challenges Cost cutting worth USD 4
Regulatory Patent billion (current sales force
constraints challenges size: 38,000)

USD 4,5 to 5 billion cost

cutting (reduction of 7,000
Pricing & reim- FTEs)
bursement
legislation

Source: pharma focus; Roland Berger 5

THE CONTEXT
Sales Force Effectiveness aims to increase sales force productivity
AS-IS SITUATION
• Most pharma companies still
experience sales growth driven by
successful product launches
• Highly decentralized sales &
marketing structure in place with "in
field resources" as "affiliate silos"
• A changing healthcare landscape
leads to increasing price pressure
• Additionally, new approaches for
pharmaceuticals sales &
marketing are emerging
Source: Roland Berger
DRIVERS FOR SALES FORCE
EFFECTIVENESS
• Increase sales force productivity
during a period of successful
business performance
• Reevaluate the "traditional"
pharmaceutical sales model
• Define a best practice approach
using innovation, creativity and
competency within affiliates
• Measure the productivity impact
• Provide an action plan for
implementation
6
How can the average sales rep perform as today's stars?

Ideal shift of the performance curve

Sales per rep

Average without Average with

sales excellence sales excellence

"The days of armies of sales reps in the field driving revenues are over. It will no longer be
about numbers and volume. Now the focus will shift to productivity and performance of the
sales staff who remains."
April 15, 2005

Source: Roland Berger 7

Increasing attention to sales force effectiveness in Europe

Attendance at Eyeforpharma sales force effectiveness conferences [number]

Key topics of interest

550

• Innovative sales models

400
• Resource allocation strategies

• Training, coaching and

250
development of sales reps

• Performance management and

80 incentive schemes

• Customer centric sales strategies

2003 2004 2005 2006 (expected)

Source: Eyeforpharma; Roland Berger 8

B. The comprehensive and modular Roland Berger approach

6_01_04 Best sales master V03neu05012006.ppt 9

Sales excellence requires ongoing, multi-year relentless execution

Secure sustainability through Anticipate and address very

upfront training for sales dynamic healthcare
managers and reps environment at a local level

Transfer advanced sales and Focus on pragmatic, easy to

marketing concepts outside
Key success implement tools and concepts
the industry factors during the next 1-2 years

Leverage IT to prevent Combine top-down and

it from becoming a barrier bottom-up approach to obtain
to change country buy-in

Source: Roland Berger 10

Roland Berger´s sales force effectiveness model provides a
holistic picture
Key levers of Roland Berger's SFE model

Change focus

Metrics Incentives Culture

Customer focus Company focus Employee focus

Targeting Organization & size People

Sales & marketing

Amplification Training
interactions

Call quality Sales support functions Performance

Information technology focus

Source: Roland Berger 11

Roland Berger has a proven comprehensive and modular approach

Steps to achieve sales excellence

Constant change
5 Kick-start implementation drives relentless 1 Frame the change scope
execution
Drive the change through local Select the levers to be addressed
general managers and their teams based on concrete analysis
5 1

4 Consolidate and decide 2 Define the SFE model

4
Consolidate business ease for SFE 2 Define the key principles and best
model and obtain formal implemen- practices for each selected lever
tation decision 3 (e.g. tools, process, guidelines)

3 Validate with the field

Build change momentum by

securing and communicating "quick
wins" with measurable impact

Source: Roland Berger 12

 Roland Berger has applicable methodologies and tools at all levels

Selected Roland Berger methodologies and tools

Country

At country management level

• Healthcare decision point management 1

• Proven implementation approach 5

Across countries
Regional/
global • Quantitative internal sales benchmarking 1
• Roland Berger sales force effectiveness model 2

Bottom-up in a country

• Qualitative country SFE assessment database 1

• Sales-up! methodology 3

Source: Roland Berger 13

 1 FRAME THE CHANGE SCOPE

Analyze healthcare decision point management

Roland Berger 6-P analysis

Getting Getting Getting Getting

Getting listed
registered prescribed dispensed consumed

Policy maker
Payor/
formulary
Physician
No differentiated
approach to regional Pharmacist
Under-developed
authorities
KAM approach to
Patients
payors Lacking KAM
approach for mid- No pharmacy
sized hospitals franchise Brand awareness/
concept consumer involvement
OPinion
underutilized/not
leaders leveraged
Regional opinion
leaders not targeted
sufficiently

Source: Roland Berger 14

 1 FRAME THE CHANGE SCOPE

Benchmark sales costs quantitatively across countries

Roland Berger quantitative sales benchmarking approach

• Prescriptions share
Efficiency/
effectiveness • Prescriptions on EUR 1 of M&S investment
• Prescriptions per sales rep
• Call productivity index1)
• Fraction of sales reps to total country FTEs Analyze
combined
effects of
Costs • Costs per sales rep selected cost
benchmarks Factor costs
• Price index (of prescriptions)2) benchmarks
across
countries
• Potential per covered doctor
Structure
• Annual calls per rep in country
Accepted frequency by physicians

1) Annual calls per rep compared to industry average 2) Only relevant for costs comparisons relative to sales

Source: Roland Berger 15

 1 FRAME THE CHANGE SCOPE

Assess selected SFE levers qualitatively

Roland Berger qualitative country SFE assessment database

LEVERS IMPLEMENTATION LEVEL

Low High
1 2 3 4
Targeting

Organization
& size

Metrics

• Roland Berger SFE assessment database • Consolidated assessment per lever

• Focussed set of analysis questions per lever • Complemented with qualitative input on
country examples

Source: Roland Berger 16

 2 DEFINE THE SFE MODEL

Build on our large collection of external examples

Selected external examples

Sales & marketing interactions Metrics
FIELD FORCE ACTIVITY
PRODUCT WHO • Cross functional team with • Calls per field day
TEAM essential sales participation • Calls per rep
• Core team formed by product • Meeting contacts per rep
manager, product physician, • Field days per rep
clinical research, district managers • Share of voice
• Manager coaching day FIELD FORCE
• Responsible for development of share PRODUCTIVITY
WHAT
strategic, operational and
marketing plan FIELD FORCE TARGETING • Sales per rep (price
PRODUCT • Manage entire product life cycle indexed)
• Coverage rate
CHAMPION • Prepare action plan and deliver • Sales growth per rep
• Call allocation rate
action plan roll-out • Targeting effectiveness (price indexed)
ratio • Units per call
WHEN • At least quarterly product • Field force cost ratio
performance meetings FIELD FORCE QUALITY • Market share
• Coaching days per rep
• Customer satisfaction index
HOW • District managers express field- • Call quality index
ACTION PLAN based view and collect sales force • Retention of high performers
ROLL-OUT input • Turnover of low performers
• District managers gather • Field force satisfaction index
competitor intelligence
• Team leader defines agenda and
organizes meetings Data
Metrics Scorecard sources & Reporting Implemen-
definition design system process tation plan
check

Source: Roland Berger 17

 2 DEFINE THE SFE MODEL

Quantitative and qualitative criteria for performance assessment

Selected external example for performance

Evaluation criteria Scale Performance matrix

Quantitative criteria Quantitative evaluation

• Budget 0 1 2 3 4 5 6
• Market share 0
• Turnover 6 0/6 1/6 2/6 3/6 4/6 5/6 6/6
• ROI
• Calls per field day/per rep 1
• Coverage ratio 5 0/5 1/5 2/5 3/5 4/5 5/5 6/5

Qualitative evaluation
• Call allocation ratio
• Targeting effectiveness ratio 2
• Number of application studies 4 0/4 1/4 2/4 3/4 4/4 5/4 6/4
• Usage of central events
3 3 0/3 1/3 2/3 3/3 4/3 5/3 6/3

Qualitative criteria
4 2 0/2 1/2 2/2 3/2 4/2 5/2 6/2
• Results orientation
• Customer orientation 1 0/1 1/1 2/1 3/1 4/1 5/1 6/1
• Expertise 5
• Self-assurance
• Self-initiation 0 0/0 1/0 2/0 3/0 4/0 5/0 6/0
• Teaming 6
• Communication Performance Performance Performance Performance
group 4 group 3 group 2 group 1

Source: Roland Berger 18

 2 DEFINE THE SFE MODEL

Targeting is about „doing the right calls“

Selected external example for targeting

Targeted customers Coverage strategy Process, team & measurement

• Reach
• Frequency

• Define segmentation criteria to
select the most profitable
customers (e.g. concentration
curve based on potential)
• Document and review the future
potential of customers regularly
• Cluster the customers and
address them consistently as
segments
• Define a specific coverage
strategy for each segment
• Formulate reach and frequency
objectives per segment
• Monitor execution by segment
on a regular base
• Define an overall process with a
clear vision, purpose and value
• Install a cross-functional team
to execute the process
• Monitor the effects of targeting
at sales rep/team level
continuously

Source: Roland Berger 19

 2 DEFINE THE SFE MODEL

Call quality is about „doing the calls right“

Selected external example for call quality

Understand physicians
Formalize call preparation prescribing behavior

to be able to focus on specific to be able to tailor the

customers' needs promotional mix accordingly

Focus on most important

customers Identify best practices

with a detailed tactical plan of the top performers and

and monitor the plans Call quality transfer them to the other
execution and impact sales reps

Introduce a formalized
coaching Invest into selling skills

of the sales reps during joint of the sales reps through

calls with first line managers regular training

Source: Roland Berger 20

 3 VALIDATE IN THE FIELD

Validate impact through focused field initiatives

Roland Berger Sales up! methodology

A Definition of/agreement C Ongoing control of

on action plans performance vs. KPIs
Break-down of overall Monitoring of pragmatic KPIs
budget into campaigns (ongoing) and early intervention
and specific sales (if required)
targets/action plans
with clear objectives,
(e.g. implement life Continuous
cycle value concept improvement
for hospitals) cycle

B Account-per-account execution
Implementation of clearly defined sales campaigns
based on concrete action plans per team

Source: Roland Berger 21

 5 KICK START IMPLEMENTATION

Generate the necessary momentum for the implementation

Roland Berger implementation approach

A B C
Perform gap analysis Prioritize initiatives Define action plans

Stan- Implementation level Prioritization matrix Action plans

dards
1 2 3 4 Task Who When Status

I Hard but High priority 1 … …

needed "quick wins"
II
"start early"
Impact

2 … …
III
Low priority Low hanging 3 … …
… "do later" fruits "should
… do"

Ease of implementation

Set of qualitative assessment Facilitated interactive Proven action planning tools

questions per standard prioritization workshop

Source: Roland Berger 22

D. Why Roland Berger Strategy Consultants

6_01_04 Best sales master V03neu05012006.ppt 23

Driving pharmaceutical sales excellence with Roland Berger

Proven track record with Tried-and-tested methodologies and tools provided at no costs
vast pharma sales (e.g. Roland Berger assessment database, healthcare 6-P analysis)
experience

Pharma industry and Numerous projects in pharma industry help us understand the problems
process expertise fast and derive workable solutions, (e.g. pan-European launch strategy)

General sales and Our Competence Center Marketing & Sales serves as a platform for global
marketing expertise best practice solutions (e.g. quantitative sales benchmarking)

Strong healthcare We are driving the transformations of national healthcare systems across
knowledge Europe working for leading payors and providers

Our tools, project methodology and teams help deal with complexity fast
Able to manage complexity
and efficiently as more than 900 corporate transformation projects testify

We tailor our methods and models to the customer’s specific requirements

Customized approach and provide stringent solutions by working closely with the customer’s
resources

Mature and highly skilled We know the specifics of the pharmaceuticals and healthcare market and
team can still provide an outside-in perspective
Source: Roland Berger 24
Our key to success: Interdisciplinary consulting teams

Our industry and functional competence centers

Engineered
Products &

Healthcare
Chemicals

Consumer

High Tech

Pharma &
Financial

portation
Goods &

Services
INDUSTRY

Services
InfoCom

Utilities
motive

Trans-
Public
CC

Retail
Auto-

& Oil
FUNC-
TIONAL CC
Corp. Strategy &
Organization

Information
Management

Marketing & Consulting

Sales Team

Operations
Strategy

Restructuring &
Corporate Finance

Source: Roland Berger 25

Our Competence Center Pharma & Healthcare ensures industry
expertise and extensive experience in Sales Force Effectiveness

• Numerous marketing and sales projects focusing

on effectiveness, efficiency increase, sales
coordination and business planning

• We have numerous consultants with hands-on

experience working for pharmaceutical
companies prior to joining Roland Berger as
consultants

• Pan-European Sales Force Effectiveness project

• Marketing and sales efficiency program for
a top-10 pharmaceutical company in Europe
• Sales efficiency program for a leading biotech
company in Europe
• Sales Up coaching in GP and hospital markets in
• We have detailed project experience in
Germany, France, UK, and Italy
marketing and sales projects for clients
• Regional business plan training for sales
in the pharmaceutical and biotech
organizations
industry in all relevant markets in
• Sales force organization in Switzerland
Europe, the US, as well as Asia
• etc.
Source: Roland Berger 26
The Pharma & Healthcare Team comprises an international
network of experienced consultants

AMSTERDAM LISBON MUNICH VIENNA

Tijo Collot d'Escury Antonio Bernardo Martin Schloh Roland Falb
BERLIN LONDON NEW YORK WARSAW
Stephan Danner David Stern Wim v. Acker Artur Pielech
Joachim Kartte
MADRID PARIS SÃO PAULO
BRUSSELS
Josep Ros Michel Jacob Paul Gruppo
Jean-Roger de Bandt
BUCHAREST MILANO PRAGUE SHANGHAI

Anca Ioan Carlo Gasparini Martina Mannova Max Gu

BUDAPEST MOSCOW TOKYO ZURICH

Katalin Morgos Sergey Shibaev Isao Endo Aleksandar Ruzicic

PHARMA & HEALTHCARE TEAM

• Partners with industry experience in 20 international offices
• About 70 consultants with industry-specific professional experience
• Strong practices in Germany, UK, France, Italy and Spain

Source: Roland Berger 27

Driving sales excellence across Europe through new
practices and standards

Case study 1: pharmaceutical Sales Force Effectiveness in Europe

The objectives The major changes

• Introduce “selling excellence” practices to improve
sales force effectiveness across Europe
• Facilitate international cross fertilization by sharing
existing best practices across countries
• Build-up a self-learning organization by
continuously evolving standards to the next levels
• Defined cross-functional targeting process with
individual sales rep commitment for call plans
• Introduced a comprehensive set of KPIs across
Europe (“what gets measured gets done”)
• Formalized a clear performance management
process including a performance appraisal model

The approach The results

• Pan-European core team from largest countries
with senior sales and marketing managers
• Dedicated lever sub-teams to develop
recommendations how to reach objectives
• Roll out across Europe with a gap analysis
followed by detailed implementation planning
• Approximately 20 tangible standards defined with
concrete tools that can be used across Europe
• Sales excellence model approved for global use by
responsible executive committee member
• Training program set-up for local SFE teams to be
able to take-on implementation responsibility

The initially European project was rolled out on a global basis

Source: Roland Berger 28

Maximizing launch effectiveness of a first-to-market
oncology product in Europe

Case study 2: oncology product launch strategy in Europe

The objectives
• Ensure readiness of all relevant organizational
units of the company to maximize launch
effectiveness for the client's key oncology product
• Conduct a pan-European country gap assessment
regarding launch readiness
• Facilitate roll-out of pan-European launch plan
including continuous tracking of execution
The major changes
• Major gaps regarding launch readiness identified in
most European countries
• Key initiatives to maximize launch effectiveness
defined and prioritized for most European countries
• Pan-European launch action plan agreed and
followed-up for one year

The approach The results

• Pan-European team including general managers,
BU heads and senior marketing managers
• Launch readiness assessment along five work
streams (Marketing, Medical Affairs, Pricing &
Reimbursement, Supply Chain, HR)
• Roll out across Europe with continuous intranet
based program management tracking
• Successful first-to-market launch of a new oncology
product
• Over-budget sales uptake in first two years after
launch
• Action planning tool used also for other projects
throughout the organization

Increased launch effectiveness translated into tangible business results

Source: Roland Berger 29
Reorganization and strategic re-positioning of Europe's
largest university hospital

Case study 3: reorganization of leading university hospital

The objectives The major changes

• Define future business model, considering recent
changes of the regional healthcare policy and the
identified funding gap
• Reorganize centers of excellence to gain a
sustainable competitive advantage in Europe
• Set-up and track a pan-organizational action plan
through continuous program management
• Redefined short-term and long-term strategy and
business plan
• Revised concept for centers of excellence
• Approved concept for the realignment of
administration, IT and laboratory medicine

The approach The results

• Close cooperation with management and
supervisory board
• Overall program management for reorganization
and business planning
• Liaison with healthcare policy decision makers
• Identified funding gap addressed by comprehensive
business plan
• Action plan for all overhead functions and centers of
excellence defined and followed-up continuously
• Initiated first cost savings (e.g. outsourcing of facility
management, headcount reductions)

Identified funding gap addressed by a comprehensive action plan approved by advisory board

Source: Roland Berger 30

In cooperation with our Competence Center Marketing & Sales, we
also ensure access to non-pharmaceutical best practices in sales

Source: Roland Berger 31

Our consulting approach "Creative Strategies that work" puts us
ahead of the competition

2.5 2.5 2.8

Creativity1)

2.2 2.2 2.4

Experience1)

64%
39% 33%
Implementation
success2)

Roland BCG McKinsey

Berger
1) School grades from 1-6
2) Share of projects with successful implementation

Source: Roland Berger; Manager Magazin 07/01 32

For lasting impact, contact us

Stephan Danner Aleksandar Ruzicic

Partner Project Manager
CC Pharma/Healthcare CC Pharma & Healthcare

Roland Berger Strategy Consultants Roland Berger AG

Alt-Moabit 101 b Neumünsterallee 12
10559 Berlin, Germany CH-8008 Zürich, Switzerland

Tel: +49 30 39927-556 Tel. +41 (0)44 384 81 67

Mobile: +49 160 7443556 Mobile +41 (0)76 320 61 49
stephan_danner@de.rolandberger.com aleksandar_ruzicic@ch.rolandberger.com
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