Healthy Skepticism Library item: 7168
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
Brickates Kennedy V.
Pfizer cuts signal shift in Big Pharma marketing
Market Watch 2006 Nov 30
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B2AC9B9E8%2DC455%2D4CC5%2D8155%2DE823443D0A6A%7D&source=blq%2Fyhoo&dist=yhoo&siteid=yhoo
Abstract:
Pfizer Inc.‘s recent announcement that it plans to slash its U.S. sales force by about 20% signals a shift in how major pharmaceutical firms are approaching sales, with industry experts expecting more companies to follow suit.
“I think there’s been an acknowledgement by investors and companies that the sales forces have been overbuilt,” said Deutsche Bank analyst Barbara Ryan in an interview, adding that Pfizer’s move was essentially “unilateral disarmament.”
Ahead of an analysts’ meeting slated for Thursday, Pfizer (PFE : Pfizer Inc
Last: 26.21+0.01+0.04%
12:07am 12/21/2006
PFE26.21, +0.01, +0.0%) announced late Tuesday that it plans to eliminate about 2,200 U.S. positions of its roughly 35,000 global sales force. With 100,000 employees worldwide, Pfizer is currently the world’s largest pharmaceutical firm. See full story.
Gauging the average sales representative’s salary at $200,000 a year, analysts estimate that Pfizer’s cuts should save the company about $440 million a year. As the result of an ongoing restructuring plan, Pfizer already has cut over 5,000 workers since 2005.
While the cuts may not result in huge savings for a company that brought in $51 billion in sales last year, it does mark a distinct shift in Pfizer’s thinking about how it markets its products to the medical community. In the past, Pfizer has been known throughout the industry as a marketing powerhouse that was willing and able to have multiple salespeople assigned to the same doctor.
“The old-time detail sales force has become a dinosaur,” said Robert Toomey, analyst for E.K. Riley Advisors. “The whole model for sales and distribution is changing.”
“I think it’s gotten to a point where there are just too many [salespeople] going to docs’ offices,” agreed Deutsche Bank’s Ryan.
Stretched schedules
‘The old-time detail sales force has become a dinosaur. The whole model for sales and distribution is changing.’ – Robert Toomey, E.K. Riley Advisers
Industry experts have noted that in recent years, for example, doctors simply don’t have enough time to meet with sales representatives, given the tight scheduling imposed on their workdays by managed care.
In addition, many hospitals and medical schools increasingly frown on doctors enjoying free dinners and trips from pharmaceutical firms, which once were commonplace in the business. A steady stream of state and federal investigations into drug-marketing practices also has had a chilling effect.
Analysts also point out that physicians increasingly have less latitude in selecting what drugs to prescribe, given reimbursement constraints by insurers. In addition, more mature products, such as Pfizer’s Lipitor, are already well known by doctors and thus require less hands-on marketing than newer products.
Indeed, Pfizer’s stagnant top line is also a driving force behind the move the staff cut. In recent quarters, the company has been burdened with a string of patent expirations for several of its best-selling drugs, such as Zoloft and Zithromax, with more on the way. As a consequence, Pfizer has said that it doesn’t expect to grow its top line until 2009, when it expects sales of newer drugs to gain enough traction to compensate for lost sales of older products.
News of Pfizer’s cuts was warmly received by investors, who bid up the shares of practically all the Big Pharma denizens, particularly those of U.K.-based GlaxoSmithKline Plc (GSK : GlaxoSmithKline plc
Last: 52.29-0.13-0.25%
12:07am 12/21/2006
GSK52.29, -0.13, -0.2%) and French conglomerate Sanofi-Aventis (SNY : sanofi aventis sponsored adr
Last: 45.50-0.34-0.74%
12:07am 12/21/2006
SNY45.50, -0.34, -0.7%) , two of the world’s largest drugmakers.
“Because Pfizer was the leader in sales-force building, Pfizer will be providing political cover if you need to cut,” said Les Funtleyder, an analyst for Miller Tabak & Co.
Ripple effects
Indeed, all eyes will now be on Glaxo, for in the past Glaxo management has said that it would consider cutting its sales force if Pfizer did first. Glaxo’s plans could be revealed as early as the week of Dec. 12, when it is slated to hold a meeting with analysts.
Meanwhile, companies who already have pared back their sales forces will be under less pressure to slash. Wyeth (WYE : wyeth com
Last: 51.400.000.00%
12:07am 12/21/2006
WYE51.40, 0.00, 0.0%) , for example, cut about 15% of its force last year. Merck & Co. (MRK : Merck & Co., Inc
Last: 43.30-0.21-0.48%
12:07am 12/21/2006
MRK43.30, -0.21, -0.5%) also has made some reductions as part of an ongoing restructuring, as has Bristol-Myers Squibb Co. (BMY : Bristol-Myers Squibb Company
Last: 25.77+0.12+0.47%
12:07am 12/21/2006
BMY25.77, +0.12, +0.5%) , according to analysts.
Ironically, shares of Pfizer’s competitors in the hugely lucrative cholesterol-drug market also heated up Wednesday, largely on hopes that fewer salesmen for Pfizer’s blockbuster drug Lipitor would translate into higher sales for their products. Shares of Merck and Schering-Plough Corp. (SGP : Schering-Plough Corporation
Last: 23.86+0.15+0.63%
12:06am 12/21/2006
SGP23.86, +0.15, +0.6%) , which jointly market Vytorin, and AstraZeneca Plc (AZN : astrazeneca plc sponsored adr
News , chart, profile, more
Last: 53.80+0.14+0.26%
12:07am 12/21/2006
AZN53.80, +0.14, +0.3%) , which sells Crestor, all finished the day at least 2% higher.
“They should all have an easier time marketing,” said Raymond James & Associates’ Michael Krensavage of Pfizer’s competitors. “But that’s why drug companies have been reluctant to cut people.”
