Merck to Shed Fat, But Not in Sales & Marketing

As reported by Gary Haber in The News Journal, Merck plans to cut 7,000 jobs (11% of its global work force) and improve manufacturing efficiencies to maintain its profit margin despite loses from the Vioxx withdrawal, Vioxx lawsuits, and soon-to-be-off-patent Zocor.

"Whitehouse Station, N.J.-based Merck, the world's third-largest drug company, said it will close or sell five of its 31 manufacturing plants. The locations were not disclosed, but Merck, which employs 62,000 worldwide, said about half of the job cuts would be in the United States."

"I'm confident this first phase of the restructuring plan sets the course for us," Richard Clark, Merck's chief executive, said in a conference call Monday.

The guy on the left is Richard Clark, Merck's chief executive. (Hmmmm...he looks very familiar.) Back when Merck was looking for a new CEO, I turned down the job (see "John Mack Rebuffs MerckÂ’s CEO Offer") citing other mountains to climb.( Come to think of it, Clark looks a lot like me with my beard and mustache shaved, as they are now! Who knew Merck would select a Mack look-alike for CEO when they couldn't get the real thing!) Anyway, Clark obviously is no mountain climber, and Wall Street has given his ideas a vote of no confidence.

The article goes on to quote me:

While the job cuts are due in part to the company's situation, they also reflect general industry conditions, said John Mack, publisher of Pharma Marketing News, an industry publication. Drug manufacturers are scrambling to find new markets as most of the chronic medical conditions affecting people already have multiple drug offerings, Mack said. Merck "is losing two major products, which is more than other companies are losing," Mack said. "If you're losing major products, you have to cut back on manufacturing. There is no sense in maintaining capacity if you don't have the products to sell."

I had a few other comments, which were not published, that I'll share with you now.

Why Isn't Merck Making Cuts in Sales and Marketing?
The pharma industry has been criticized for its humongous sales force and doctors are beginning to push back and restrict sales rep access. Some companies, such as Pfizer, have responded with cuts in its sales and marketing departments (see "Pfizer to Slash 30% of its Sales & Marketing Staff"). Other pharma companies have also announced cuts in sales and marketing (note: Pfizer may not cut as many as 30% of its work force as was rumored).

Doesn't Merck -- like Pfizer and most major pharma companies -- have a lot of fat in sales and marketing that can be cut? Some experts think so: "When you start seeing these big, big products coming off patent, there's plenty for most of them to cut," said Les Funtleyder, a health care strategist at Miller Tabak & Co. in New York. "It is quite possible that all of them have plenty more to cut if they want to."

Many of Merck's leading drugs such as Zocor and Fosamax will be facing generic competition in the coming years. To reap the maximum revenue from these products in the allotted timeframe, now is not a good time for Merck to cut its sales and marketing staff.

So, despite Wall Street's concerns about Merck's strategy, it may be the only strategy open to Merck at this time. Or is it?

Apply Technology in Sales and Marketing as Well as in Manufacturing
If Merck wants to realize efficienciess to maintain its margins, why doesn't it do something to increase sales and marketing efficiencies? One way to do that is to use the Internet more effectively to market to physicians and consumers. eDetailing, for example, offers efficienciess, especially for late-cycle drugs like Zocor and Fosamax (see, for example, "eDetailing ROI Better Than DTC?" and "eDetailing Supplement"). According to Manhattan Research, Merck does not rank very high among the top seven pharma companies using eDetailing (In rank order, the top seven pharma companies in reaching physicians with edetailing are Pfizer, AstraZeneca, Novartis, GSK, Aventis, Merck, and Lilly.) It could do better.

Sexy Reps Sell Rx Redux
I've gotten some feedback from PHARMA-MKTING listserv members regardingmyu comments about the use of cheerleaders as pharmaceutical sales reps (see original post: Sexy Reps Sell Rx).

Jane Chin, Ph.D., President, Medical Science Liaison Institute, had this to say:

Reps who got the spotlight in Stephanie Saul's article may not have gotten the sneering tone, but the article focuses entirely on their appearances and the pros and cons that came with being too beautiful. Throw in a lawsuit and you've got another hot-selling item on the newspapers. Looks like sex sold this story for the NYT publication.

Here's my question: Would the media feel better if doctors are visited by UGLY reps?

Obviously the author wants us to be uncomfortable with PRETTY reps - especially PRETTY FEMALE reps. There were no mention of the beautiful MALE reps that populate pharma's sales forces, or any mention of the number of reps with backgrounds in other disciplines (for example, the military) that are just as athletic but less predisposed to emotional baggage of the pretty-cheerleader-type.

This is the case of the misplaced "b" - a focus on "beauty" in the problem rather than "brains" in the problem. After the first season of the television shows "Survivor" and "The Apprentice" the media highlighted the growing attractiveness of the following seasons candidates. A popular show gets increasing applications, just like a popular profession gets increasing applications. Companies that have the luxury to pick and choose candidates from a large pool of
applicants make their preferential choices when hiring. Why does the media act surprised when it had a helping hand in shaping these trends?

Ultimately, what the article does not focus on is what the pharma companies do once the candidates got hired. There was no mention of the rigors or relevance (or lack thereof) of the training program. No mention of the amount of time (or lack thereof) companies give reps to prepare before deploying them into the field. These issues are the REAL problems in the loss of credibility that industry and its employees experience today.

Jane, I agree with your points and wish I had made a stronger case for the brains (or training) vs. beauty angle!

Georgette, a female sales rep, had this to say:

I hope that this was statement was made "tongue in cheek." Being a sales person in the industry, I hate to think that the reason doctors saw me was because I was attractive ... although not a cheerleader, that is for sure.

Perhaps Georgette is referring to the "Sex sells and that is the name of the game" comment. I must admit that I was merely repeating what I believe is a marketing truism that "sex sells." And selling is the ultimate goal of marketing and sales.

I also hope that doctors want to see reps for other reasons than good looks. There's also the pizza, don't forget that! (a bit of "TIC" here).