Pharmaceutical Commerce - September/October 2017 - 6

Op-Ed
New approaches to specialty distribution
A direct-distribution model could save expense for payers and patients while providing better service
By David Hileman, PharmaCord

The recent market
news surrounding the
difference between
gross and net pricing
for branded products
brought to light the
inefficiencies in today's
product distribution
and management models. It is becoming
increasingly evident that the industry is
due and preparing for an innovative
change. The methods that were well suited
to the blockbuster products of yesterday
are antiquated to support the complex
therapies of today and the future. A new
method leveraging technology to connect
patients with these expensive therapies
must be created. A channel focused on both
the complete support of patients along
with the direct distribution of products by
manufacturers through an independent,
non-biased entity removing layers of
historical inefficiencies is on the horizon.
Many years ago, when the potential for
personalized medicine became a reality for
products, such as Provenge (sipuleucel-T),
the possibility of a manufacturer going
direct-to-patient emerged. While initially
thought to be practical only for products
tailored for individualized use, the potential

for broader utilization became a quick,
apparent reality. Specialty pharmacies
stepped in to address this need. Today, most
specialty prescriptions are now fulfilled by
payer- or PBM-owned pharmacies. Not
only is there a lack of efficiency but these
organizations are inherently providing
services based upon the cost containment
strategies of their parent organizations.
The healthcare industry is faced with an
increased focus on cost containment. For
example, the cost of products used for the
treatment of Hepatitis C or the introduction
of immuno-oncolytic agents will only drive
this pressure. As such, the industry is looking
for solutions to address the challenge. We
are seeing new programs being developed
from all aspects of the continuum. These
efforts encompass new initiatives from the
employer side of the table, such as the new
Healthcare Transformation Alliance. This
is an organization focused on removing
the multiple layers and inefficiencies for
employer groups. Their primary goal
is to attempt to gain control over rising
medication costs. The challenge with this
initiative is that the necessary, innovative
tools have not been brought to market to
enable this to become truly effective. For
example, the Alliance has been left with

leveraging the traditional PBM functionality
to manage access while contracting directly
with the manufacturers.
A good first step, but is there potential
to go one step further? The industry needs
to look for solutions to remove costs and
inefficiency from the system; to take greater
control over the distribution of expensive
therapies, and eliminate redundant and
unproductive steps along the path.
One potential avenue to meet these
objectives is to enable manufacturers to
connect directly with the patients to
shorten the supply chain, to evolve the
"Hub" programs of today into the direct
distribution programs of tomorrow.
Alongside this, the relationship between the
employer groups, payers and manufacturers
needs to continue to evolve, perhaps into a
direct contractual relationship. This model
is best suited for those products we deem
today as specialty products. By using a
neutral third party intermediary, such as
an independent company like PharmaCord,
manufa c turers could not only ship
product directly to the patients, but also
support these same patients with benefits
verification, prior authorization tools,
financial assistance counseling along with
clinical intervention programs. Another

added value is the increased efficiency
through the channel management process;
a cornerstone for the collection of valuable
data elements. These comprehensive data
elements, in turn, become the building
blocks for establishing outcomes-based,
predictive reporting and the measurement
of value-based care.
Consider the path as we know it today-
from manufacturer - to wholesaler - to
pharmacy - through a PBM - to the patient.
Each of these steps cost valuable time and
money. Now let's look at the model of the
future-from manufacturer - through
PharmaCord - to the patient. The time has
come to consider a change that positively
affects the patient journey using efficient
channel management.
ABOUT THE AUTHOR
David Hileman is executive vice president
and COO of PharmaCord (Louisville, KY,
pharmacord.com). He has a 30-year career
in patient services and biopharma channel
strategy, most recently as operational leader
at Omnicare Specialty Group, which included
RxCrossroads, of which he was a founding
member in 2001. He has a BS in pharmacy
and a BS in business administration from Ohio
Northern University.

Change is a constant for sales incentive planning
Sales Compensation Solutions, a new book from ZS Associates, outlines problems and solutions
By Andris Zoltners, Prabhakant Sinha, Chad Albrecht, Steve Marley and Sally Lorimer, ZS Associates, Inc.

An environment of unprecedented
information technology and digital channel
innovation is rapidly changing the nature
of business. Advances in information
technology, including systems (customer
relationship management, digital asset
management), tools (data management,
analytics), infrastructure (mobile, cloud)
and information (big data), give sales forces,
along with their customers and competitors,
better access to information. At the same
time, digital channels (apps, social media,
email, text messaging, videoconferencing)
give buyers and sellers new ways to connect
and create value for one another. All of
these changes affect sales forces and sales
compensation plans.
Despite all the change taking place
today, sales compensation remains a
powerful management tool for motivating
salespeople, providing strategic direction
and encouraging fiscal responsibility in a
sales force. Several current issues make it
more challenging than ever to design and
implement effective sales compensation
plans:
* Current sales compensation plans

are misaligned with today's sales roles,
especially where multichannel or teambased selling are concerned.
* Financial incentives aren't always
enoug h to motivate today's diverse
workforce
* More than ever, sales forces feel
pressure to drive profits, not just sales;
the ability of a plan to direct sales efforts to
the right customers and products, and to
sell at the right price, becomes increasingly
important.
* The issues of quota setting and
plan understanding are not going away;
accurate quota setting is a perennial issue,
and companies struggle with getting sales
forces to understand and embrace sales
compensation plan change.
The latter bullet item is especially
relevant to the biopharma industr y,
where sales compensation plans change
frequently as new products are launched
and markets evolve. A particularly difficult
transition is changing a commission plan
paying from the first dollar sold to a quotabased plan paying only for sales above a
quota or threshold. Companies may do

6 Visit our website at www.PharmaceuticalCommerce.com September | October 2017

this if pay levels under the commission
plan start growing precipitously because
salespeople are generating many repeat sales
for minimal sales effort yet aren't serving
their customers well or following up on all
opportunities. Salespeople don't want to
give up earning potential, so the company
risks losing salespeople and customers if
it changes the commission plan or tries
to reassign accounts to improve customer
coverage.
A b i o t e c h n o l o g y c o m p a ny u s e d
culture and communication to enable the
transition from a commission plan to a
quota-based plan without significant sales
force and customer disruption. Back when
the company had launched its first product,
sales leaders had introduced an incentive
plan paying salespeople a commission on
all sales in their territory, while making it
clear that the plan would change after the
initial launch phase. By the second year
after launch, the company had enough data
to make reasonable forecasts of territorylevel sales, and it changed to a quota-based
incentive plan.
Salespeople's payout started at 80% of
their territory sales quota and accelerated

beyond 100% of quota. Going forward, the
company could adjust territory quotas as
needed to keep pay levels in line with the
evolving sales role and market needs.
By thinking ahead when creating a sales
compensation plan and using analytics
to predict future financial consequences
under different performance scenarios,
continued on page 34


http://www.pharmacord.com http://www.PharmaceuticalCommerce.com

Table of Contents for the Digital Edition of Pharmaceutical Commerce - September/October 2017

Table of Contents
Pharmaceutical Commerce - September/October 2017 - Cover1
Pharmaceutical Commerce - September/October 2017 - Cover2
Pharmaceutical Commerce - September/October 2017 - Table of Contents
Pharmaceutical Commerce - September/October 2017 - 4
Pharmaceutical Commerce - September/October 2017 - 5
Pharmaceutical Commerce - September/October 2017 - 6
Pharmaceutical Commerce - September/October 2017 - 7
Pharmaceutical Commerce - September/October 2017 - 8
Pharmaceutical Commerce - September/October 2017 - 9
Pharmaceutical Commerce - September/October 2017 - 10
Pharmaceutical Commerce - September/October 2017 - 11
Pharmaceutical Commerce - September/October 2017 - 12
Pharmaceutical Commerce - September/October 2017 - 13
Pharmaceutical Commerce - September/October 2017 - 14
Pharmaceutical Commerce - September/October 2017 - 15
Pharmaceutical Commerce - September/October 2017 - 16
Pharmaceutical Commerce - September/October 2017 - 17
Pharmaceutical Commerce - September/October 2017 - 18
Pharmaceutical Commerce - September/October 2017 - 19
Pharmaceutical Commerce - September/October 2017 - 20
Pharmaceutical Commerce - September/October 2017 - 21
Pharmaceutical Commerce - September/October 2017 - 22
Pharmaceutical Commerce - September/October 2017 - 23
Pharmaceutical Commerce - September/October 2017 - 24
Pharmaceutical Commerce - September/October 2017 - 25
Pharmaceutical Commerce - September/October 2017 - 26
Pharmaceutical Commerce - September/October 2017 - 27
Pharmaceutical Commerce - September/October 2017 - 28
Pharmaceutical Commerce - September/October 2017 - 29
Pharmaceutical Commerce - September/October 2017 - 30
Pharmaceutical Commerce - September/October 2017 - 31
Pharmaceutical Commerce - September/October 2017 - 32
Pharmaceutical Commerce - September/October 2017 - 33
Pharmaceutical Commerce - September/October 2017 - 34
Pharmaceutical Commerce - September/October 2017 - Cover3
Pharmaceutical Commerce - September/October 2017 - Cover4
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