Don't Blame Kindler

Jeff Kindler has been CEO at Pfizer since mid-2006, and I think of him whenever I think about the next President of The United States. Kindler, like the person who will follow George W. Bush, took the helm from a predecessor who spent eight years at the top before leaving his situation as a mess for someone else to deal with. Jeff Kindler has shouldered much of the Wall Street blame for Pfizer’s stagnant stock value, but to those on the inside, it’s been evident for two years that he never really had a fighting chance.

Blame the wars. For Bush, it was Iraq. For Kindler, it was an out-of-control enlargement of the sales force (the army, if you want to call it that) which came as a flawed legacy from the man who preceded Kindler as Pfizer CEO. By the time Kindler took over at Pfizer, this pharma arms-race, characterized by escalating numbers of so-called, “detail people,” was destabilizing, not just Pfizer, but the entire pharma industry. But it’s worth noting in hindsight that Pfizer started it.

There are 1.4 million men and women practicing some form of medicine in the U.S. who are lawfully allowed to prescribe human pharmaceuticals. Some of these legal prescribers are dentists, some are part-timers, and some are retired. A few are actually dead, and their family members, for whatever reason, keep their DEA number active. The actual number of human physicians who write at least one prescription annually is something in the neighborhood of 900,000. This is the pool- the reservoir- of medical people that the pharma industry seeks to court. By the end of 2006, the total industry-wide number of “detail people” was 92,500. Do the math. That computes to more than one pharma salesperson for every 10 prescribers. That may not make sense to you, but in the earliest years of the 21st century, it made sense to the head of Pfizer. And when it stopped making sense, Jeff Kindler was the man left to deal with the fallout.

I’ve talked with physicians who tell me that- at the high point of the madness- it was not uncommon to see three different Pfizer salespeople each week. Other pharma companies joined the bandwagon and beefed-up their sales ranks as well. Pfizer’s total number topped-out at about 30,000. Merck and J&J were right behind, along with GSK and others.

Taking into account a nice salary, company car, expense account, healthcare benefits, and storage rental for space to hold the astronomical quantities of drug samples, it takes about $200,000 a year to keep a “detail person” in a territory. Add to that, the cost of the management hierarchy layered over the sales reps, and the production and supply costs for all those drug samples, and soon you’re talking about some real money in the marketing budget. To be honest, at the beginning, the strategy made a certain amount of sense. The late 1990s had seen an unbroken and timely string of blockbuster drugs entering the Pfizer product roster from an R&D department that seemed charmed in its ability to deliver the goods. Lipitor, Celebrex, Viagra, and other whoppers drove the Pfizer stock price to stratospheric heights in 2000 before the price, then, fell to half its value where it has languished for the past eight years. Added to the product cascade was a series of takeovers by Pfizer of other drug companies like Warner-Lambert and Pharmacia. These new Pfizer corporate acquisitions also meant new “acquired” products to feed the sales machine. At the top floor on 42nd street, the new strategy was to have multiple sales forces detailing different therapy classes. Hence, the tales from physicians about seeing three different Pfizer salespeople each week.

Shorty before Jeff Kindler took over the corner office, the once-prolific Pfizer R&D operation hit a number of dry holes and the new product flow slowed to a trickle. Behind this was a new, and less benevolent attitude at the FDA. The real setback, however, was a new, and less benevolent attitude in physicians’ offices. Quite simply, doctors got sick and tired of seeing so many salespeople. Today, a good detail person can get, on average, only five minutes of “face time” with the doctor. Most sales calls today are nothing but sample drops, and this activity hardly justifies the $200,000 annual investment in the sample dropper.

In 2006 and 2007, public opinion polls started showing that the pharmaceutical industry was held in the same low public esteem as the gun manufacturers and the tobacco companies. This is partly the result of constant battering from the U.S. Congress and the AARP. The 2005 movie, The Constant Gardener, didn’t help either. None of the blame for any of this rests with Jeff Kindler, but he is the one who seems to be taking the heat. One of his first moves as CEO was to begin cutting the number of salespeople, and it seems like, long term, it may have some benefit. On the whole, however, Kindler faces a situation analogous to the one faced by the next U.S. Commander-in Chief. He has to clean up the mess. And as for Kindler’s predecessor, he jumped off the top floor on 42nd street floating under a 200 million dollar golden parachute.