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It has become an industry joke that doctors are so busy fending off salespeople that they no longer have time to treat their patients.
If you think this sounds a Mad way to run a healthcare business, you would be right. On some estimates, only 20% of sales visits result in a drug company rep seeing a doctor. It is a hugely wasteful process, and one that alienates the medical profession as much as it encourages the adoption of new therapies.
Some pharmaceutical bosses, including Sir Tom McKillop of Astra Zeneca, have for some time recognised that the drug companies have to reform their businesses. But having assembled their armies of sales reps, no company wants to be the first to stand down its troops.
Last week, it finally seemed as though this impasse might soon be broken: Pfizer confirmed it is conducting a review to seek “better efficiencies and streamlined decision making”.
An analyst at Lehman Brothers suggested Pfizer might be considering laying off up to 11,000 of its 38,000-strong sales force.
More than any other company, Pfizer epitomises the proliferation of marketing reps that has taken place since the late 1990s. The American company is the world’s biggest pharmaceutical group. Since the launch of Viagra in 1998, Pfizer has become renowned more for its marketing muscle than for its record of innovation.
Along with Britain’s Glaxo Smith Kline, Pfizer sought to establish itself as the marketing partner of choice — the company to which smaller drug developers would license their most promising products.
Although the industry spends billions developing new drugs, it spends even more on sales and promotion. In recent years, in America this has included the “direct-to-consumer” advertising of blockbuster products.
Martin Hall, analyst at the Eden Group, said such advertising has contributed to the industry’s problems by encouraging less discriminating use of new (and therefore risky) medicines. It has also raised the public profile of companies, making them bigger targets for liability claims if side-effects emerge.
Merck, another big American drug maker, is facing claims of $20 billion or more over health problems related to Vioxx, the blockbuster arthritis medicine withdrawn last autumn.
JP Garnier, the GSK chief executive, is under less pressure to take an axe to his salesforce because, after a long fallow period, the company hopes to launch six new products this year. These include Vesicare for over-active bladders, Rotarix for the prevention of infant gastroenteritis, Boniva for osteoporosis and Requip for restless leg syndrome.
With the industry under such pressure, City chatter is again suggesting that GSK should acquire Astra Zeneca. While not ruling it out, Garnier said: “Right now, our priority is to do the smart things to develop a promising pipeline. Astra Zeneca would be a large transaction. Any such large transaction is potentially disrupting.”
Recent history suggests that, for drug companies, R&D is a much better source of share-price growth than takeovers.
Since 1998, Pfizer has acquired two of its top 20 rivals, Warner-Lambert and Pharmacia. Yet its shares are still at about $25, half the peak they touched in the wake of the launch of Viagra.
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