Big Pharma—Too Big To Fail?

Last month it was Pfizer who climbed into bed with Wyeth, and two weeks ago Merck got so cozy with Schering that the two became one— presumably till death do them part. Now it’s Roche who has taken over Genentech, although by all accounts this was more of a rape than a marriage. We’ve seen this scenario before in the financial setting when banking giant, Citigroup, took over Smith Barney back in those days of ancient history when both firms were actually making good money. We’re now told that Citigroup is too big to fail, so it’s natural to wonder if the newly bloated Pharma giants might not be positioning themselves to also be considered, “too big to fail.”

Following each takeover or merger, the well-orchestrated Pharma PR machines went into high gear, spinning out the usual PR-isms about achieving “synergies” and realizing “economies of scale,” but what have been the observable results? The first noticeable change came in doctor’s offices where the number of Pharma salespeople making sales calls fell off dramatically. My own personal physician would sometimes see as many as eight salespeople in a single day (most sales calls were two-minute sample drops). That was a year ago. Recently, the number has fallen off to one or two in an average day, and sometimes none at all. In the 1990s, many young people graduating college looked on Pharma sales as a worthy career aspiration, but today, many of those who realized their dream with a job selling pharmaceuticals have recently learned how fallen leaves probably feel in front of a leaf blower. The industry which once fielded over 100,000 sales people now has about one-third of that number.

None of this is particularly unsettling unless you’re making your living selling drugs. The problem for the greater society is that the research departments in companies like Pfizer are undergoing the same atrophy that’s been seen in the sales divisions. This means that potentially fewer new medications will come into the field of medicine, and even fewer existing drugs will undergo needed improvements. DTC marketing, however, remains robust and will only continue to grow, so look for Pharma advertising on TV to become even more abundant and glitzy as drug firms use this avenue to pump up sales and profits.

Merck Cuts 7,500 Jobs

Yesterday, drug giant, Merck, announced that it was cutting 7,500 jobs, and it’s a sure bet that most of those job eliminations will be in the sales positions. The unfortunate sales reps who lose those jobs will feel acute loss in their income and maybe even their lifestyle, but the brutal fact is that they will not be missed by either their company (Merck) or the physicians and the greater medical community.

Imagine yourself going to four different Walgreen drugstores just to purchase toothpaste, toilet paper, aspirin, and body lotion— because no single store can sell more than one item. That’s analogous to the relationship that has evolved between the doctors and the drug companies. By duplicating and triplicating the sales presence in every medical office and clinic, the drug companies reasoned that each doctor could be bombarded with three or four sales pitches from the same company in the time that it usually took to get in one good pitch. Each sales rep would sell just one or two drugs rather than having one rep sell six or seven drugs. But, like most big ideas that get spawned in upper management, the plan totally failed to consider the needs and wants of the customer. As a result, physicians simply stopped fielding sales pitches altogether.

My personal physician told me that she limits herself to seeing no more than eight sales reps in any single day. She averages about 25 per week, or 100 per month, but nearly all of those so-called “sales visits” are nothing more than sample drops lasting two or three minutes. Drug industry internal statistics show that the average pharmaceutical sales call results in less than five minutes with the prescribing physician. I retired from a job in pharmaceutical sales ten years ago, and back in the good old days my sales visits averaged 25 minutes, and I sold every drug in the company product portfolio. But now, Big Pharma with their manager-driven big idea has managed to alienate the medical community, and has pretty much made their sales force irrelevant to the product promotion process. That’s why companies like Merck can feel comfortable with 7,500 person layoffs.