In every loaf of bread we buy, the total cost of direct selling is buried in its price tag. Similarly, the sales costs of the cars we drive, the laptops we use and even the banks, religious institutions, and schools that compete for our loyalties are embedded in their total cost. We accept this because we know that organization within these markets utilize coordinated public relations, marketing and direct sales efforts to grow their revenues.
In health care, we tend to see things differently. We know the health care industry is large — it comprised $3 trillion in revenue in the U.S. as of 2014 — and growing. We understand that marketing and public relations professionals provide value, and that the sales forces in our organizations are tasked with bringing home the bacon. Headhunters are compensated well for bringing savvy salespersons to our organizations: companies that sell products and services ranging from drugs, devices, technologies, facilities, lenders, lawyers, accountants, consultants and many more. But somehow, we’re prone to think those involved in the delivery of care are immune to such promotional tactics. We like to think that we’re giving our patients what’s needed based on therapeutic value and hope our decisions aren’t influenced by factors other than safety and efficacy concerns.
Today, the role of direct selling in health care is experiencing unwelcome attention and unprecedented pressure. The pharmaceutical industry is a case in point, but lessons are clear across the entire health system.
Lessons From Pharmaceutical Sales
A decade ago, there were 102,000 drug reps who called on doctors and hospitals to tout their pills and injectables. Today, there are 63,000 and their ranks are shrinking. For their efforts, they are paid well: base compensation ranges from $122,000 to $138,000 (depending on the clinical specialty and drug company compensation plan) with a bonus adding up to 40 percent if sales goals are met. One would think sales’ roles in drug manufacturing would be increasing. After all, new molecular entity approvals hit 20-year highs in 2014 and 2015, so pipelines are growing. Spending on prescription drugs in the U.S. reached $339 billion last year, according to industry reports — making it the fastest growing health cost category for the third consecutive year. And the $600 billion global market is critical to each company’s long-term aspiration. One would assume companies would double-down on sales personnel, but that’s not the case.
Direct access to physicians has fallen dramatically: only 51 percent of physicians are accessible on a good day. Regulators are publishing physician-prescription patterns, exposing inducements from sales representatives to physicians to public scrutiny via the Open Payments Database. Studies have shown that physician judgment can be swayed by effective sales techniques. Regulators are scrutinizing the business practices of group purchasing organizations and pharmacy benefit management companies. The public is getting a regular dose of media coverage about “price gouging” by way of the escapades of Turing, Valent and others.
The effect of this is that drug companies are pushing their sales teams to work harder to “hit their numbers” and purging those that can’t cut it. And it’s not just a U.S. storyline. The death this year of 27-year-old drug representative Ashish Awasthi in India, whose suicide note opined that he could not cope with the pressure of his sales target, garnered media coverage here and abroad.
Questions to Ask When Looking At Selling in our Organizations
Conceptually, we all acknowledge that sales roles are indigenous to health care from top to bottom. We prefer to think this guild operates honorably. We like to think the drugs and devices we buy are the best for the purpose intended, the lawyers, accountants and consultants hired the most competent and capable and so on. But we need to take a closer look.
The health care industry needs to adopt stricter codes of ethics and business practices upon which relationships with sales representatives engage in our organizations. Nowhere is this more vital than in their interactions with our hospitals and physicians. Senior management and boards must take fresh looks at how selling in our organizations is conducted, and how the companies with whom we do business manage their sales processes and personnel. Among the questions they should ask are:
- Are confidentiality agreements kept?
- How are confidentiality agreements monitored?
- Are consultant, lawyer and accountant credentials verified?
- Are affirmations in proposals about client satisfaction and relevant engagements independently validated or taken at face value?
- And is the organization’s posture toward its selling—its culture, compensation and performance evaluation procedures — conducive to principled growth or is selling anything at any cost the unwritten policy that rules the realm?
Selling in health care is an essential function. It impacts every transaction directly and every patient encounter eventually. Now, it’s a function that’s in the spotlight as never before. The selling game in health care is out of the closet.
Paul H. Keckley, Ph.D., firstname.lastname@example.org, does independent health research and policy analysis and is managing editor of The Keckley Report. He is a member of Health Forum’s Speakers Express; for speaking opportunities, please contact Laura Woodburn. Marina Karp can be reached at email@example.com