The Path to Meaningful Digital Transformation

Pharm Exec: You’ve talked about a hybrid sales model, a blend of the digital and in-person, as a “phygital” model becoming dominant in the coming years. But given we’re still finding our way out of the COVID pandemic, is this hybrid model likely to dominate soon or do you think pharma companies will stay in their digital “comfort zones,” at least for the short-term future?

Pratap Khedkar: While it depends on the specialty, in about 40 to 65% of cases, doctors prefer virtual settings – and not just during the pandemic. Let’s assume COVID is over. We estimate at least one-third of physicians will say, “Stay virtual. Even if you could come back in person, stay virtual.” Secondly, pharma is all about reach and frequency. With virtual, reaching one-third of physicians is a problem, but frequency is an even bigger problem. It used to be possible in-person; the rep could show up twice/month and wait to talk to the doctor in the hallway. But the frequency model is dying – and digital isn’t a comfort zone. Nobody has embraced digital in the true sense of a rep who can be in-person, but then remote, and then back to in-person and easily switch between the two. We’ll need to get better at that as an industry, because reps cannot sustain frequency in the virtual setting.

About 25% of companies are acting on this. They’re saying, “We’ll adopt digital for this purpose; we’ll become much better at virtual selling, and we want to start upskilling the reps.” They’re taking active steps and could choose to let go of those who can’t adopt digital. Another 25 to 30 per cent of companies are waiting. They’re concerned about making major changes or initiating layoffs. Then, some companies are in the middle – thinking about digital transformation but haven’t “pulled the trigger” yet. Why not? First, we’re seeing a skills gap. If reps truly want to become digital, it can’t just be about knowing the product. The doctor will say, “If you’re going to tell me the same thing again over the phone or over video, I don’t need you to come in. But if you’re a problem solver, if you’re truly going to be an orchestrator and understand my issues, I’m okay having a detailed conversation once in a while – and then you can follow-up virtually.”

Being truly digital involves changing the rep’s role. It’s not just about going in and out of different media channels. About half of the reps today can’t do that. So, pharma has to say, “What do we do? Do we get rid of these reps? Do we change them? Do we hire recent graduates? Do we start training intensively?” All that can be done, but it’s a bigger conversation than simply switching on a new capability or system. That’s why people are hesitating. The progressive 25% will look to move into the “phygital” field toward the end of this year or the beginning of next year.

Looking outside the sales model at other areas of digital transformation, where else do you expect to see advances this year?

Pratap Khedkar

At a large pharma company, there’s probably about five or six areas where digital could be applied or transfused. We’ve talked about digital in marketing and sales, which is number one. The second area is digital for patients. Part of that is telemedicine, although that is changing the provider world more than the pharma one. Some companies are saying, “How do we provide a service to patients, and how can we use data to improve that experience?” Putting digital in the service of transforming what pharma does with patients directly is becoming a very important area. Some companies, such as AbbVie, focus on patient services really well, and digital can further help with that.

How does that focus break down?

One way is at the top of the funnel, which includes marketing and social media. Companies are generally getting better at that – and some have done a lot of work there. But what people are now focusing on is: What happens at the bottom of the funnel? Too often, reaching the patient has been about patient marketing — DTC ads, digital outreach, emails, websites, banner ads, social media — and drawing them into the funnel. Once the prescription is written, though, what happens to the patient? That’s where about 30 to 50% of value is lost. That means 30 to 50% of all prescriptions that adherent patients consume remain unfulfilled, likely leading to sub-optimal health outcomes. So, it’s not about sales and marketing; it’s about patient services: reimbursement, adherence, creating a long-term relationship with the patient, one-to-one relationships – and not just a broad social media approach. Digitizing that part of the patient journey and investing heavily in it is a high priority. Half a dozen companies – about the top 15% – are actively working to become better at this, and you will see a fair amount of investment over the next year.

Do you see companies building new digital capabilities in-house or achieving their new digital goals by partnering?

Over the last three years, we’ve tracked 15-20 large pharma companies – and they’ve established about 75 partnerships. These companies are very active; on average, they have five or six partnerships each. But we found a very interesting phenomenon. If we look at R&D versus commercial versus manufacturing, the majority of partnerships are with startups, the others are with big tech. Out of the 75 partnerships, around 60 are with startups and concentrated on the R&D side. Companies are saying, “With R&D, we need more innovation from the outside. These startups are more nimble, more creative; we will partner with them and basically have them figure out the difficult stuff.” On the commercial side, it’s less about startups. We have to build in-house capabilities using assets and products – and the problem is as much scaling it to multiple brands and countries as it is about being digitally innovative in the first place. Ultimately, we have to change a lot of things in-house, including connecting all the data, changing the mindset of the marketer, creating this service arm and pumping money into it. It’s a very different approach from the R&D side versus the commercial side.

On the commercial side, we saw companies plough ahead with launching drugs and doing deals virtually last year. Do you see this approach sticking around for the long-term?

What companies discovered is that many activities they assumed must be done in person don’t have to be done in person. The due diligence and initial part of the deal can be virtual. While doing the deal virtually is easier, the challenge comes with integration. Integration is based on trust and relationships. People integrate into a team; it’s not all IT systems talking to each other. But parts of integration can be done virtually. You don’t have to fly across the country all the time, for example, to meet in conference rooms. Many acquisitions announced in 2019 completed integrations in 2020, despite being the year of COVID. Going forward, integration will be a blend of virtual and in-person.

COVID delayed plans for quite a few product launches, as companies were not always willing to risk doing this virtually. Of the 53 NMEs approved in 2020 (which is on par with past years), only 40 decided to launch – that was the toll COVID took. But it’s not all doom and gloom. We found a number of strong performers despite launching in this environment. About one-third of these launches performed at more than 120% of their forecast. Of course, there is a range, but companies that met customers where they are and supported them with a broader set of services were able to launch successfully. These companies also ensured access was not a barrier – in terms of paying for drugs and also literally getting the drugs in the hands of the patients through alternative methods such as direct shipping and telehealth. They also adapted their commercial models for successful product launches through broader use of digital, virtual/personal engagement and collaboration with medical.

Are we still suffering a shortage of data scientists? What are likely to be the talent and recruitment issues this year?

Yes, there is still a shortage in that area, and it will continue. But here’s the twist. From a pharma company’s perspective, people are saying, “Oh, digital means I have to hire 200 data scientists.” That’s the wrong approach. The right question is “What is needed to make the data scientists effective once I hire them?” As an example, let’s say a company decides to experiment and invest in digital. It might hire 50 data scientists, who come in with lots of cool ideas. The company has done its “experiment,” the proof of concept works. But it remains just a concept; no impact materializes for the company as a whole. The company hasn’t found a way to scale the success. And even those companies who have scaled it are not seeing the value. What is the ROI? If they can’t feel the impact, they will start to lose belief in digital.

You can hire data scientists — and you should — but they need three or four different skills in addition to data science. Otherwise, those 50 hires, ultimately, will not be able to create value to the pharma company. For example, patient services and interaction data can frequently be a mess, and need cleaning up before anyone can work with them. The data scientists don’t want to work with those data; they say, “Somebody clean this up first, please.” So, you need a lot of data engineers, then you need data scientists, then you need the model maintainers. If we look at a company like Microsoft, roles around the data scientists outnumber the data scientists ten to one. You have to surround them with the right ecosystems to go all the way from idea to experiment to scale to impact. Many are eager to hire a lot of data scientists, but that alone will not make the magic happen – and that’s the key pivot. A few companies are realizing this, but it will be a big enabler of digital transformation.

Pratap Khedkar is managing principal for ZS’s global pharmaceuticals practice.