Pity the poor pharmaceutical sales rep

Amid mounting competition and a backlash against Big Pharma's aggressive sales tactics, drug reps are looking more and more like an endangered species.

By Aaron Smith, CNNMoney.com staff writer

It's hard out there for drug sales reps--particularly if they work in places where gaining access to doctors is becoming increasingly difficult।

Take Boston, Glenn Abrahamsen, senior director of global analytics for drug company Schering-Plough says the city is full of medical groups with formal policies restricting the access that company reps have to individual doctors। "We weren't allowed to leave samples: not tissue boxes or anything," said Abrahamsen, "We weren't allowed past the receptionist।"

Such "closed door" policies are now common around the country, especially in Washington, Minnesota and Wisconsin, according to anecdotal evidence from drug sales reps and medical groups. The backlash--fueled in part by double-digit increases in advertising spending by Big Pharma--is turning the industry on its head. Sales reps are facing massive layoffs and falling incomes as commissions drop. Drug companies, meanwhile, are scrambling to come up with new ways to get their medications in front of the doctors who would prescribe them.

In one sign of the dislocation, Pfizer is in the process of laying off 2,200 sales reps, or about one-fifth of its U.S. sales force. Industry watchers expect rival companies will soon follow with cutbacks of their own.

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Novartis suspends U.S. sales of Zelnorm

Financial Analysis: Novartis will survive Zelnorm

By STEVE MITCHELL

WASHINGTON, April 2 (UPI) -- Novartis suspended U।S। sales of Zelnorm after the irritable bowel syndrome drug was found to be associated with an increased risk of heart problems and stroke, but analysts think the move will be only a slight bump for the pharmaceutical giant and is actually more reflective of an increasingly cautious Food and Drug Administration.

Nigel Birks, an analyst with Dresdner Kleinwort, said the Zelnorm suspension is "obviously going to have an impact on Novartis," noting that the drug was slated to bring the company more than $1 billion in 2012.

"It does reduce this year and going forward some of the company's anticipated growth and earnings," Birks told United Press International.
But ultimately, the long-term outlook of the company is positive and it should recover after taking a hit in the short term, he added.

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Merck Forced To Put Unsuccessful Insomnia Drug To Sleep

NEW YORK (Reuters) - Merck & Co. and H. Lundbeck A/S said on Wednesday they were ending studies of experimental insomnia drug gaboxadol due to disappointing effectiveness and worrisome side effects in late-stage trials.

Merck and Lundbeck said the side effects included dizziness, headaches, hallucinations and vomiting. In a mid-stage trial presented last summer, Merck said one of the most common side effects was tachycardia -- a rapid heartbeat that can be fatal, especially to patients with heart disease.

Shares of Danish drugmaker Lundbeck closed down almost 17 percent on Wednesday in Copenhagen. Merck, a far larger company with a wide array of medicines, was little changed in early afternoon trading.

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Global Pharmaceutical Market Grew 7.0 Percent in 2006

HARTFORD -- IMS Health (NYSE: RX), the world’s leading provider of market intelligence to the pharmaceutical and healthcare industries, today announced that the 2006 global pharmaceutical market* (see endnote) grew 7.0 percent, at constant exchange rates, to $643 billion. A rebound in growth to 8.3 percent in the U.S. — fueled by an increase in prescribing volume due to Medicare Part D — and innovations in oncologics that drove strong 20.5 percent global growth in that therapeutic class, were key contributors to the market’s expansion.

“We continue to see a shift in growth in the marketplace away from mature markets to emerging ones, and from primary care classes to biotech and specialist-driven therapies,” said Murray Aitken, IMS senior vice president, Corporate Strategy. “Oncology and autoimmune products increasingly are demonstrating their value in answering unmet patient needs — offering significant opportunities for growth.”

In 2006, specialist-driven products contributed 62 percent of the market’s total growth, compared with just 35 percent in 2000. A number of primary care classes are experiencing slowing or below market-average growth due to the entry of lower-cost, high-quality generics and switches to over-the-counter products. These classes include proton pump inhibitors (PPIs), antihistamines, platelet aggregation inhibitors, and antidepressants. Last year, generics represented more than half of the volume of pharmaceutical products sold in seven key world markets — U.S., Canada, France, Germany, Italy, Spain, and the U.K. This trend reflects the changing balance between new and old products and the growing “genericization” of many primary care categories.

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From Swallowing to Swallowed-Up

Why sales-force automation company Dendrite decided to sell out

NJ BIZ Staff, Shankar

As a hard-driving 33-year-old entrepreneur, John Bailye brought a start-up company called Dendrite from Australia to New Jersey in 1986. Last week, he stood to pocket about $35 million from the $751 million sale of Dendrite, which makes software for pharmaceutical sales forces, to France’s Cegedim. Earlier this year, it lost its biggest customer, Pfizer, which accounted for a 10th of Dendrite’s $437 million revenue last year.

The deal, announced two weeks ago, marked a turnabout for the companies. It was Dendrite that stymied Cegedim’s attempt to enter the U.S. market four years ago when Bailye outbid the French company for Synavant of Atlanta, another developer of customer relationship management (CRM) software with a strong franchise.

At the time, Bailye shared with NJBIZ his dream of taking the combined entity’s annual revenue from about $400 million to $1 billion in five years.

The expansive mood led Dendrite to relocate from its Morristown offices to its current headquarters across 233,000 square feet in Bedminster’s Somerset Corporate Center. But Dendrite now faces challenging times, with increasing competition and pressure on profit margins. Earlier this year, it lost its biggest customer, Pfizer, which accounted for a 10th of Dendrite’s $437 million revenue last year.

Pfizer decided to take some of the sales-force automation work in-house and parceled out the field-sales support business to IBM. Meanwhile, Dendrite stock slumped from about $20 a share in September 2005 to between $12 and $13 before Cegedim offered $16 on March 2.
The deal values Dendrite at nearly 30 times projected per-share earnings in 2008, higher than the average of 25 times for enterprise software companies, according to Wachovia Capital Markets.

The $16 per-share Cegedim will pay in cash represents a 40 percent premium to Dendrite’s average closing price over the 20 days before the announcement. Dendrite, which operates in 50 countries with 3,000 employees, including 700 in New Jersey, must have seemed an obvious takeover candidate for Cegedim, which had not given up its U.S. aspirations after the Synavant debacle. “We saw it coming: consolidation is occurring in the entire business-applications area,” says Vikas Vats, executive vice president of marketing and business development at Market Rx, a Bridgewater-based supplier of planning and analytics services to the pharmaceutical and life sciences industries. Vats says the CRM industry’s 100 percent-plus growth rates of the early 1990s were not sustainable, and have fallen into the low double-digits in recent years.

Sales-force automation was a nascent business with just nine companies in the United States when Dendrite started out. Dendrite was the smallest and the only one in New Jersey. In recent years, the company has seen competitors eat into its business. Notable deals included rival Siebel’s 2001 win of Johnson & Johnson as a client. David Coman, Dendrite’s vice president for global marketing, says his company continues to have some of the strongest relationships within the pharmaceutical and life sciences industries. “We do business with all the top 20 pharmaceutical companies,” Coman says. Dendrite’s Web site lists 42 clients in the industry’s group.

“The combination [with Cegedim] is going to be a fantastic company with combined revenue of more than $1.1 billion, operating in more than 75 countries,” he says. “The merger will really enable the combined company to compete with some of the horizontal giants trying to come into our space.”

Pharma Marketing Blog: Are All Pharma Bloggers Biased Against the Industry?

By John Mack

Pharma Industry, Be Happy--Somebody Cares

By Lisa Conte

An Indian court case is once again pitting western pharmaceutical companies against the lives and health of poor people in the developing world. "Quarter of a million people urge Novartis to drop case against India," reads a January 29, 2007 press release from Doctors Without Borders.

Inflammatory headlines and angry NGOs anxious to bash big pharma proclaim that greed and inhumane practices are the pattern for the multi-national drug monopolies.

They remind us how Novartis sued Nelson Mandela in 1997 for signing a law that allowed South Africa to import cheaper HIV-fighting medications. These destructive battles are the predictable and unnecessary results of shortsighted pharmaceutical industry strategies in the developing world.

Big pharma's choice to argue for an overbroad interpretation of their patents make it easy to portray them as profiteers who restrict delivery of crucial medicines to the developing world. It doesn't have to be that way. Intellectual property rights and access to affordable medicines in less developed countries are not mutually exclusive.

Some background:

Why Bristol And Sanofi Shouldn't Merge

Pharmaceutical investors are enthused about the merger rumor du jour: the potential acquisition of New York drug maker Bristol-Myers Squibb by Paris-based Sanofi-Aventis. A French newsletter reported that the companies are in talks, while Bristol may have even hired bankers to scope out potential deals. Bristol-Myers shares have jumped nearly 10%.

In the long term, though, such a deal is probably a bad idea, one of those short-term fixes that has left drug companies scrambling to reinvigorate their research labs as fewer and fewer medicines actually make it to patients. It would be best for long-term investors and the drug industry if Bristol (nyse: BMY - news - people ) doesn't sell out.

Bristol and Sanofi chose not to comment for this story.

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If I Ran Pfizer

The industry is at a crossroads, and all eyes are on the world's largest drug maker. When Pfizer leads, others follow. So we asked: If you had that sort of influence, how would you steer Big Pharma?

By: Beth Herskovits

When Pfizer CEO Jeffrey Kindler took the podium in January and announced that the struggling company would scale back and restructure its operations, he did more than just signal the end of an era. He proved that to turn around Pfizer—and in a way, the industry at large—companies need to hack away the parts that just aren't working anymore.

Certainly, the reorganization plan of the world's largest drug company is ambitious. It involves streamlining operations under five newly created business umbrellas, ramping up communications with payers and patients, ending smothering sales tactics with physicians, and cutting the fat out of middle management. In every sense, it was swift and unforgiving—but observers were unimpressed.

"It's not even close to revolutionary; I wouldn't even say it's evolutionary. It's just stand-pat," said Bill Trombetta, professor of pharmaceutical marketing at St. Joseph's University in Philadelphia, who noted that GlaxoSmithKline and Merck have already undertaken similar strategies. "They're not doing anything that's different from what any company would do when its back is against the wall."

The moves were all practical. Unable to build a beanstalk from its magic bean torcetrapib, Pfizer had no choice but to scale down its infrastructure. But observers didn't believe that Pfizer's plan got at the heart of the industry's troubles: the costly and time-intensive R&D process, higher hurdles at FDA, ever-present risk of unforeseen adverse events, and the ticking clock on blockbuster patents.

Trombetta and others talk about the need for drug companies to think beyond their role as drug suppliers and become companies that offer a strategic advantage to their customers. They're certainly capable of doing so. After all, it was Pfizer, Trombetta noted, that worked with Florida's Medicaid program in 2004 to fund health education, triage services, bloodpressure cuffs, scales, and other personal health aids for people who couldn't otherwise afford them.

But the program wasn't institutionalized. "The drug industry is there to sell products—it hasn't been there as a source of strategic advantage," Trombetta said.

"The ramifications are all the way up the chain: from drug discovery to what business pharma companies are in. Are they in the drug business or the solution business?" said Steve Wunker, a partner at consulting firm Innosight. "That will be the hardest challenge for pharma to address. They're very good at innovation—in the sense that they're good at finding new molecules—but they're very bad at innovating what they do."

Mighty Pfizer sets the tone for the rest of pharma. But now, when all eyes were on the industry's role model, some observers believed company executives dropped the ball. They talked about innovating new products, but they didn't talk about innovating what they do.

So we asked observers, critics and supporters, to fill in the missing pieces. If they ran Pfizer—or more specifically, a Big Pharma company that wielded a similar position of influence—what model would they create? How would they tackle the issues facing the industry?

Here's what they had to say.

Bristol, Boehringer Sales Teams Rank 1st

Taken from Forbes:

Bristol-Myers Squibb Co. and Boehringer Ingelheim Corp. ranked best in a new survey that ranks the effectiveness of the drug industry's sales forces set to be released Tuesday.

Bristol-Myers has the most effective team for targeting specialists while Boehringer's representatives were rated best at reaching primary care doctors, according to a survey of more than 20,000 physicians conducted by TargetRx Inc., a consulting company specializing in pharmaceutical sales and marketing. The survey covered a total of 210 brands but doctors were only asked about products that had been marketed to them.

The size and expense of drug companies' sales forces has increasingly become an issue as numerous drug makers seek to cut costs as many struggle with patent expirations and consumers' resistance to pricey medicines. Last year, Pfizer Inc. announced it was cutting 20 percent of its U.S. sales force while last week Abbott Laboratories said it was laying off several hundred representatives as it absorbs its purchase of Kos Pharmaceuticals Inc.

An average sales person costs a pharmaceutical company about $200,000 including salary and benefits such as a car, said Mike Luby, president and CEO of TargetRx. He said that the challenging business environment means it is imperative for drug makers' sales forces are as effective as possible.

Luby said the survey asked doctors about numerous issues including the quality of the marketing materials, the representative's knowledge of the product, disease and appropriate patient population and whether the sales person's pitch was balanced and efficient.

Pfizer, the world's largest drug company which is widely considered among the best marketers in the business, ranked 12th among primary care doctors and eighth among specialists. In a statement, Pfizer said it had fared better in other surveys and that overall its sales force has consistently held high rankings from physicians in the areas of performance, professionalism and customer focus.

Forest Pharmaceuticals Inc., a subsidiary of Forest Laboratories Inc., ranked last of the 16 companies rated by primary care doctors while Merck & Co. was in the basement of the 18 drug makers measured by specialists.

In a statement, Tony Hooper, Bristol-Myers' President of U.S. Pharmaceuticals, said that the company works closely with physicians to ensure that they have the information needed to make informed decisions for patients and that it was constantly measuring, evaluating and correcting its sales approach.

Boehringer spokesman Mark Vincent said the company strives to hire high-quality individuals and arm them with good information to help physicians. A core component of the strategy is to ensure sales people understand the realities of physicians' life such as their time constraints and contracts with numerous managed care companies, so the representatives can be as sensitive and useful as possible.

Merck said in a statement said that it introduced five medicines and vaccines last year and that "the strong uptake of these new products is a stronger measure than any survey.

Forest Labs declined comment while Boehringer, a privately held German company, didn't have an immediate comment.