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Big Regional Differences? Europe Has Seen It, and Solved It

Posted by Roz Lawson on March 17, 2016



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There’s a lot of excitement about regional resourcing models and differential resourcing in the U.S. at the moment. Of course, regional variation exists, and in an article from the November 2015 issue of IN VIVO, called “Why Medtech’s Commercial Models Must Adapt to Local Needs,” ZS experts Pete Masloski and Yuta Ito describe regionalization in the U.S., saying, in a nutshell, that the evolution of the U.S. healthcare ecosystem necessitates a localized and customized commercial model that accounts for those variations—and that many life sciences companies already have started to develop new go-to-market strategies.

But if you shrink the geography and take a zero off of the numbers, you’ll see that companies have been dealing with in-country geographic variation for years in various parts of Europe. There are 17 autonomous communities in Spain, each making their own healthcare funding decisions, so your product may be reimbursed in Madrid but not in Andalucía. The 20 regions of Italy also have devolved decision-making, and it’s common to see huge price variation between Milan in the “richer” north and Sicily in the south, for example. Some decisions are made at the province level, and there are 110 provinces.

This variation can be used as an excuse for a lack of strategy, and can evolve into chaos without leadership and discipline. When looking across Europe at different selling models and sales team setups, we do see a lack of structure—if not chaos—in many of the more complex markets. There are enough genuine variations within the market to perplex outsiders, and a well-argued case often wins over senior management, but the results don’t always follow. We aren’t advocating for regional differences just for the sake of it.

Resourcing models should differ when the way that the market or customer acts is truly different by region. I would group these into three buckets:

  1. Market access differences: For example, you’ve just won a tender in one region or lost a big contract in another.
  2. Buying process differences: For example, in one part of the country, surgeons or nurses can choose the product that they want, while in another, procurement or purchasing has much more power.
  3. Value differences: For example, your sales and the market potential justify your own sales team in major cities but not elsewhere.

A tender or a big contract is often a trigger for a resourcing change. The challenge is that you often need to switch the type of resource: To prepare for and win the tender, you need expertise, deep knowledge of the account and negotiation skills, and once you’ve won it, you need “feet on the street” to drive pull-through. We’ve seen companies decreasing headcount where they’ve lost a regional tender in Spain, or adding more reps where they’ve won. But in Europe, at least, it’s hard to hire and fire quickly, or to change people’s roles or territories without consultation. Some companies have reps who are prepared to move around the country, but most don’t. Most companies handle this by having the team who wins the contract cover a larger area and rotate through their accounts depending on their stage in the buying process. Then once the tender is won, they can backfill vacant headcount into the new area.

Buying processes can differ from one region to another. This is driving a lot of change in the U.S., where changes in the payer-provider landscape (including increasing consolidation and experimentation with different payment models such as ACO, bundled payment, etc.) mean that providers and their networks are taking different approaches and often have very different needs. In the U.K., an interventional cardiologist in a London teaching hospital may be able to use whichever device he wants, while his counterpart in Oxford is locked into a particular device because his hospital has a sole-supplier contract for cath lab services. The resource model and selling process need to be different: In the London scenario, the emphasis would be on procedure specialists investing time with the surgeon, and in Oxford’s case, it’d be much more of an account sell, likely involving many members of the sales team, head office team and mostly likely the national sales manager or GM. We’re increasingly seeing less specialization and more key account management for areas where specialization is no longer justified, and it’s being accepted by customers. You might need a procedure specialist in Hamburg, but you can make do with a generalist in Poland.

Regionalized resourcing makes sense when there are big value differences between regions. In Russia, you have your own sales team in Moscow and St. Petersburg but use distributors everywhere else. In Turkey, you deploy your sales reps in Istanbul and Ankara but use distributors in the eastern part of the country. Both countries have very concentrated value (or sales potential), clustered—as you would expect—around major population centers. What makes them different is just how concentrated they are: We see 50 to 70% of the sales potential in just two major cities in many medtech procedures. This sort of value concentration is often seen in Spain and in the Nordic countries, but it is more distributed in other main European countries. Whatever your resourcing plan, allow for some flexibility to use different channels when your own selling efforts should be focused on the top 50 to 70%.

Differential resourcing across regions within a country has been around for some time. Perhaps now it’s time to look to our European colleagues for what works and what doesn’t.

Topics: Roz Lawson, medtech, Europe, resourcing models, regional differences, regionalization, geography

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AUTHORS
Brian_Chapman_thumbnail
Brian Chapman
Principal,
ZS Associates
Tobi_Laczkowski_thumbnail
Tobi Laczkowski
Principal,
ZS Associates
Will_Randall_thumbnail
Will Randall
Manager,
ZS Associates
Matt-Scheitlin-London_thumbnail
Matt Scheitlin
Associate Principal,
ZS Associates
Andy-kach_thumbnail
Andy Kach
Associate Principal,
ZS Associates
Bhargav_Mantha_thumbnail
Bhargav Mantha
Associate Principal,
ZS Associates
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