LIFETIME VALUE OF AN ONCOLOGY ACCOUNT

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LIFETIME VALUE OF AN ONCOLOGY ACCOUNTA customer once said “I’d love to prioritize my accounts”

by Dimiter Shalvardjiev, Senior Healthcare Business Consultant

Working with the second largest pharmaceutical company in the worldprovides a plethora of multidimensional challenges. More often than not, we need to put all our experience as data scientists, healthcare experts and business consultants to the limit. This is one of the cases where a complex solution was needed to answer a simple question – how much is an account worth over its lifetime?

We, at GemSeek, handle questions seriously, especially when related historical data is scarce at best. To estimate the lifetime value of an account, one has to answer at least two key questions – what factors determine the value of an account and how long is a customer going to use the same pharmaceutical partner. While historical data (in case it is well documented and complete) could give insight on parts of the question. But we are usually presented with a limited set of data from a single competitor – not only is the data biased by human decisions (e.g. pricing policy, account management, preference), but it is also limited to a single competitor, which makes it not representative for the whole market.

At this particular instance, we handled the problem from a broader angle.

Any market estimation exercise starts with a scope definition. From the very beginning, we limited our model to a single country. Furthermore, we introduced several dimensions of interest:

• Cancer type• Geographical area• Cluster grouping (most oncology clinics are

part of a larger cluster, or operate under a common contract)

• Number of oncologists in the clinic / cluster• Number of patients treated

Even though there are many more quite interesting splits we could look at (e.g. oncology ward efficiency), we’ve decided to limit ourselves in order to focus on the main question – how much is an oncology account worth?

The first set of statistics that we usually look at is cancer incidence, 5-year cancer prevalence and mortality. Those give us an overview of the whole treatment lifecycle, and when we compare geographical areas in terms of total population versus incidence we may be able to spot potential areas of interest – namely, areas with higher cancer incidence or such with higher mortality due to insufficient or inadequate care.

LIFETIME VALUE OF AN ONCOLOGY ACCOUNT

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Afterwards, we look at human capital: we try to understand how treatment pathways work, which specialists are decisive factors in the treatment process, what educational steps they need to take and how long are they in charge of oncology treatments. For example, we’ve found out that an oncologist starts treating cancer patients at the age of 36 and does so for the next 26 years.

The next piece of the puzzle is the average number of patients that get treated by oncologists – split by diagnosis. More often than not, we observe deviations: for example, areas where gender-specific cancers are treated by urologists, as there are no trained oncologists present.

Cancer expenditure per diagnosis per area is also important. With that, we can accurately estimate how much money would cycle through an account.

We then proceed to collect statistics on clinic size and utilization, number of practitioners, average age of practitioners.

Having all of that in place, we start building a model, which we will later calibrate with our customer by a mix of historical and projected sales. Below is a moderately simplified visualization of our model:

Incidence and mortality

Annual cost per diagnosis

type

Annual survival rates

Number of oncologists

Patients per oncologist

BUILD

AVERAGES

Model

Clinic size

Clinic utilization

Number of oncologists

BENCHMARK

AGAINST

AVERAGES

Sales data

CALIBRATE

Start making informed business decisions

LIFETIME VALUE OF AN ONCOLOGY ACCOUNT

GEMSEEK WHITE PAPER SERIES

APPLICATION

With the model in place, our customer can already start benchmarking new accountsagainst existing ones. This helps regulate initial investments, as well as gives insights on account effectiveness.

A simple interface to rank accounts is also available, so if an account manager is ever in doubt how to split his efforts during the quarter, he would always refer to the tool.Senior Management, on the other hand, can easily review the output and make leadership decisions on pricing and strategy, depending on a Growth-Share matrix (anonymized):

ONLINE INTERFACE

At GemSeek we believe in rich online visualization. Excel and Powerpoint are fundamental in our day-to-day business, but the word of the 21st century is “online”.

Fueled by our proprietary GemSpark platform, we empower our customers on the fly. Be it in the quiet of their office or on the way to their next meeting, our work is right where it is needed most – at our customers’ fingertips.

Can we help you? Contact us at: office@gemseek.com.

SUGGESTED FURTHER READINGS: • Cubic spline (Wikipedia) , (UCLA), (MATLAB),

(R)• Laplacian (additive) Smoothing (Wikipedia),

(MATLAB)• Time Value for Money (Wikipedia), (MATLAB)• Naïve Bayes classifier (Wikipedia), (R)• Lowess regression (Wikipedia), (Iowa

University), (R)• Boston matrix (Wikipedia), (Boston

Consulting Group), (R)• GemSpark, http://gem-spark.com/

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