Healthy Skepticism Library item: 7006
Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.
Publication type: news
Agovino T.
Drug maker Pfizer cuts 2,200 U.S. sales jobs as part of reorganization
The Associated Press 2006 Nov 29
Abstract:
Pfizer Inc.‘s (NYSE:PFE) decision to cut 20 per cent, or 2,200 jobs, from its U.S. sales force may trigger other companies to slash their own ranks of representatives, ending an expensive and not especially efficient arms race, analysts said.
On Tuesday, Pfizer said it would cut the jobs as part of a cost-cutting program to transform the company into a more nimble organization as it struggles with sluggish sales.
Analysts applauded the move, which they speculated could save Pfizer between US$400 million and $500 million annually. But beyond the benefits for Pfizer, analysts hoped other companies would consider paring back their own expensive sales forces as some of them face patent expirations and lacklustre pipelines.
In recent years, drug companies have added sales staff but analysts have questioned whether having hordes of representatives repeatedly visiting doctors was economical because patients’ health plans play a crucial role in what drugs are prescribed. Patients will often ask a doctor to prescribe a treatment on their health plans’ preferred drug list because the copayment is lower.
Pfizer’s marketing prowess is renowned in the industry and analysts said its competitors were reluctant to cut their own sales staffs when they had to contend with the might of the world’s largest drug company. Now that may change.
“Pfizer was the 800 pound gorilla and one reason everyone had so many sales people was to keep up with the Joneses,” said Barbara Ryan, an analyst at Deutsche Bank.
Pfizer’s stock rose two cents to close at $27.07 on the New York Stock Exchange. The drug company has 11,000 sales representatives, and the cuts will be made by the end of the year, according to company spokesman Paul Fitzhenry. He couldn’t say how much the cuts would save the company or if it would take any kind of an earnings charge because of the move.
Last month, Pfizer said it would slash costs beyond a program announced last year, which was designed to cut $4 billion in expenses by 2008.
At the time, Pfizer CEO Jeff Kindler said there would be no sacred cows in the reorganization but some thought the sales force would escape the chopping block because it was such a company hallmark.
Pfizer has lost patents on numerous drugs recently, including blockbuster antidepressant Zoloft. Other drugs, like blood pressure medicine Norvasc, are slated for generic competition in 2007. Pfizer said in October that sales would be flat for the next two years after previously predicting moderate growth.
With this background, some analysts insisted cutting the sales force makes sense.
“This is something Pfizer should have done a long time ago,” said Jason Napodano, an analyst at Zacks Independent Research. “It is a good thing. It shows Kindler is doing something.”
Kindler became CEO over the summer, replacing Hank McKinnell who remains chairman. Pfizer said there will be additional announcements about its long-term outlook and actions for revitalizing the company in January.
Pfizer said its sales force cuts won’t effect its ability to market its major products including cholesterol-lowering drug Lipitor as well as new drugs such as cancer treatment Sutent. Fitzhenry said the cuts would affect sales representatives as well as management and support staff.
On Thursday, Pfizer is hosting an analyst meeting to highlight its pipeline of new drugs. The star is Torcetrapib, a cholesterol treatment. But a recent study showed it raises patients’ blood pressure, raising fears about its future and leaving analysts wondering what other products Pfizer has to bolster future sales.
“What are they (Pfizer) going to do about research and development and improving productivity? That is what I want to know,” said Ryan.
