Getting The Most Out Of Pharma Spend Analytics
It’s something every Transparency and Compliance professional has worried about after the Sunshine Payments Act. It’s stressed seasoned professionals in internal audit, legal, compliance and transparency for weeks on end. It’s raised questions that have uniformly plagued their minds and kept them up at night.
- What are my spend figures saying?
- Is the data accurate?
- Did I miss something the CMS will catch and penalize?
- What if the sales team made an error and I overlooked it?
Cumbersome and demanding, a single report can take from a few hours to several weeks of data-driven effort, depending on the size of the organization.
In this guide, we share the top five ways you can make compliance analytics work for you.
It can be tempting to leave spend data scrutiny for the end. Indeed, with hundreds of sales reports collecting in your inbox every week, why—and how—could you instantly scrutinize every activity whose report you receive? It isn’t possible.
Not possible for humans that is. If you get a good spend analytics solution on board—a cloud-based SaaS for instance—things can get simpler very quickly.
If your company belongs to the tier of small or mid-sized pharmaceuticals, spend scrutiny may have to start small. Relying on a spreadsheet solution for 1000 records or less for instance, is a good start.
You can use this spreadsheet to:
- Identify outliers: ‘HCP-Meal’ is a popular category where spend amount (TOV) can either be too high or too low. You can benchmark this against internal spend history, industry trends and/or even competitor data. Thanks to the CMS Open Payments Database, this information is freely available.
- Spot Trends: Industry practices are not one-size fit all (and may never be). What works to promote one drug may fail for the other, even in the same category. What works to earn the endorsement of one physician (HCP) may not work for the other—in fact, may even fail the second time for the same physician. Likewise, just as there are ‘blockbuster drugs,’ there are ‘sleeper hits’ in the pharmaceutical industry—Opinion Leaders, best practices and spend categories that are popular, effective and yet go largely unnoticed. To ensure you make the most of each activity—or rather spend against each activity—it is critical to keep following the direction your budget is taking. Trend lines in simple spreadsheet software can help with disclosing declining trends. They are not as helpful for emergent ones.
- Measure Physician ROI: Your sales reps have been dedicating several hours each week to visiting a physician, distributing giveaways and trying to get his/her approval for a speaking session. It works. The physician is a keynote speaker at your event. And—sure enough—prescriptions (sales) have increased following the speaker session. Looks good, sounds safe, right?
Analytics tell you exactly how much you benefit from the cost you incur. If it was possible to benefit more (e.g. get a stronger endorsement); or lower costs (like engaging a less-expensive physician with similar credentials)—a spend analytics solution will let you know.
The key is to keep feeding, cleaning, categorizing and monitoring all the data you enter into your solution.
Spend review helps you identify what may be easily missed in routine transactions. These include:
- Misclassifications: An example would be the ‘HCP meal’ category described above.
- System Errors: Misapplied formulae; missed transactions; error carried over from one figure.
- Human errors: Decimal point misplaced, projections made without converting currencies first.
To ensure decisions related to pharma spend are effective, insightful and far-reaching, it is important to base them on year-round reviews.
Cognitive biases are just one of the many mistakes you risk running by keeping review as an end-of-year exercise. To give data the validity it deserves, a compliance/transparency professional should keep an eye on spend movement throughout the year. This will not only give your function the legroom to take timely corrective action, identify errors, but also—if the need comes—to redirect business processes in a manner that is remedial and will prevent further errors.
Given the big pharma landscape, year-round-reviews equip your company with the resources needed to help match—and fix—data anomalies occurring due to mergers, acquisitions, media disclosures and other externalities.
Year-round review also keeps the transparency function fluid. The organization is less dependent on a single individual for reporting. Likewise, a single professional will be less burdened by the task of internal/external reporting if the task takes place at regular intervals.
Compliance Analytics will never succeed as a standalone exercise. To make them work, the Compliance/Transparency team needs to get internal buy-in from several functions within the organization.
Simplicity and visibility are key to getting timely, responsible sign-off on spend data.
Comparing apples and oranges should not happen in the pharma compliance space. But it happens more often than you would think.
Typically, this is a function of mis-categorizing spend data. For instance, “Speaker Events” can erroneously blanket physician costs related to:
- Travel and lodging for the event
- Fees for writing a syndicated article related to the event
- Meals included in the speaker event
Data cleaning, as we mentioned in the figure above, is a critical element in ensuring the right comparisons are made, and realistic expectations are set across the sales team.
In this regard, relying on historical performance alone is again, a known cognitive bias. A good analytics platform will reflect the impact of externalities—including competitor and industry performance, changing legal requirements, and demographic shifts. This is a critical shortcoming that spreadsheet users need to circumvent.
How To Set The Right Benchmark
Rule number one: Benchmark all the time.
The emphasis here is not on placing benchmarks, (which, ideally, should be a periodic exercise), but on using them to draw objective conclusions about performance.
In other words, appropriate benchmarks simplify comparative analysis; and this is the area that should elicit most users’ effort. Comparative analysis can—and should—take several approaches.
Foremost is internal comparisons: Benchmarking current sales with historical performance, as a function of pharma spend. What will make this analysis even more robust is a comparison of the degree and depth of engagement. For instance, the number of physicians engaged, and amongst these, a distinction between practitioners and KOLs (Key Opinion Leaders). Seeking patterns or shifts will be central to planning better. For instance, analyzing spend data on the basis of sales territory, drug, and physician specialty might reveal surprising and critical insights about how your pharma spend has performed.
It is the ideal way to proceed with assessing performance across markets. If your organization has an international presence via subsidiaries, JVs or R&D collaboration, this is the most objective tool to determine whether performance is justified against the competitive landscape.
You would be advised to not limit the use of this analysis to performance analysis. A comparison such as this one can be an effective ‘housekeeping’ exercise which will help you uncover missing or erroneous entries, double entries and more. It will tell you—with precision—the kind of training needs your sales team actually needs.
Then we come to the second (external) level of comparison.
Industry comparative analysis will undergo all the dissections above and more. Examples include:
- Competitive and Industry Analysis: Between 1995 and 2015, there were 63 mergers and acquisitions in the global pharmaceutical industry. When this is the prevalent dynamic, it can be hard to determine which organizations qualify as strategic competitors, and which ones may be approached as potential partners. Periodic, competitive analysis by numbers will tell you both. Select your peer group by segmenting geographically, by specialty or by size. Compare performance against demographic penetration, ROI on R&D, patent cliff management, and so on. It will give you a realistic assessment of your own sales reps’ performance against your direct and indirect competition; a plan for combating threats and capitalizing on opportunities. Expanding this analysis beyond indirect competition to include all relevant pharmaceuticals will yield similar insights for the industry.
Some metrics, such as ROI per physician will have different implications per market. For instance, publication consent, which is significant in EFPIA-member countries, would give you a precise account of how well your sales rep has built relationships. If a physician is providing consent to competition, but not to you, despite being a larger spend recipient of your budget, some corrective action is obviously needed. Likewise, physicians who have only provided you with consent may not necessarily be good news, as your costs may be needlessly inflated and so on.
- Direction Management: A superficial analysis will miss out on latent or emerging trends, for instance declining brand equity, or a smaller brand slowly crowding out the space of a blockbuster drug. A superficial analysis will also miss out on physicians with growing brand credibility—an opportunity your competition may catch on to before you do. The solution is to structure your data such that it is open to qualitative and quantitative insights. Visual representation is the way to go.
#5 Compliance Data Repository
Data Repository–the place where it all comes together. Spend data analytics are more cyclical and less periodic. An analytics solution relies on enriched datasets, built from a variety of internal and external resources. This guide already mentions the CMS Open Payments Database as one useful external data source. Others include the company’s own historical reports, professional BI reports, and competitor data and trade publications.
Of these, the most insightful source for spend patterns, is the pharmaceutical company’s own records.
Building, and then periodically replenishing spend data is key to fostering a strong analytics culture. An internal data repository can give powerful insights on the company’s performance, relative to:
- Industry and competitor activity
- Its own subsidiaries (Regional Vs Group Performance)
- The company’s reaction to externalities—like changes in regulation, patent cliffs and so on.
In cases where punitive action is imminent, a robust data repository is a powerful defense mechanism. It gives evidence of historical spend behavior; collective spend motivation and much more. A data repository gives evidence of a company’s performance in its competitive space.
How To Build A Compliance Data Repository
This is a continuation of the analytics exercise you—as a compliance/transparency user have been conducting for your annual reporting. For pharmaceutical organizations in Europe/USA this effort is externally driven by reporting requirements, i.e. CMS for USA and EFPIA for Europe:
- Internal data is collected from a variety of ERP systems. Again, typically, these would be SAP, Oracle and cost-focused solutions like Concur etc.
- The data is aggregated, mastered and entered into reporting templates.
- Reports are generated and submitted.
To build a repository, the user must continue from Step # 3.
- Date collected for transparency reporting is entered into a nascent repository. Depending on the sophistication and scale of operations, this could vary from a simple database to an in-house SaaS.
- The next step is to feed external records from CMS Open Payments/EFPIA database and the records that exist with the pharmaceutical company’s sales team into this new repository.
- Using external data, like market intelligence reports, is the next and final data entry step.
- By this stage, the repository must be rich in records. CMS alone currently hosts 28.21 million, a figure that has grown steadily from 4.46 million in 2013.
- If you already have an analytics solution in place, the solution will help you organize and identify spend patterns, determine appropriate thresholds and apply a benchmark in each category that is realistic and mindful of market realities.
- These thresholds and benchmarks can then be used to set up alerts in your solution. The alerts may be spend triggers or red flags—any mechanism that tells the relevant function to take action.
The best thing about a repository is that its value gets compounded at each period. So the earlier you start, the more returns you can expect to achieve.
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