Death of a salesman: drugmakers recast reps' role

The old-style sales rep may have had his day thanks to shifts in the pharmaceutical market and a cost-cutting drive by drug companies.

The pace of decline in rep numbers has accelerated across Western markets this year, driven by a fresh spate of mergers and a looming wave of patent expiries for some of the industry's biggest-selling medicines.

But the cutbacks are not just about saving money.

The industry is also undergoing a profound structural change in which the payer, not the prescriber, is taking over as the true gatekeeper to pharmaceutical sales.

The effective demotion of the primary care doctor -- the traditional target for industry reps -- means drugmakers are directing their selling firepower higher up the demand chain.

Nowadays they want to address the bureaucrats responsible for drawing up all-important drug formularies used by national, regional and private sector healthcare providers.

Nowhere is the issue in sharper focus than Britain, where the state-run health service dominates the market and the National Institute for Health and Clinical Excellence (NICE) decides centrally which drugs are worth using.

THE DOCTOR WON'T SEE YOU NOW

It makes for a testing time for the traditional salesman, as Andy Smith knows to his cost.

The 27-year-old was made redundant three times in 11 months by different companies at the end of a four-year stint as a drug rep, during which it got harder and harder to pitch to doctors.

By the end of my time as a drug rep, there was a definite reluctance to see me, and a resignation to the fact that decisions were less based on clinical evidence and more based on price, he told Reuters.

His experience is far from unique. Simon Jose, who heads GlaxoSmithKline's British unit, tells a similar story.

Jose has been reshaping Glaxo's sales force since 2007, when a study into the British market confirmed his suspicions that Big Pharma's marketing model was seriously outdated.

IMS Health researchers found that 43 percent of drug rep visits to British doctors were canceled, 87 percent lasted less than two minutes and only one in 10 was remembered.

It showed they don't really want to see us; when they do, they don't want to spend a lot of time with us; and when they do spend time with us, they don't remember what we said, Jose said in an interview.

His answer has been to slash Glaxo's traditional British sales reps by a third, from 800 to just over 530, and create more payer-focused medical advisers and health outcomes consultants, who are trained to use sophisticated modeling to prove the economic value of its drugs.

In this model you don't require as many feet on the ground because you're having a more mature, higher-level discussion with higher-level influencers, he said. The UK is at the front edge of the wave.

Scandinavia and parts of northern Europe are moving down a similar path, though southern Europe remains more prescriber-focused -- and in emerging markets drug companies are actually increasing conventional sales rep numbers.

U.S. drug companies are also bracing for an increase in payer power in the wake of President Barack Obama's planned healthcare reforms.

The United States has already seen deep cuts, with the number of reps at the top 40 branded drug companies falling from 102,000 in 2005 to 82,000 by the third quarter of this year, according to healthcare analytics group SDI Health.

Detailed figures are not available outside the United States but Tim Anderson, an analyst at Sanford Bernstein, said there had also been substantial field force reductions in Europe.

SLOWING EARNINGS GROWTH

With field force accounting for roughly 40 percent of companies' selling, general and administrative (SG&A) expenses and each rep costing a total of around $200,000 a year, there is a big incentive to find smarter selling models.

All of theminent loss of exclusivity on key blockbusters, some of which -- like AstraZeneca's heartburn pill Nexium anm are looking at it and grappling with the issue, said Simon Friend, global pharmaceuticals leader at PricewaterhouseCoopers.

The long, hard look at selling coincides with the imd Pfizer's
antidepressant Effexor XR -- have already had promotion cut.

The loss of such old money-spinners and the lack of obvious replacements means the five-year earnings growth forecast for global pharma has fallen to just over 6 percent from nearly 12 percent since 2005, according to Thomson Reuters I/B/E/S.

The historical issues of lack of new products, patent expirations, generic intrusion and price cutting from the payer community is making companies look much harder than they've ever looked before at their margins ... you will see some significant change over the next five to 10 years, Friend said.

(Additional reporting by Kate Kelland; Editing by David Cowell)