Medical Device Link.

Originally Published MX March/April 2006

ADVERTISING, DISTRIBUTION, & SALES

Medtech's ever-changing global marketplace demands innovative approaches to sales and customer relations.

Moderated by Steve Halasey

For all the time and money that medical device companies spend on product research and development, at the end of the day it is the sales effort that determines a company's success in the market. Recruiting and managing a sales force to meet the needs of medtech's continually changing environment is no small task, and often presents challenges that can absorb a significant amount of attention from company leaders.

To find out more about the challenges that medtech companies face in developing and managing their sales forces, MX invited a panel of seven industry sales experts to share their views (see sidebar). In the following roundtable, panelists reflect on how company sales efforts have been affected by some of the major changes that have occurred in the medtech marketplace over the past decade. Participants emphasize that the clinical value of a product still trumps other considerations when it comes to closing the deal, and they highlight the ongoing need for specialized sales professionals who can carry out education and training functions with customers.

Nevertheless, the panelists admit that manufacturers are more and more being asked to demonstrate the cost-effectiveness of their products, and they suggest that companies with a substantial economic proposition stand a better chance of market success. Along the way, the roundtable participants also comment on current trends that are affecting medtech sales, including direct-to-consumer advertising, the use of automated sales force tools, and the industrywide movement to define and enforce ethical behavior in dealing with customers.

MX: How has the purchasing power changed in the medical device marketplace over the last decade?

Stuart Raetzman: Ophthalmology is an important area for most health systems, and generally the ophthalmologists' preference has held sway over purchasing power. Consequently, at Alcon Laboratories (U.S. headquarters in Fort Worth, TX), we have not felt the impact of corporate purchasing power as much as companies in other sectors. The importance of clinical value is still higher in ophthalmology than in other areas. A lot of that has to do with portfolio development. In the last 24 months, there have been a number of quite remarkable technological advances in ophthalmology, and those advances have swung the pendulum toward clinical success considerations over corporate purchasing.

John, is that the same for you?

John Rooney: Yes. In the interventional field, acquisition costs do not outweigh clinical value. To a large extent, physicians still call the shots about which products they want to use in a procedure. Although purchasing and acquisition costs are becoming more-significant issues, group purchasing organizations (GPOs) do not have a big hold on this yet. That is what we find with many of the GPOs. Another example is that the independent health networks say they want to go off the GPO pricing and bid it out on their own.

Matt Margolies: There's always been a difference between capital equipment and a disposable or commodity-type product. Integrated networks, depending on where they are in their supply-chain initiatives, are starting to say, ‘We want to take it out on our own, but we still want to have that safety net of the GPO.' GPOs such as MedAssets (Alpharetta, GA), Novation (Irving, TX), or Premier (San Diego), each offers different products to their customers. Viasys Healthcare (Conshohocken, PA) has a presence on all of the GPOs' lists.

Most of the GPOs are moving toward dual-source and tri-source contracts, versus the sole-source contracts that we used to enjoy. GPOs are important to our company. We still need to have a presence there, but we are starting to develop our network deals based on where the integrated network tells us it wants Viasys to offer value.

Trent Reutiman: Start-up companies at which the technology has not yet achieved critical mass rely heavily on clinical success. Additionally, OmniSonics is looking for opportunities to create value beyond pricing. We try to drive training and education programs through GPOs to increase the visibility and utilization of our new technologies and procedures.

How is this shifting power base affecting companies' sales strategies? What do companies have to do to accommodate all of the different groups that are influencing sales?

Peter J. Masloski: We are definitely seeing a shift from the national GPO sole-source agreements, and decision makers are emerging from further and further down the chain. Regional offices, shareholders, and integrated delivery networks (IDNs) are becoming more important. My clients generally pay more individualized attention to those groups in order to provide them clear accountability within their organization and give them a single point of contact. In some cases, my clients have expanded their dedicated account management teams to cover some of these entities.

This need to accommodate a variety of players has also reinforced the value of and the need for a strong selling organization with feet on the street. Companies are continuing to invest in building large and strong sales forces to ensure their messages are reaching all levels of the client and customer organizations.

It sounds like physicians still have a fair amount of power and that clinical value is quite important in purchasing decisions. Are there areas in which other entities and economical considerations are exerting greater influence than before?

Rooney: A shift to the IDNs and the regional players is occurring. At large IDN organizations, this shift is being internalized. New miniexecutive positions are emerging for the sole purpose of managing service lines. In my field of interventional practice, for instance, a company might be dealing with a service-line manager or director who has responsibility for all of the organization's radiology, cardiology, and vascular surgery purchasing.

Usually those directors—if you can find out who they are—have a direct line to the CFO of the company. These directors are typically people with nursing or clinical backgrounds who also have an MBA. They are tasked with ensuring that the right choices are made across the whole service line. Luckily for manufacturers, their considerations still go beyond acquisition costs. They are looking at efficiency across the whole line.

Demonstrating Cost-Effectiveness

That puts manufacturers in the position of having to demonstrate the cost-effectiveness of their products, doesn't it?

Margolies: You are hitting it exactly on the head. I do not want to deemphasize the economic portion. Customers are coming to expect that manufacturers will give them a fair price, especially when the clinical value is there.

But manufacturers are no longer just selling equipment; they are selling a solution. Companies have to understand data exchange and information technology (IT). Equipment must be linked to the hospital networks, and manufacturers have to show their customers the process for doing that. Customers are willing to pay for that service, as long as the cost is reasonable and the manufacturer is providing a solution to their problems.

Reutiman: While I was with RITA Medical Systems (Fremont, CA), a company establishing radio-frequency ablation as a cancer therapy, we focused on identifying both the potential clinical opportunity—which is a completely new opportunity specific to hospitals and not necessarily GPOs—as well as the financial opportunity. The more effort that smaller companies, such as those where I have worked, put into identifying both types of opportunities for stakeholders, the greater level of success they will have.

Raetzman: We have faced similar pressures. Fortunately, Alcon has built a portfolio that allows it to sell procedures. For a cataract procedure, for example, the company rolls all of the product needs into one package. The company sells more-efficient, more-effective procedures.

In doing so, Alcon is speaking the language of the customer. Instead of looking at one product versus another product as individual components of a procedure, Alcon sells the entire procedure to the account. The customers have requested that from us, and we have been able to give it to them.

Manufacturers are clearly responding to the need to make their sales organizations fit what the market is demanding. How have you seen that changing the way your companies approach sales?

Reutiman: Manufacturers are working to ensure their sales forces have a range of competencies. This requires identifying clinical opportunities for the physician and the hospital, as well as addressing the financial and reimbursement side. This might include partnership in clinical marketing, or helping the hospital to market a new procedure or technology to a patient population.

Rooney: Another issue that comes into play from a sales and marketing perspective is the need to know the stages of healthcare in which these IDNs work. The way that manufacturers have to interact with customers in heavily capitated areas of managed care, such as Minnesota or California, would be much different from their interactions with customers in regions dominated by stage-one fee-for-service providers. We need to know how to approach customers and how customers are going to approach us.

Margolies: This has been a particular challenge for Viasys because most of the company's sales force is very clinically oriented. Due to the greater emphasis that has been placed on the economics of purchasing and materials management over the last couple of years, we've had to shift our sales strategy. Whereas our sales force used to deal only with the department and the physician, we're having to train our representatives how and when to approach materials and purchasing managers. Our sales force has to go to greater lengths than it has historically, and our representatives also have to know the appropriate time to do so.

How are companies assigning the task of making the economic argument to their customers?

Masloski: In some cases, internal organizations are being developed to determine the economic value of a product. In other cases, companies are bringing in reimbursement specialists who are not necessarily directly linked to the sales force. These entities help interpret the economic value of products and ensure that customers are correctly coding and capturing the appropriate value for the products and procedures.

As a sales team leader, do you exert pressure on your reimbursement teams or other economic teams to provide data that you can then take to the customer?

Raetzman: Absolutely. In our case, our customers can pursue one of two strategies. They can either position themselves in the marketplace as a high-technology, premium provider, or they can focus on costs. Our company looks to provide data on which of those strategies is more effective in ophthalmology. Having these data is important because it allows us to communicate to our customers the benefits of positioning themselves as the high-technology leader in their marketplace. Those accounts grow at a faster rate than accounts that take the lowest-cost approach. However, getting those data is very difficult.

Trent, in an emerging company like OmniSonics, there are not a lot of clinical data out there to rely on. On the other hand, you have the advantage of being able to conduct studies from the very beginning that could theoretically provide you with a lot of cost-effectiveness data. How is OmniSonics approaching that?

Reutiman: Our opportunity is not so much a matter of trying to gather existing data, but rather building partnerships around creating data that will make sense for hospitals, regional markets, and even the GPOs across the nation. We are looking for opportunities to gather successful data stories and create partnerships. Some groups find that more attractive than others.

Rooney: It is really difficult to get the data in a lot of these businesses, and ours in interventional products is no different. But if the manufacturer can identify the person with a direct line to the person in the finance department who makes the decisions, that organization will often work with a manufacturer on a pro forma statement—as long as it makes sense to that organization and the manufacturer uses data from that institution.

For instance, if a company wants to prove that it can turn over a hospital's beds more quickly, it should use data from its partner hospital. If that approach makes sense for the hospital, its administrators will often work with the manufacturer on such a project. In this way, the company does not have to fund a separate, sophisticated study, which can be very difficult and very costly to conduct.

Margolies: Not only does a company need to understand the current data and push on reimbursement folks for updates on current procedural terminology (CPT) codes, but that company must also look to the future. For Viasys, the diagnostics business is critically important, and understanding the future of reimbursement in the diagnostics realm is crucial. Will Medicare continue to reimburse outpatient procedures in a lab, or will the sector move toward home-care diagnosis? Those shifts could dramatically affect our business, so our company needs to understand what is happening not only today, but also in the future.

Consumer Considerations

Is there a direct-to-consumer (DTC) angle to what your sales organization does and, if so, how does that affect your relationship with healthcare professionals in terms of the selling proposition?

Raetzman: DTC efforts affect small companies differently than big companies, and they have an important impact on a company's sales strategy.

The key to DTC initiatives is ensuring that a company's physician customers are ready when those consumers come in. If a company is successful with a DTC effort, it is going to be sending patients in to the physicians. If the physicians are not in alignment with what the company is saying to the consumer, all the manufacturer will have accomplished is to create frustrated doctors and frustrated consumers. Then the company will really have a mess on its hands.

In these cases, a company's reach is key. A market leader probably has the sales infrastructure necessary to make sure the entire physician base is ready for patients before it turns on its DTC initiative. A smaller company may have difficulty with that. A small company may have a remarkably compelling consumer angle, but if it does not have a sales infrastructure large enough to prepare every physician who might potentially see one of these patients, the company will have a difficult time.

There is wonderful work in the DTC realm going on right now in the joint-replacement marketplace. There are some remarkable opportunities in ophthalmology as well. But before a company pulls that trigger, it has to make sure that the physician base is ready. And that requires a significant investment in sales force time.

Reutiman: As a smaller company, OmniSonics will try to ensure success in local markets before taking a grand DTC-type approach. The company works to ensure that it gets the necessary traction at a particular center, based on the educational efforts at a referring-physician level or at a particular call point, prior to helping that center market DTC. Start-up companies need to be sensitive to the consideration that if they want to turn on a DTC approach, they better have a customer base that can handle what might be coming.

Greg, the diabetes market lends itself to healthcare consumerism and DTC marketing. Do you have any thoughts on the sales importance of those two trends?

Greg Meehan: Direct-to-consumer is a tricky piece for those of us that come from a hospital background. It is quite a transition when you get into DTC advertising or building a therapy using a DTC strategy. One of the biggest challenges faced in the diabetes sector is that a lot of the business is direct to the consumer.

Beyond reimbursement, the biggest challenge our company faces is at the healthcare-professional level. With diabetes, there is a heavy patient-training component involved. If the physician and the staff do not have the capacity to do the training, then the manufacturer has some significant challenges in trying to get its therapy out into the marketplace. If a consumer wants a product, that person will go to a physician. If the physician does not have the resources to train the consumer, the physician oftentimes will talk that person out of beginning that therapy simply because he or she does not have the means to support it.

When this situation occurs in our business, the company is challenged with providing the capacity on behalf of the healthcare professional. The manufacturer has to do the training. It has to educate the patient and even provide ongoing education. I don't mean making adjustments to the therapy—obviously that is a physician's call. But rather, any educational resources the physician does not have become the burden of the manufacturer. Medtronic has been dealing with this issue for quite some time in the insulin pump therapy market. Through CPT codes, the company looks to increase profitability for the physicians so they can hire the staff to provide this capacity. That will take much of the burden off the company and ultimately increase its profitability and reach with this therapy.

David, any thoughts on DTC marketing trends?

David Brown: U.S. Surgical has not made specific efforts to drive potential patients to its surgeons. However, consider bariatric disease. Patients do seek out physicians for information on treatment, and part of our company's job is to prepare the surgeon for the continuum of care that goes along with that disease state. Physicians need to be able to engage patients when they come to them, regardless of the impetus behind the visit. Sales organizations need to anticipate that need, and physicians should be supported through marketing efforts.

Matt, what are your thoughts on this trend in the respiratory care market?

Margolies: On the sleep therapy side of its business, Viasys has not done any direct-to-consumer advertising. But some of our competitors—ResMed, Respironics, Tyco Healthcare—are starting to plan initiatives in this area. Certainly there is a lot of discussion and awareness among consumers on sleep therapy issues. DTC advertising is an area where we are going to see more growth; however, Viasys has not yet been a major participant in this move.

Is the sheer expense of DTC marketing one of the reasons more medical device companies haven't pursued these initiatives?

Meehan: Yes, it is very expensive, and that has been one of our challenges: the return on investment (ROI). It is tough to reach enough consumers to see that return.

There is a benefit to being part of a sector that is dominated by large companies with deep pockets. That is the state of today's diabetes market, with Johnson & Johnson's recent acquisition of Animas Corp. and Abbott's entry into the market. Now the sector has four major companies—Roche, Abbott, J&J, and Medtronic—with pretty deep pockets. Hopefully, as a unified group, we can move forward in promoting awareness of this therapy. It is cost prohibitive when a single company tries to do it, which is the situation Medtronic was in before the other big players came on the scene.

But there has been a transition in our market. Our therapy has achieved 23% penetration in the type 1 market and is virtually untouched in the type 2 market. There is a huge opportunity in this market if we can get the word out to consumers and motivate them to ask their physicians about the benefits of pump therapy and request to go on pumps. Clinically we have proven that it is superior to multiple daily injections. Due to CPT coding and the fact that physicians do not have the capacity to train their patients, they currently are not actively promoting pump therapy. If the industry can communicate the benefits of pump therapy and patients begin to demand the therapy, it will benefit everyone involved. But it is quite costly.

Masloski: I do not hear companies citing concerns about the expense of DTC marketing as much as I hear them say the technique just needs to be appropriate for their given product. In most cases in the device and diagnostics industry, the clinician team makes the final decision on the therapy and on the brand. There is a subset of the market where consumer advertising is even appropriate. In those cases, it becomes a question of reach and capability. Does the organization have the capability to reach that group with a message that is going to stick and is the ROI going to be there?

Strategies for Growth

There are a lot of small, start-up companies in the medical device industry. As they develop and grow, sales is often one of their last considerations. After focusing on reimbursement, regulatory, and technical issues, a company might finally get around to hiring a sales force, only to realize it doesn't have the reach to succeed. For this reason, the company might end up selling itself to a larger player. How can smaller companies avoid falling into the trap of not having the sales force when they need it?

Reutiman: This issue is right in our strike zone. Our company is much more interested in achieving a high level of utilization amongst a smaller number of customers—staying somewhat narrow but going very deep. We pay attention to average-selling-price (ASP) trends and, in introducing a new technology, we look for how many iterations of development the device must go through to move beyond early adopters to general market acceptance. We try to stay focused on utilization rates and the amount of traction we are getting among that small number of customers to evaluate success.

Brown: Other than to emphasize the need for strong sales leadership, I cannot comment on how to avoid the trap of not having the appropriate sales force when it is needed. Our company's sales leadership is always engaged in an active discussion about what size sales force is needed to do the things that we are being asked to do.

Greg, am I correct that Medtronic's diabetes unit is an example of the upside of this trend for larger companies?

Meehan: This was a significant factor in Medtronic's purchase of MiniMed. MiniMed's top line was growing very quickly, yet the company had achieved relatively low penetration in the market. Obviously Medtronic has the ability to put more salespeople on the street and to drive adoption of the therapy beyond what MiniMed could accomplish alone.

Conversely, smaller players entering the market have been using a "sniper fire" approach rather than machine gun fire to counter Medtronic. That is, they come on the scene and focus on the largest prescribers in the country. They don't help us expand the market. Instead, they try to take big pieces of the pie in the form of a few large accounts. On the other hand, Medtronic is trying to drive broader adoption of the therapy among multiple call points—not only with endocrinologists, but also with internal medicine and family practices.

It seems every company is facing the imperative to grow, no matter what its stage of development. How are your companies modifying their sales strategies to accomplish the goals put in front of them?

Raetzman: A growth strategy begins with a good understanding of a company's sources of business and growth. Some organizations do a better job than others of developing growth strategies by understanding how their market growth, share acquisition, or ASP growth relates to their changing product mix. Companies should know which of those three things had the greatest effect on their business over the last three years. Some companies can answer that question very easily, and other companies scratch their heads a little bit.

Growth strategies begin with an understanding of a company's historic growth and its potential sources of future growth. With that understanding, sales strategies can be developed and implemented. This requires communication among a company's sales analytics group, marketing research group, product management marketing group, and sales management group. All these entities must work together on the coming year's budget to ensure consistency among growth objectives. A company must identify where the vast majority of its growth will be—in market expansion, share acquisition, or ASP growth—and build its sales strategy around that.

Masloski: Many of my clients look to new products—or at least relatively new products—to continue their growth and increase their market share. This places stress on the size and structure of sales organizations. As a company continues to add new products, it has to worry about the capacity of its salespeople. Do they have enough bandwidth to be able to promote new products or are they beyond their capacity? Does the company need to think about changing its sales model to make sure it is going to get the right kind of representation and the right kind of expertise for its customers? As a company grows and expands, it has to think about potentially changing its structure.

A company also has to worry about growing pains with its sales force—adding new territories, splitting territories, disruption in customer relationships. So in addition to all of the integration, planning, and alignment of strategies, companies also have to ensure their sales forces are well designed, aligned, and set up correctly to be able to implement those strategies.

Rooney: We are facing some of those issues right now. One of the things that we have tried to do is integrate business development with product marketing. I compare this to a trick play in football where the quarterback flicks the ball to the running back, who then passes it off. Our company needs someone in the middle who can help us keep our eye on the ball. We also need to see what is coming down the road so our product managers and product teams do not get behind. All this needs to be communicated to the sales force so it can prepare for deployment and execution on the desired timelines. It is difficult to coordinate all these elements to get a company's sales organization in line with the product organization's needs, but that is one way we are trying to attack it.

On another front, our company is moving to a lower cost to serve. We have about 3500 customers nationwide, based on procedural data on ICD-9 codes, and about 1000 of them constitute 80% of all procedures in the market. We are moving the other 2500 to a lower cost to serve by leveraging inside sales support. We hope this will allow us to implement the correct-size sales force to really focus on those 1000 customers who represent the bulk of the market. Currently, our sales team is distracted with all of the smaller accounts, which are just as heavy in administrative demands as large accounts. That is something we are looking to change.

Meehan: Our business is a little different from a hospital-based business. When you are in the hospital environment, there is obviously a heavy investment up front during the evaluation process, during which a company works to get a surgeon comfortable with a product line. Once a surgeon is comfortable with a line, there is less work load in maintaining that business going forward. Certainly a company still has to call on that physician and support the difficult cases, but companies don't have to be there for every single case.

In the diabetes world, sales are linear. If a sales force wants to sell twice the number of units that it sold the year before, it needs to add more resources in the form of head count in order to accomplish this. Territories reach a capacity, be it 30, 40, 50, or 60 units a month. Each patient requires the same amount of effort on behalf of the manufacturer to get that person through the learning curve and ultimately achieve success with the therapy. My organization has used consulting firm ZS Associates (Evanston, IL) to explore other cost-effective sales alternatives in attempting to balance our work load and expand our field capacity.

Hiring the Help

With all the companies looking to grow, is it a challenge to find good salespeople?

Brown: The answer depends in part on a company's planning cycle. If a company is looking to respond on a quarter-to-quarter basis, from a sales perspective it is hard to significantly change anything from a resource perspective. Any change would have to come through targeting, segmentation, or some other similar focus.

From a strategic perspective, finding talent in the marketplace is never easy and it is a huge investment of resources, particularly in management time and effort. From a sales leadership perspective, the key is establishing a commitment to investing the time and effort needed to get the right people into the sales organization. The age-old question is into what size body of water should a company cast its net. If a company is looking for people with previous experience in medical sales, it is competing in a fairly small pool and will have some challenges. More often than not, there are a lot of other companies' castaways in that talent pool. But if a company is casting its net into a wider talent pool and can train people who come onboard—which is what Tyco does—the company can ultimately do very well.

In the latter situation, a company has to allot a fair amount of time to bring salespeople into the organization and then train them as effective members of the team. For example, if you told me today that we could add 30 heads to our sales organization, you would have to allot about three months to hire those people and then another three to nine months—for a total of one year—to get those reps to a point where they can effectively cover their territories. The planning cycle is the key, as well as determining the level of training a company can support to develop its sales reps. I know many start-ups do not have the luxury of extensive training, but we do.

Are start-ups and emerging companies at a disadvantage in a marketplace like medical devices where there is a lot of competition to find salespeople?

Reutiman: The only disadvantage is there is an even higher onus to make sure the company hires the right people. Start-ups and emerging companies are also less likely to have all of the training resources of large organizations. There is a strong onus on pinpointed hiring.

I have been fortunate, though. Start-ups are attractive employment opportunities to certain types of people, depending on where they are on their career projections. There is a unique role to be played in an emerging organization. Start-ups usually have not completely implemented a sales plan, and sales personnel may participate in the codevelopment of this plan. For the representative, there are numerous opportunities to have an impact on a company's strategy and deliver value to the organization.

The array of roles and responsibilities that the representative can play in a start-up organization makes joining a start-up an attractive opportunity to some segment of the available market at any given time. Unique responsibilities might include field-based marketing activities, research-and-development input, and customer interpretation on the iteration of products.

I have not found start-ups to be at a disadvantage. If a company's story for physicians is crafted and exciting, there are a lot of good representatives that are available. Our company does not have the resources to spend a lot of time on training, so the training we do has to be very effective and specific. We are usually looking for somebody that brings quite a bit of experience to the table and is exchanging a lot of those experiences and resources with our organization.

What kind of training strategies has Viasys employed to get its salespeople up to speed?

Margolies: Because Viasys is in a clinical sales situation, one of the challenges is looking at each individual territory and deciding whether to hire a clinical rep and teach that person to sell or hire a sales rep and provide that person with a clinical background. Our company has a mixture of in-house training and in-field clinical training. We have an excellent staff that goes beyond providing only customer-based training. Our company has tasked our sales managers with understanding how to train clinical personnel to sell from an economic perspective.

It is always easy to find a bad sales rep, but it is really tough to find a good rep. Once a company finds a good rep, it needs to give that person the right tools. Success requires understanding, on a quarterly basis, what your sales team needs. Our company has a process in place to identify our reps' needs, including which areas of training each rep specifically needs. This is opposed to a broad-brush training program in which a company trains everybody in the same fashion. Our company tries to ensure that it personalizes the training for each individual rep based on the circumstance of that person's territory.

All of you have significant experience in managing a sales team. What do you consider the most challenging aspect of the management part of sales?

Raetzman: As a business matures and the needs of the business become more sophisticated, managing that transition from a freewheeling start-up mentality that isn't very structured to one that is a little bit more sophisticated can be a tricky job. The representatives who have done a very good job and have helped build your business may not be all that thrilled about having to use a new sales force management software program or take on more administrative or business-planning tasks. The evolution of the sales organization in moving from that entrepreneurial stage into a more sophisticated business model can be tricky, and that is just one of the pieces.

Another piece is related to territory size. Some companies use territory size as a carrot or a stick. If a rep is not doing well, the company may scale back that person's responsibilities and give that territory to a rep who is doing better. Ultimately the rep who was not doing well is reduced to a territory that is so small that the person cannot generate the needed income, and the rep leaves. Then the company is stuck trying to hire a top performer into a territory that is not big enough to sustain a top performer. Managing territory size is critical and can be very tricky.

Rooney: Another factor that sales managers face is being able to train salespeople to distinguish themselves from the other people who are knocking on the doors of physicians' offices. Doctors see a lot of people each day. More and more, they are flooded by representatives from large pharmaceutical companies, and it is challenging to get into some of these offices.

Positioning the salesperson as a partner with the doctor is easier said than done—and a bit of a cliché. But one way to do it is to help your sales force understand the issues and the terrain that these physicians and hospitals are facing today. Many of the salespeople who achieve that partner status—where they can just pick up the phone and call a physician personally—understand the entire terrain in which these hospitals and physicians work. Oftentimes, the salespeople our company hires do not understand that yet. Companies need to help them understand the healthcare environment, and that is a big challenge for management. Sometimes the managers might not understand it either.

Meehan: The biggest challenge comes when a rep who does not have past management experience is promoted into an area manager or district manager position. One of the challenges that they face is balancing all the requirements of the job, which requires identifying what is most important, what is least important, what must get done today, and what can wait for tomorrow. This also requires balancing time among recruiting, coaching top performers, and coaching poor performers.

Managers must also decide at what point to move those poor performers out of the organization. Managers tend to spend an inordinate amount of time with people that are struggling in their positions. The opportunity costs associated with this process often are at the expense of top performers.

The balance that a manager has to strike is critically important, and achieving it is very difficult for those who have never managed in the past. New managers have a tendency to want to compensate for the poor performers and not spend time with the top performers in driving their performance to the next level.

Automating Sales

How useful are software systems such as sales force automation and customer relationship management (CRM) packages? What are their most important functions?

Raetzman: The difficulty with CRM platforms is that they were all built for massive pharmaceutical sales organizations, then the vendors tried to retrofit them for the medtech area. I have not found one that is remarkably helpful for the medical device side. They are still more pharmaceuticals based, which is an issue. I would love to see software that meets the specific needs of the medical representative.

Brown: I have gone through this, and I am still continuing to go through this right now. Our company has a system right now that is customizable and very flexible in adapting to what U.S. Surgical is looking to do. As such, the key issue in implementing a system is defining what the tool should be able to do. As a seller, there is nothing more frustrating than operating within a system that causes confusion or in which information isn't readily accessible. The system should be easy to use and help reps manage their territories.

A company has to start with a definition of its required tool. If this definition outlines a tool that will help sellers manage their territories—meaning they will be involved with the tool—they will see it as a benefit that helps them plan their time, organize their schedules, and strategize their territories, and provides them feedback on how these things affect their compensation. When a tool does all those things, the information that is generated on the seller level is then usable at a management level.

The second requirement is ensuring a company's management team is committed to using the information generated by the seller. Is the management team asking for additional information or is it not looking at the information at all? This active component requires management to use the information received to reinforce the seller. This confirms the system's usefulness with the seller, driving them to use the tool instead of using others or ignoring it all together.

The third requirement in implementing a system is ensuring that it is a living tool, one that can be adapted as a company changes. And these changes must be made in real time to avoid information becoming obsolete. If a company focuses on all three of these issues, it should avoid some of the more common implementation problems.

Meehan: The systems are only as good as the rep who uses them. At Medtronic, due to the nature of our call points, there is so much data to manage that we have created a homegrown system called MM Sales. It operates almost like a fighter pilot's cockpit, in which operators have multiple heads-up displays in front of them. At any time, reps can take a quick look at all of the key metrics and information needed to effectively manage their business.

To have that one-page summary in front of you when you pull it up on your computer or tablet personal computer in the field is very, very beneficial. And to have the ability to then drill down off that fighter pilot screen is extremely helpful.

But at the end of the day, the key for sales reps is to get their faces in front of key decision makers. And then it's a matter of how effective they are when they are in front of those decision makers. Our company's heads-up display tells a rep where to go, but when that rep is in front of a key decision maker, there is no substitute for sales talent, relationship building, and clinical knowledge.

Rooney: The manager's commitment is critical. That is so easy to say yet so hard to do.

A lot of these are off-the-shelf programs. A company must really take the time to build the system slowly with the help of the representatives and the managers in order to get what they want to get out of it. Most managers come from long sales backgrounds and they bring the software that they have used over the years with them. Getting them to switch over to another system is very difficult if they are not involved in designing it.

On the other side, it's difficult to bring marketing and sales together in the system unless the company can join the sales process with some kind of a forecasting tool. Companies don't get a lot of value out of these programs if the sales force is not using them for other needs. If there is no forecasting or reinforcement of the sales process, these systems can collect a lot of dust.

Margolies: Viasys developed its own system a couple of years ago. It was implemented before I arrived, and it is called the Viasys account management system (VAMS). We use it for all of our contact information as well as forecasting. By working with manufacturing, the information I pull from the system can be used to evaluate the forecasting activity at the rep level to see if they are doing it effectively. The system is critically important to us and basically manages our entire process.

From a cost standpoint, can emerging companies afford the systems that are out there or the development of a custom system?

Reutiman: A lot of times there is a temptation for a smaller or start-up organization to avoid a heavy investment in IT. However, I am a very strong advocate of IT. There is a tremendous upside to gathering all of the important information elements of an early-stage opportunity and harnessing as much of that information as possible. Clinical and financial interpretations are paramount in an early organization, and it's beneficial to invest in a system to capture these up front.

That said, if a company is going to invest in them, it has to ensure they provide meaningful data and that people do use them and know how to use them correctly.

Small organizations can't afford to neglect this. If they do, they will find themselves in a situation where a lot of very important data are being lost on the development of a product or procedure as it transitions from inception to commodity, and as the dynamics of the marketplace change. Without implementing an appropriate IT system early, a company will find it is difficult to sift through data on a bunch of home-brewed systems. I am a big advocate of being on the front end of a comprehensive system, as opposed to the back end.

Small companies are going to catch some waves and be ahead of their plans at different points. These companies may also wake up to some plateaus that they were not expecting. Storing data in a database from the very beginning really gives a company a good chance to look at its data cross-functionally and ensure everyone is on the same page—from the executive management team to the marketing department, all the way down to the seller.

Sales and Ethics

The marketing and sales practices of medtech companies are coming under increasing scrutiny. A couple of years ago, industry association AdvaMed (Washington, DC) revised its code of ethics, which some companies have adopted as a guide for sales interactions with healthcare professionals. What are your companies doing in regard to ethics?

Raetzman: We have a compliance officer. We have mandatory testing to demonstrate a salesperson's understanding of the AdvaMed code. We have audits of expenses. We take it very seriously, and it is important to us. Our company leads in ophthalmology, and, as a leader, there is a responsibility to ensure the industry as a whole and our niche specifically is seen in the right light: as being ethical, aboveboard, and totally transparent.

As current chairman of AdvaMed, Medtronic president and CEO Art Collins has been one of the big proponents of the AdvaMed code of ethics. What effect has his involvement had internally at Medtronic?

Meehan: If it does anything, it holds our company to an even higher standard. We have a compliance officer in place, and I obviously sit on the committee. We meet once a month with our legal and compliance teams. Medtronic sends consistent messages into the field regarding AdvaMed's guidelines and Medtronic's code of conduct.

With every training class at Medtronic Diabetes, I review the seven principles of Medtronic-MiniMed management, one of which is integrity. The sales team is encouraged to be creative in the field to achieve success, but it is never acceptable to cross the line and violate ethical codes, codes of conduct, or business practices. That would put the representative and our company in a compromising position with the government and others. This message is reinforced from the first day a rep starts at Medtronic Diabetes, and it is consistent throughout that person's entire career.

Rooney: We are wrestling with this right now. Our company has a regulatory and compliance officer that management is working with to develop good promotional practices. We have hired a firm out of Washington, DC, to help us do that. Right now we are in the process of benchmarking those practices against those in other sectors of the industry to make sure our company is staying compliant with industry.

One of the things we have learned is that FDA and the Office of Inspector General both respect a legitimate scientific exchange that salespeople can have, and there are ways to do that and ways not to do that. We focus on training our reps for that legitimate scientific exchange. Our sales organization has taken time out of the field to spend a couple of days at a time on this issue to ensure everyone understands this concept. During these sessions, most of the benefit comes during the question-and-answer portion. Reps can spend an hour or two evaluating and discussing the situations they face on a day-in, day-out basis. I agree that these discussions have to be integrated into the sales training process, and our company is working on doing that right now.

Margolies: As sales executives, it is critically important to make sure we are delivering the appropriate message and walking the walk when we are out in the field with our reps.

Also, in conjunction with our human resources department, our sales team has gone through ethics training, and our customer base is starting to appreciate and understand the shift that has occurred within sales organizations. Years ago, physicians would ask for certain perks, and I am not seeing those same requests now. The requests have shifted from expensive dinners and trips to getting the best products, clinical information, and education after the sale.

Reutiman: Without the luxury of having a separate compliance officer at my company, in hiring talent I feel very fortunate that a lot of the companies represented here do as much training as they do. OmniSonics is looking for individuals who have a lot of experience and have built a reputation in the field based on strong ethical performance. For our company, that is extremely important. When a company is introducing a new technology or procedure that will be the crux of its operation, everything that company does must be interpreted in the best ethical sense. Our company is sometimes challenged with questions in this area that companies with established technologies do not face. As the company's closest thing to a compliance officer, I have to make sure the right messaging gets out to the reps, and their behavior is incredibly important.

Adapting to Change

Looking forward, how are sales strategies shifting to meet the changes in your customer bases?

Raetzman: Down the line, companies will continue to face the need to be able to sell their products not only in the operating room, but also at the practice level, based on economic benefits.

Sales will always be a relationship business. Those salespeople who build lasting relationships through years of value addition for a physician and a practice are going to be successful today, tomorrow, five years from now, and 10 years from now. That is what this business is about. It is about helping physicians and practices perform better medicine. That is not going to change. But in addition to that, companies will have to provide skills training to help representatives sell the economic value of products a little bit better.

Meehan: In our business, the challenge is that the technology on the diabetes side of the business is changing very rapidly. Soon we will arrive at a sensor-augmented system, meaning patients will have an insulin pump delivering insulin and a sensor that will tell them what their blood sugar level is at all times, as opposed to patients having to prick their fingers all the time. Although finger sticks will still be required, patients will have sensors communicating blood sugar information to their pumps. Obviously when the industry advances to that point where patients are constantly aware of their blood sugar levels, ongoing education will be required for them to understand the technology to make therapy changes.

Reutiman: The economic input is really important in these early pioneering technologies. We need to ensure that there is an economic benefit in place for everybody involved. On the front end, this can be a slightly different consideration. Corporately, our company is responsible for pushing the envelope and ensuring there is enough of a market out there. We can do this by partnering with larger organizations that can help us drive reimbursement policies. At the same time, the company must also identify strong reimbursement opportunities for those practitioners who want to adopt an early technology and help pioneer the early data by tracking their outcomes. This ensures benefits for the system as a whole.

Rooney: As I look back at my career in the 1980s, I remember the interactions with physicians were pretty lengthy. Salespeople could kick back and talk for 30 or 40 minutes and have a good exchange with physicians. The companies were smaller in the 1980s. In the 1990s, things just got out of control. Companies had three, four, five, or more people calling on a doctor, and it overwhelmed the physicians. More recently, a lot of physicians have clamped back on their availability—for the better, I think.

A lot of the industry standards have cracked down on all those dinners and other physician perks, and that is good. What is going to emerge in this decade and beyond 2010 is an educational approach that satisfies the regulatory requirements. That is going to become more and more important. It is shifting now to the Web. Instead of salespeople taking time out of a doctor's evenings and weekends, physicians are getting on the Web at the end of a long day to get their education. Companies that excel at putting together these peer-to-peer online networks really stand to win. Companies that can put together legitimate peer-to-peer consultancies that fit into the doctor's world will demonstrate that they understand the market. The doctors will respond to this approach and not clamor for all the lavish things that they have had in the past if they can just get their education quickly. However, it will affect sales and marketing deployment because those programs are very expensive. The size of sales forces and the amount marketing departments spend could change.

Margolies: In the 1990s, a lot of companies went toward account-management-based sales forces. Companies gave their reps a lot of products and said, 'Manage a small territory.' A lot of these companies are realizing that that model is not working now. Companies need to get more-specialized sales forces in place. Organizations are breaking apart those account-management positions and going toward specialized sales forces for multiple reasons: education, clinical benefits, regulatory issues, a lot of different things. That trend will certainly continue.

Masloski: In a broad sense, cost pressures, technology advances, and increased competition have created an environment where it's critical that salespeople be able to add value during the sales process. Physicians see salespeople as a source of information, and therefore salespeople need to be highly knowledgeable about their devices, their clinical applications, and the overall economics associated with their products.

But simply having a well-trained and tenured sales force isn't enough. Hospitals and physicians are diverse groups with sometimes widely divergent needs. Many companies understand this, but few are effective at being able to segment their market based on customer needs and align their value propositions and selling organizations to deliver value against these segments. Companies that can do this well can earn competitive advantages.

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