Thursday, January 04, 2007

Are Sales Reps Necessary?

That's a weird question, considering that there are about 100,000 pharmaceutical sales reps out there today in the US. Sales reps are such a staple of the pharmaceutical sales and marketing machine that it's almost a sacrilege to suggest that they may not be necessary.

Yet, recent announcements by Pfizer, for example, proclaim that there are "no sacred cows" when it comes to cutbacks:
Pfizer CEO Kindler told Wall Street analysts recently: "There will be no sacred cows. Everything is on the table." See "Transforming Pfizer?" (Forbes Online).
In this atmosphere, downsizing the sales force is definitely an option that many pharmaceutical companies will consider.

But the usual 10-20% cut may not be enough, especially if a good portion of that cut is in support staff rather than in-the-field reps.

I've been hanging around CafePharma lately just to hear what pharma sales people are thinking. It turns out that many of them don't think they are worth the salaries they are paid and that they are just not that necessary. Some think any run-of-the-mill UPS delivery person can provide almost the same value-added services as they can, which involves mostly distributing samples and lunches.

Here are some comments I picked up from a CafePharma Lilly discussion board. The thread began when Alex Berenson, a New York Times reporter who wrote an article about Lilly's Zyprexa coverup ("Eli Lilly Said to Play Down Risk of Top Pill", NYT, 12/17/2006), asked for informants to come forward. The discussion quickly turned to how bad cooperating with the press is for reps.
"The NY times is a worthless rag these days. We all know that. Anyone in the industry should turn on that paper. The articles only hurt the reps, not the company. When cuts have to be made, where do they come first? Oh, that's right, the reps."
Yeah, Duh! Reps are first to cut because (1) there are too many of them, (2) they get paid too much, (3) they are less and less effective. That's not me saying these things, that's the reps themselves saying this:
"Hey chief, I've been in this game for 10 years, and guess what:

1.) We don't provide value anymore.
2.) Without the sales and marketing arms, drug prices would go down.
3.) Charity and patient assistance would be the same.
4.) The docs could sure as shit get their samples directly from the company.
5.) The public, congress, and consumer advocacy groups would stop hating us because the most visible part of the industry, i.e., you and your little rolly bag, would not be front and center to the 65 year old man with diabetes in the waiting room.

"You really think that you are worth your salary? Ask Indy why they are sending out web based sample ordering systems to "select" offices to "pilot." We don't have long. Hope you have planned, because I sure as hell have."
To which someone responded:
"It's been tried before...nothing beats person to person contact..."
Speaking of person-to-person contact, you should read the Time article, "Attack of the Pharma Babes," written by Scott Haig, a physician. He notes, among other things, the following: "But 10 minutes of rapt attention from a smiling beauty [sales rep] is still 10 more minutes than usual." You can read more about pharma sales rep babes in my previous post about pharma's penchant for hiring former cheerleaders. See "Sexy Reps Sell Rx."

But, we need to question the importance of person-to-person contact, especially these days when MySpace offers a credible example of the popularity of non person-to-person contact. OK, it's popular, but is it effective? Or is it applicable to pharmaceutical sales? I don't know. Nobody or no company I know of has built a MySpace sales application for docs. Sounds like a good idea to me.

Anyway, let's continue with the CafePharma dialogue;
"Here's some facts for you 'chief'. By the way, I've been in the industry for 9 years, so I don't need to be talked down by your sorry ass.

"1. The good reps still provide value. I agree there shouldn't be 100,000 drug reps in the U.S. That's ridiculous. After the clueless Barbies and Kens are weeded out over the next few years (first Pfizer, then GSK, etc.) it hopefully will resemble what it was like when you and I started and even years before if they eliminate enough. Being able to regularly talk with most physicians would be a great thing once again.

"2. Without sales and marketing arms, SALES GO DOWN. The biggest costs and reasons for high prescription drugs are not the drug reps. $35 billion dollars a year are spend on R and D by Pharma companies in the U.S. $15 billion is given out by pharma

"3. You said charities and patient assistance would remain the same. How? You have to have sales to support samples, patient assistance, etc. Companies like Lilly or Pfizer sure aren't going to continue to spend $35 billion in R and D if they won't have blockbuster products anymore and sales go down--which they would without sales forces. As for cost of drug reps, taking a generous $90,000 per year average in wages/benefits x 100,000 reps= $9 billion dollars. That's a lot, granted and should be reduced. However, $35 billion for R and D, $15 billion for samples and $12 billion for Patient assistance adds up to $62 billion dollars a year. That's not even counting the untold billions that Big Pharma gives to charities. I used to sell for JNJ and we were REQUIRED to give generously to United Way, among other charities. If companies' sales go down, so would charitable contributions.

"4. Samples directly from the company: Like someone else posted, face to face sales is still the most effective method.

"5. The public hates us because of slanted reporting like your buddy Alex Berenson at the NY Times. If he or any of his integrity-lacking journalists would ever present the WHOLE story (including the good things) about our industry and not just the negative--maybe there would be a different perception. I don't know you are attacking me and my "wheelie bag" when you claim to be a rep, also. I'm assuming you slipped and you are not even a rep, but I digress.

"Regarding 'am I really worth my salary'? Hell, yes I am worth my salary. The AVERAGE UPS driver makes over $25 an hour now (straight pay). At 50 hours a week, without any overtime, holiday, extras, etc.=that's around $65,000. I have a friend who's been with UPS and he makes almost 100K. If we are considered 'only UPS drivers and caterers', we should at least make what we do. We are actually doing three jobs: 'UPS delivery people', caterers and sales people. We all have at least bachelors degrees, have to learn technical information and the good reps out there do provide value to the doctor and staff."
per year in the U.S. This is listed under "marketing" , which it is; but it's very misleading as many billions of dollars in samples go to those who need it. That's not paid for by the taxpayers, it's paid for by companies like Lilly, Pfizer, etc. $12 billion dollars a year are given out in various Patient Assistance programs in the U.S. per year.
I note that this defender of reps confesses that reps act as UPS delivery people and caterers as well as sales people. Which means that roughly two-thirds of a rep's focus is on sales support rather than sales per se. More importantly, delivering samples and lunches can be handled much more cost-effectively by other means, including via the Internet. Just look at all the companies that are setting up online catering services for the pharmaceutical industry (find a list here).

Another CafePharma member speaks up (boy, these guys have potty mouths!):
"Both of you idiots just keep on thinking that bullshit and maybe someday you will believe it. If you had ANY decent relationships with ANY of your customers you would be able to ask them if there is ANY future to your job, and i can assure you that they would tell you that there was not. The very fact that you equate the need for samples with a need for you should tell you that you are reaching. Come on, you don't really believe that Lilly is going to continue to pay you 100k a year to get little forms signed do you? You just said yourself that a UPS driver could do it for 65K, and that is if they were only delivering Lilly drugs."
Which elicited this response:
"From your brilliant perspective, getting the opinions of my physicians who I have good relationships with will tell us all the future of the pharmaceutical industry. "Do you think there will be drug reps in the future Doctor Jones (my favorite doc.)? No. That's too bad. I'm leaving the industry now". I said in my last post that 100,000 are WAY TOO MANY drug reps and there will be significant cuts over the next several years (Pfizer, GSK and everyone else will follow). That doesn't mean they are going to completely eliminate the sales forces. So what if they try pilots where they mail samples to certain offices? That doesn't mean doom and gloom and EVERYONE is going to have their jobs eliminated.

"If you look at history and even morons (whoops) like yourself, they believe that robots were/are going to replace people for everything. For SOME THINGS and jobs, robots are useful; for the majority of things they are not. Like I said, why reason with someone like you who has a pea-sized brain, is bitter at the world and "doesn't play well with others"? I guess you are too much of an A-Hole and you have dragged me down to your level with insults. Sorry. Many thousands of rep positions will be eliminated over the next few years (as Forbes and other REPUTABLE sources suggest), but not everyone dipshit. If you claim to have been in the industry for 10 years (very doubtful) or even a rep as it is (extremely doubtful)--you'll easily be eliminated with your shitty attitude and poor sales numbers. You can't be a top performer as bitter as you appear to be. By the way, I know you are very concerned for my welfare (sarcasm); so yes I have prepared in case something goes down with my future in this industry and my spouse does make good money."
At that point, I left CafePharma and washed up.

What Do You Think?

What Are Sales Reps Absolutely Necessary For?
Increase Scripts Written
Deliver Samples
Source of Practical Information for Docs
Cater Lunches for Docs
Compensate for Lack of Trained Hospital/Office Staff
Manage Patient Assistance Programs
All of the Above
None of the Above
Take this poll about the necessary roles of pharmaceutical sales reps. Some of the roles are self-explanatory. For "source of practical information," I mean in the sense put forth by Scot Haig in the Time article: "many doctors rely on reps for practical information. Someone has to show the doctors the new stuff they can prescribe, or the new procedures they can do using new medical equipment." He may be thinking of medical device reps, but my poll is about Rx drug reps.

Scot also was talking about hospital sales reps compensating for lack of staff when he said: "The third, most urgent reason we need our reps is that hospitals are low on trained staff these days. And as more and more of our nurses are immigrants from countries that don't have such amazing medical technology, the rep's job in the hospital has become even more essential." This last comment seems a bit prejudicial, and I am not sure it is applicable to office-based Rx reps. IMHO, if reps are needed to perform healthcare functions for docs, then our healthcare system is in serious trouble -- more serious than high drug prices even!


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8 comments:

  1. Anonymous3:17 PM

    Hi John:

    I read with great interest some of the posts regarding the sales representatives and the delivery of value to their customers. Given the state of healthcare and the time demands being placed on doctors and other ancillary health care providers for increasing patient load AND maintaining high quality of care, the time component once enjoyed by many reps has shrunken significantly. Couple that with emerging access issues and regulations: For example, Stanford, Henry Ford and University of Penn (to name a few) have enacted guidelines on interactions with industry representatives which, in many circumstances, all but denies access to some of the customers critical to a brand's success.
    Physicians need information and seek credible sources of that information to guide their prescribing decisions (I believe Accenture study 2003 elucidated this). Thus, if a rep is not bringing this information that is needed, there is no value of the interaction between rep and doc. Is 100,000 the right number to demonstrate value? Absolutely not...diminishing returns on rep investment has been in the literature for the past several years and I would certainly expect to see the cuts that have been implemented at Pfizer be echoed across the industry in '07 and beyond.
    But what of Medical liaisons? They are well-trained in the delivery of credible information that the physicians have been seeking, and access to these physicians has not yet been much of an issue as the physician places value on the interactions with these MSLs. Will there be growth in these Medical Affairs functions? I would submit that companies who recognize that MSLs provide the level of customer service and demonstration of value offered by MSLs, these teams will effectively grow to meet the needs of the customer and the business....we shall see.

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  2. A superb topical. Relevance of MRs or pharma sales reps in the internet age!? The way you portray the picture I will not be surprised if logistics companies pick up the cue and propose a sample, gift and communication input distribution business model to a market savvy innovative pharma company. Who knows a differentiator logistics company may propose a value added sample, gift and communication input distribution business model along with dispensing order pickup!!?

    In fact in India you have a superb case story of the second largest Indian company CIPLA (as per ORG IMS retail audit study, Nov 2006). Cipla was racked with severe union problems with their MRs. Dr. Hamied the contra strategist and Chairman & MD of Cipla took a major decision to suspend the field force and start intensive database marketing chiefly with the help of courier agencies. And he succeeded with aplomb. Cipla continues to grow at a clipping rate. Today Cipla has a field force too and a strong database marketing backbone.

    And now is Kindler serious? If he means what he says and not to just to get media bytes because the Pfizer share prices are taking a beating on the bourses thanks to the torcetrapib controversy then take my thoughts (they are free) IT IS TIME TO INVERT THE PYRAMID. Top heavy organizations and hierarchical setups, which all pharma companies are noted, for, will find the going getting tougher. It is time to get flatter and work 360 degrees in a collaborative manner for market successes. It is the age of networks. The company with the more powerful network will have more power. The rise of IT/ITES/BPO/Consulting segment adds to the flux in the market. Persuasive communication is today delivered by a host of routes. MRs are an important avenue for persuasive communication. But are they dispensable? That is a great call to make. And if you downsize the field force will a company increase communication through other means?? That question needs to be addressed too. Also see www.greatmarketing.blogspot.com for some good posts. – Sunil S Chiplunkar

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  3. Charles H. Green11:08 PM

    Great topic, great post.

    I'm struck by the rep's argument that face to face selling is still the best, that to cut back on it would be to reduce revenues.

    That is utterly beside the point. That's true at any point of marginal returns.

    The point, as I see it, is not whether this particular model still generates positive returns at the margin, but whether or not this particular model is bankrupt, and delivers returns vastly below what they should be doing.

    If there was ever a role custom made for a trusted advisor, it ought to be the liaison between a pharmaceutical company and a physician. The science is complex, doctors don't have time to follow it, claims are all over the place, and one who truly has the customer's (read, the doc's) best interests at heart would be a godsend to the entire healthcare industry.

    Instead, what pharma has engineered over the years is a very different model, one that aims at pushing product, gaining competitive advantage, that is measured by frequent short-term metrics aimed solely at moving product. The last thing it is aimed at developing is trust-based relationships.

    Supermarkets thought they were doing "the best job possible" at selling coffee--until Starbucks came along, with an approach bulit around the customer, not around pushing bulk coffee.

    Pharma reps may still earn more than their base pay; but they are worth so much less than they could be, ought to be, if their employers saw the job as being truly about serving customers.

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  4. Kapeel Kapoor Indore India
    Every organisation is a value creating entity, within which each individual part has to harmonise with other parts so as to create a superior value which any part can individually deliver.

    Pharma selling has become a sales push game indeed. Probably the days are gone when Physicians could really look forward to having a valuable, practical opinion on healthcare issues / treatment options from a Medical/ Pharma Sales representative. Today majority of Physicians sense an ever decreasing contribution of Pharma Sales Reps (Even lesser probably for many line managers who only add a "Special Request" to the call). In fact many a physicians treat the reps as an unwelcome interruptions and try to minimise the access by specifying days/ hours or even number of reps allowed to meet them. Reps are asked to just remind the brand name and leave soonest possible.

    However it is not the Pharma sales reps alone to share the entire blame. The great Pharma Sales Organisation expects them to push the products with a scant regard to values like Building trust, or ensuring a healthier nation. When performance parameters are based largely on sales push, what else can be expected. The rot is probably much deeper and even other echeleons of the Sales Hierarchy have to really justify the value addition they deliver.

    With Consumer geting impowered, I strongly believe the days for such practices are numbered. What is inevitable is that each stakeholder in the healthcare value chain has to rediscover their role and to justify their existence
    Regards
    Kapeel Kapoor
    A Pharma Marketing Professional
    Indore India

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  5. I don't really know how it works in the US given that your medical system works in a different way to ours in the UK.
    I worked as a medical rep for just over a year and it really opened my eyes. Each area of the UK is controlled by a primary care trust who set recommendations for the medicines they want doctors in their area to prescribe - not based on how effective the drugs are, but based on price.
    This means that many patients aren't receiving the best drugs available for their condition.

    With this system in place i don't think there is a need for medical reps because the PCTs will reject most drugs out-of-hand, in favour of cheaper generic alternatives.

    It's a crazy system that, in my opinion, is failing UK tax payers.

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  6. Anonymous12:17 PM

    I used to work for Covidien. It is a terrible company to work for. It's just awful! They have not laid anyone off but they are expecting this big generic event, and the company raised rep quotas a whopping 4 months prior to product scheduled release. Now all the reps owe the company thousands of dollars because they are failing to sell a product not approved and cant make budgets. Last week they had a conference call about compensation. They decided not to change the quotas even though the product did not come out when it was expected and there is no new date in sight.

    What a joke! In the meantime their company stock is going through the roof as they rape their sales force. What losers! There is not a single one of my friends unfortunate enough to still work for them who is not looking for a new job right now!

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  7. I believe sales rep not only earn bread and butter for themselves but also for the people sitting in their cubicles, every company should do their own cost benefit analysis and if a sales rep is giving them a single dollar more than what he is getting then he is worthy of that job and should not be considered a burden on organization. There is wrong conception that these guys are only responsible for sales only, we usually miss some of their non-tangible advantages, they are the one who establish company's reputation and branding. I believe sales guys are the hunters in the pack and rest of the company's staff are scavengers, so their role should not be under estimated.

    If pharmaceutical companies really want to cut their cost then they should look for some options to work with other pharmaceutical companies in collaboration. For example: we all know in one day each hospital is visited by multiple sales reps of different companies, they all have to spend on fuel, time and effort on same target, instead they should establish a joint task force for sales, there should be more medical shows on community level, so that multiple targets should be their at one place at one time, it will certainly lower their cost.

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  8. madhav deshpande8:31 AM

    We read lots of books on influencing the customer right from dale Carnegie till many new authors have made lot of contribution in these topics. So "influencing” needs one to one exposure .this can not be achieved thru courier or by displays or ads in the journals,
    knowing the prescription output in jungle of so many brands ( more true in Indian contest as there is brand fight rather than molecule fight) and time required to get brand on tip of pen is rather like reflex action and not pre determined. (The true positioning - brand in Customer mind.) This probably can be achieved with in to one interaction rather than any other means.

    Here it is presumed that there is communication .simply throwing samples and table tops will not be helpful any way.

    So when two are essential for one to one interaction Role of MSR can not be discarded just for the cost consideration. Rather when there Are 10000 what we can do that there ability to interact is maintained
    madhav deshpande

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