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Table of Contents

Change Management in Transition from Traditional Sales Force to Key Account Management: Greece Pharmaceutical Companies - Part 3

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Chapter 2. Literature Review

2.1 Introduction to Literature Review

The pharmaceutical industry has a unique place in the business marketplace, unique to other industries. (Remer, 2002; Seeger et al. 2003; Priporas & Vangelinos, 2008, p. 88-89) Corporations face crisis regularly, but the pharmaceutical company is particularly sensitive to a real crisis or to a perceived crisis. (Priporas & Vangelinos 2009, p. 88-89) The global pharmaceutical industry is carefully regulated by international laws, because the medicines and products offered must benefit consumers. (Geitona, Zavras, & Hatzikou et al. 2006, p. 35) The pharmaceuticals produced and sold must be consistent in reference to safety and provide the intended and advertised results. (Geitona et al. 2006, p. 35) The purpose of regulation is to make sure that the profits from pharmaceutical sales do not become more important than the benefits to consumers. (Geitona et al. 2006, p. 35) In other words, the money-making aspects of selling pharmaceutical drugs need to be balanced with the creation of health advantages to consumers because this is “a patient centric world” (McIntyre, 2014, p. 1) Research studies have shown that the main drug policy focus in developed countries, and therefore including Greece, is made up of the following key issues. (Geitona et al., 2006, p. 35)

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  • Patent protection so innovation will be encouraged and supported.
  • Providing quality health care products for consumers.
  • Making sure that everyone has access to drugs that are safe to use and provide health benefits.
  • Regulation of the pharmaceutical industry so the amount of money spent is not overly large, with too much given to the industry.

2.2 Global Financial Crisis

In 2008 a financial crisis negatively affected the Eurozone (the countries in Europe that have trade agreements and all use the Euro). (Vandoros & Stargardt, 2013) The reforms in public health care and how consumers received their medicines without going into debt reflected the bigger problem of budget constraints for the nation. (Priporas & Vangelinos, 2008; Vandoras & Stargardt, 2013; Simou & Koutsogeorgou, 2014) Health costs were large in Greece because public health has been considered a priority for so many years and because of problems that demand reform. The IMF, EU and ECB decided that Greece should reform the category ‘health expenditures’ in order to cut overall costs (Vadoros & Stargardt, 2013, p. 1). Health costs were about 10.6 percent of Greece’s Gross Domestic Product (GDP) (Vadoros & Stargardt, 2013, p. 1). The total amount of spending for pharmacy products related to health in terms of GDP was reported to be 24.8 percent in Greece in 2007 (Vadoros & Stargardt, 2013, p. 1). The consequences of the financial crisis were found to have a negative impact on people’s health and the Government’s actions to cut costs in the public health sector “seem to have potentially damaging long-term consequences for public health and health care” (Simou & Koutsogeorgou, 2014, p. 118).

Vandoros and Stargardt (2013) evaluated the position of generic products in the Greek market and recommended that generic market efficiencies should be improved Generic medicines are in two classes (a) out of patent and (b) non-branded. The generic medicines are chemically the same as brand name drugs that are no longer covered by patents. A generic drug has the same pharmaocokinetic and pharmacodynamic characteristics as the branded product but it is sold at a lower price. (Vadoros & Stargardt, 2013) Any safety concerns relating to use of generics rather than original brands can be diffused by strictly enforcing “bioequivalence controls to ensure high quality of generics” (Vadoros & Stargardt, 2013, p. 4). The authors also suggested a drug budget to aid in cost control; a drug budget could apply to the three major levels (a) doctors, (b) regions and (c) national. (Vadoros & Stargardt, 2013)

The Greek Government’s goal was to implement public health policy with cost cutting, so any policy impacted the Greek pharmaceutical sector both internally and externally. According to Bhatt (et al. 2011) a key account manager must be able to deal as skilfully with internal as with external dynamics. A change occurred externally that made generics more attractive for profit-making in one company example (Bhatt et al., 2011) The company did not retrain sales representatives in order to put them into key account managerial positions. Instead, the company “hired the key members of its KAM team from fast-moving consumer goods (FMCG) companies” with excellent results (Bhatt et al., 2011, p. 2).

2.3 Transition in Greek pharmaceutical industry

Western Europe faced economic challenges which have affected the healthcare industry, as well as other industries. (Priporas & Vangelions 2008) Due to new budget constraints, the Greek Government implemented cost cutting strategies in the health care sector that directly impacted the pharmaceutical sector. (Simou & Koutsogeorgou 2014) Therefore, it became increasingly difficult for the Government to pay for drugs or subsidize healthcare in order to lower the cost of drugs for patients. (Simou & Koutsogeorgou 2014) In that respect, there was an increased push by the pharmaceuticals for hospitals to prescribe generic drugs because generics have been found to be cost effective. (Geitona et al. 2006, p. 36) With that change, there was an increased need for the pharmaceutical companies to develop close relationships with hospitals.

Hospitals generated a great volume of sales and the pharmaceutical industry has taken an advisory service to hospitals to identify cost effective prescriptions. (Nikou et al. 2013 p. 10) Due to this situation, changing to KAM could offer useful benefits. The sales teams have to identify key client accounts and develop relationships with the institutions as they become more engaged in not only the sale transactions, but also in advising on the drugs prescribed. (Nikou et al. 2013 p. 10) These types of changes led to the growing importance of KAM. The amount spent for pharmacy products was 24.8 percent of the total for public health in 2007 (Vandoros & Stargardt, 2013, p. 1). Brutally cutting the budget would result in initiating a trend of decreased health care quality and reducing access to drugs in Greece. (Simou & Koutsogeorgou 2014) The goal set by the Government was to increase efficiency, generate savings and maintain the availability of a high level of health care (Vandoros & Stargardt, 2013, p. 1). But indicators pointed to higher rates of suicides and a less healthy population. (Simou & Koutsogeorgou, 2014) Price cuts were instituted at the level of wholesale distributors. (See table 1) The largest change in wholesale price cuts was in the €50.01 to 100 price range at 27 percent, as compared to 25 percent in the €20.01 to €50 price range and the €5.01 to €20 with a 20 percent change (See table 2-1).

Table 2- 1 Pharmaceutical Cost Cuts, 2010

Greek Pharmaceutical
Whole Sale Price Cuts
Instituted on April 27, 2010
0 to 1€ no change
€1.01 to €5 3%
€5.01 to €20 20%
€20.01 to €50 25%
€50.01 to €100 27%

(Vandoros & Stargardt, 2013, p. 2-3)

According to the Policy Department in Brussels, €675 GDP per capita was spent on pharmaceuticals in 2000 and only €280 GDP per capital in 2008 in Greece. (Vandoros & Stargardt, 2013) This amounted to a decrease of €380 GDP per capita that hit pharmaceutical companies serving Greece (Vandoros & Stargardt, 2013). Pharmacy companies have threatened to stop selling in Greece or to postpone bringing new products and some shortages have occurred which resulted in banning exports (Vandoros & Stargardt, 2013). The features that lead to designing cost efficiencies include (a) changes in policy, (b) implementation of the policy, and (c) enforcement (Vandoros & Stargardt, 2013).

Vandoros & Stargardt (2013, p. 5) concluded that continuing to find strategies to be efficient is the best way to continue, and the best place to focus on next would be“to focus primarily on total volume (purchases), as well as generic uptake and generic prices” (Vandoros & Stargardt, 2013, p. 5). If the crisis lasted too long costs needed to be addressed with private expenditures (Vandoros & Stargardt, 2013).

 2.4 Crisis management

Change became necessary due to a crisis, when that happens it becomes difficult to separate change management from crisis management. Crisis management used for a sustained crisis is defined as a “long-lasting crisis from weeks to years” (Parsons as cited in Priporas & Vangelinos, 2008, p. 90).

A research study carried out jointly between the Department of Marketing and Operations Management at the University of Macedonia and Genesis Pharmacy in Thessaloniki on “crisis management in pharmaceuticals” contained some important facts relevant to this study (Priporas & Vangelinos, 2008). Sixteen pharmaceutical managers were interviewed in order to understand how pharmaceutical companies deal with crisis. Well known companies were chosen for the sample and the sixteen participating managers were from companies that varied in size, their nationality, they differed in structure, corporate culture and nationality. The participants included five Greek-owned companies, four American, two each from Germany and Denmark, and one each from Australia, Switzerland, and UK-Sweden. (See table 2)

Table 2- 2 Greek Survey Participants by Home-Country Affiliation

Characteristics of Participating

Pharmaceutical Companies

Nationality Number
Greek owned 5
USA 4
Germany 2
Denmark 2
Australia 1
Switzerland 1
UK-Sweden 1
(Vandoros & Stargardt, 2013, p. 92

Greek survey participants’ memberships were identified. Twelve were members of the Association of Greek Pharmaceutical Companies and twelve were members of the European Federation of Pharmaceutical Industries and Associations. (See table 3) Associations were notable because the companies in the survey are influenced both by European Union laws as well as Greek regulations. Associations, as has been mentioned earlier in the literature review, can be an important resource especially for smaller companies.

Table 2- 3 Greek survey participants by pharmaceutical organizational participation

Characteristics of Participating Pharmaceutical Companies
12 were Members of the Association of Greek Pharmaceutical Companies (SFEE)
12 were Members of the European Federation of Pharmaceutical Industries and Associations
(Vandoros & Stargardt, 2013, p. 92)

Crisis management was necessary in pharmaceutical companies for many reasons including the financial crisis in Greece of 2008. Some of the other reasons were having medicines tampered with while on a pharmacy’s shelf and then having consumers die because of the tampering. This happened to Johnson & Johnson’s in 1982 when random customers who purchased Tylenol were poisoned to death. In 2004 the product Vioxx was withdrawn off all pharmacy shelves by Merck because it was dangerous for the patients using it. Priporas and Vangelinos (2008) explained how the industry can be badly affected to the point of crisis are external economic or societal factors that negatively impact a specific product or the activities of the industry. A situation that affected people and their health care was likely to influence their health care providers, the agencies in charge of regulation, the public relations, and external as well as internal consumers. “Such a crisis may involve a manufacture or marketed pharmaceutical product or device” (Priporas & Vangelinos, p.88). Medicines and other pharmacy products, their marketing and manufacture, are all susceptible to crisis.

A few of the circumstances that cause a crisis include the following.

  • Tampering leading to poisoning like in the Tylenol case.
  • Adverse reactions caused by medicine
  • A large risk of death or illness, such as in the Vioxx case
  • Drug product or device failures such as an inhaler or a home blood pressure test instrument
  • Not enough of a product to meet the demand
  • Changes in regulations or the activities of regulators
  • The competition
  • Negative media attention
  • Law suits

The Priporsas and Vangelonis (2008, p. 89) research project reported that in 2005 Greece’s spending on pharmaceuticals amounted to 2.2 percent of GDB, while 1.5 percent is the average for OECD countries. The goal of their research was to understand how CM was used to deal with crisis, prevent crisis, and the challenges faced during a crisis. The problem most often cited during the interviews was a product recall.

Table 2- 4 Perspectives on Crisis of Greek Pharmaceutical Company Managers

Types of Crisis Most likely Most feared
Product recall 12 7
Fine enforcement or prosecution 11 4
Scandal accusations (corruption, forgery, sexual harassment, etc.) 10 5
Internal or external sabotage (product tampering) 9 6
Serious labor accident 8 4
Natural disasters (earthquake, fire, etc.) 5 3
Environmental disaster 5 3
Terrorist strike 3 0
Serious damages on Information
Technology systems 2 0
Consequences from changes in local legislation 2 1
Hostile take over 2 0

The interviews also revealed that the larger pharmaceutical companies have a department dedicated to CM or a link with a consulting service to help deal with crisis. Crisis has not been given a simple, generally accepted definition, but five features are considered to be universal. Those features are when many of the different type of stakeholders have been negatively impacted. A crisis happens suddenly is characterized by “uncertainty, ambiguity and time compression” (Priporas & Vangelinos, p.91). Prevention is the most favourable way to deal with crisis, but when a crisis occurs anyway, mitigation helps the most when it has been planned ahead of time. The sixteen interviewees for the survey were all pharmaceutical executives from several pharmaceutical companies involved with sales in Greece. The researchers used a purposeful sampling methodology and they chose their sample size for the survey based on the Theoretical Saturation Theory. The researchers used these methods in order to ensure quality of information instead of basing their methodology on a high number of interviews. The pharmaceutical companies who took part in the survey were based on three delineators. Firstly, the companies were from Greece and foreign businesses. Secondly, the participants were chosen based on their “annual turnover” and thirdly, they had been involved three years or more in Greece (Priporsas and Vangelonis, p. 92)

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Greek culture had a big influence on how crisis management is regarded. In fact, Priporas and Vangelinos (2008) explained that only a few national Greek companies would participate in the research because crisis is unmentionable, like a taboo; talking about crisis may invite crisis. Nevertheless, local and multinational companies were found to organize their strategies for safety and for crisis according to international standards. The Greek pharmaceutical companies were much smaller than the multinational corporations and did not have a department dedicated to crisis management. The large companies had the advantage of global business experience, reduced costs, and readily available resources. Out of the 16 pharmaceutical companies surveyed, six of them that were larger (two of them Greek) following crisis management experiences.

They had faced a crisis, they had a CM team (the Greek companies they used a consulting firm), A CM action plan had been developed, and all of them stated that the Human Factor was essential for implementing the CM action plan. (Priporsas & Vangelonis)

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