The Blog

  • March 30, 2010
  • Oracle R17 and Pharma’s Future

    Oracle announced Release 17 of CRM On-Demand today along with an updated vertical market version for the pharmaceutical industry.  Seventeen is a lot of releases even for a SaaS company and Oracle should be proud of the milestone.  The same is true of the emphasis on the pharmaceutical industry vertical.

    Oracle comes to the pharma CRM market with an assist from Siebel the one time independent leader in CRM that Oracle bought a few years back.  Before the acquisition Siebel and its pharma package had managed to corner about nineteen of the top twenty pharmaceutical companies.

    For a time in the last decade you could go from job to job as a pharma rep taking your Siebel skills with you and feel right at home.  The writing on the wall now though is that pharmaceutical sales is transitioning to a SaaS model and Oracle is managing the transition for its customers.

    Oracle’s done a good job of keeping up with changes in the industry and you have to admit that pharma sales is a different kettle of fish than almost anything else in CRM.  The pharma business model is what’s unique.  Sales reps never actually sell their wares to actual customers.  They sell to the major recommender, the doctor, and even the MD doesn’t buy anything.  He or she simply writes a prescription.  So you have this odd situation where the sales person is there simply to influence the recommender.

    You might know that pharmaceutical sales once went by the name of drug detailing because that’s what you did — you were a walking, talking ad for some molecule and the whole show might last only five minutes.  In some corners it was considered an entry level sales job because you got to make calls and your company tracked prescriptions and sales within your territory, but it wasn’t exactly the same as carrying a quota.

    The pharmaceutical industry is huge, generating hundreds of billions of dollars in revenues each year.  A mid-sized pharmaceutical company can easily have a thousand reps and the largest can have tens of thousands.  There are about 100,000 pharmaceutical reps in the US Calling on — get this — 120,000 prescribers.  Currently drug companies spend $5 billion annually fielding these people.  Those costs include salaries, bonuses — all the usual stuff — and some form of payment for transportation.  Whether the transportation is a car plus fuel and insurance or mileage is academic.  It’s a lot.

    But what happens if or when fuel costs rise?  Regular gas costs about $2.80 these days — not far from the $4 per gallon we saw a little over a year ago.  Even a pharmaceutical company with its vast resources might notice its costs escalating at those prices or more.

    Drug detailing is one of the oldest forms of selling — at least in the modern era.  How much of it is based on tradition and how much is need?  Does a modern drug company need to field an army of people for what amounts to five or ten minute calls?

    These are questions worth asking.  If I am right, companies all over the map — not just pharmaceutical companies — will need to find answers as fuel prices test their former highs.

    In such a reality, many business processes will need to be rethought with a goal of reducing costs associated with transportation and to me that means taking the call to the web and with it, losing a significant number of jobs.  Sorry.

    A future pharmaceutical CRM product might be expected to offer a portal for each doctor the company targets.  Within the portal a drug maker would be able to provide all of the information usually associated with a detailing call and more, such as custom designed video and audio that the doctor or pharmacist could access when convenient, rather than in the middle of a busy day.

    The benefits to the vendor would be sizeable.  Pharmaceutical companies capture and analyze a lot of field data and that won’t change.  But because an encounter is in a portal the quality of data captured might be better.

    One of the big reasons for sending actual reps into the field is for them to deliver samples that the doctor can give along with a full prescription to patients.  Samples could still be distributed overnight after a call in this new model but with lower costs.  Anything else needed to follow up on the call could be provided through the portal.

    The portal idea has merit.  Many younger doctors use automation applications for tracking their patients and virtually all use some form of billing automation.  My doctor carries a laptop into the exam room.  Between visits prescription refills and similar requests happen online.  If even doctors are using the Web — and they’re late adopters where office automation is concerned — the drug companies should see this as a sign that they need to catch up.  The cost savings would be significant and future changes in the economy may force their hands.

    As a practical matter the changeover would take a few years as older doctors might resist the change and that would mandate a two tier pharmaceutical sales force.  This will provide the time needed to do parallel testing of the two solutions and a rigorous cost/benefit analysis.  In the end, though, this is one efficiency move that can’t be ignored forever and CRM vendors would be smart to take notice.

    Published: 14 years ago


    Speak Up

    You must be logged in to post a comment.