Small companies stay competitive	November 2007

by Steven Niles

Small pharmaceutical and biotechnology companies are raising thought leader compensation levels to compete with larger corporations in the highly competitive opinion leader market, according to analysts with Cutting Edge Information. Small pharmaceutical companies pay an average of $722 per hour to top-tier thought leaders, which is almost $200 more than the average large company. Biotechnology companies are paying an average $1,306 to key influencers. Many small pharmaceutical and biotechnology companies are paying thought leaders upwards of $7,000 for a day’s worth of consulting work.

“Thought leader services are an expensive, competitive, and highly lucrative investment for pharmaceutical companies,” says Elio Evangelista, senior research analyst, Cutting Edge (cuttingedgeinfo.com). “It’s no surprise to see smaller companies with less name recognition forking over two and three times as much money as a typical large company to get key opinion leaders’ attention.”

Smaller companies must be careful not to be seen as influence buying, according to William D. Cooney, president and CEO, MedPoint Communications Inc. (medpt.com).

“Per OIG, it is an illegal inducement to pay KOLs more than can be justified by prevailing rates, and all payments must be directly tied to an appropriate and documented amount of bona fide consulting services,” Mr. Cooney says. “In my opinion — and not everyone agrees — KOL activities should not be tied to ROI metrics such as prescriptions, increased diagnosis, etc. OIG may consider the very existence of such ROI as proof of intent to use payments to KOLs to generate prescriptions, and that’s a kickback. The Feds have applied the same logic to the world of CME, and nobody measures the effect of CME on prescriptions anymore.”

Smaller companies and start-ups historically have been less concerned about policy and regulations because of the fragile state of their organizations, according to Rick Kennison, president and general manager, PeerPoint Medical Education Institute LLC (peerpt.com).

“Generally, their thought pattern is that high tier KOLS attract other high tier KOLs, hence pay now, play later,” Mr. Kennison says. The return on investment is justified for smaller companies, according to Dale Hagemeyer, senior analyst, Gartner Group (gartner.com). For companies that cannot afford a large sales force or the fixed costs of online detailing, investing in KOLs can be beneficial.

“Regulatory environment aside, I think the ROI does justify the expense because that’s a way they can get leverage for their brand with a concentrated investment,” Mr. Hagemeyer says.

Cutting Edge research found that large companies have the highest average of thought leaders at 259 per company. Mid-sized companies average 224 thought leaders per company, small companies average only 191, and biotechnology companies average even fewer with 76 thought leaders per company.

“The number of thought leaders engaged at a particular time varies anywhere from zero to thousands of influential physicians,” Mr. Evangelista says. “To reach effective levels, though, the type and number of thought leaders needed per company depends largely on the size of the company and the size of the target markets each company is trying to reach.”

According to Cutting Edge, most of the time, companies are contracting to work with commercial thought leaders more than clinical opinion leaders. The average company has 122 commercial thought leader relationships compared with only 95 clinical ones.

In both large and small pharmaceutical companies, there are significantly more commercial than clinical thought leader relationships in place. Biotechnology companies, however, use an equal number, 38, of the two types of thought leaders on average. Mid-sized companies, on the other hand, reverse this trend by collaborating with an average of 124 clinical and scientific thought leaders, compared with an average of 100 for their commercial peers.