Pharmaceutical Companies Replace Sales Reps With Websites

Pharmaceutical sales representatives have been battered during the recession -- thousands were laid off by drugmakers hunting for ways to trim their budgets. But even if the economy recovers with a vengeance and dry drug pipelines suddenly fill up, don't expect pharmaceutical firms to go on a hiring binge.

That's because behind the scenes, pharmaceutical companies are experimenting and finding early successes with cheaper ways of peddling their products. Among them: Pitching doctors over the Internet through what is known as e-detailing, and using call centers to answer questions.

"There has been a real change in opinion about e-detailing," says David Richardson, research team leader at Cutting Edge Information, a market research firm. "Four years ago, maybe 5% of companies we interviewed had an interest in e-detailing. Now I would say more than 25% are trying it and starting to see some success with it."

Too Many Reps, Too Few New Drugs

It's easy to see why big pharma companies are looking for a new prescription for their ailing business model. For one thing, in a sort of drug industry arms race, companies in the 1990's and early part of this decade bulked up their sales forces dramatically. The result was that physicians would sometimes be pitched by four or five reps from the same company, multiple times a month. As doctors' offices became overwhelmed with reps, some restricted access by sales people or even locked them out entirely.

But in recent years, the drug industry's pipelines have dried up, leaving all those reps with fewer new medicines to plug. And as big companies like Merck and Pfizer digest major acquisitions, they are on the hook to deliver massive cost savings to Wall Street. According to SDI, a healthcare analytics and market research firm, the number of U.S. sales reps slid from about 94,300 in 2007 to about 78,800 in the first quarter of this year. And consulting firm ZS Associates predicts that figure will drop to 70,000 by 2012.

"The sales force is an easy place to cut," says Cutting Edge's Richardson. "Sales isn't the lone group being cut, but they are feeling the crunch."

That pain is leading to innovation. AstraZeneca (AZN) stopped almost all doctor calls by sales reps for its blockbuster heartburn drug Nexium last year, according to analyst reports, and instead opened a call center and Internet operation that provides samples and information to physicians. And, in an interview late last year, Johnson & Johnson (JNJ) executives revealed that their company would be shifting away from pitching to primary-care doctors in their offices and instead connect with those physicians over the web.

ZS Associates' Chris Wright, head of its U.S. pharmaceuticals practice, says the shift toward using the Internet and other technologies will happen gradually. But with a number of big drugs going off patent in the coming years, drugmakers will be looking for any way to cut their overhead. And as younger physicians who are more comfortable with Web-based communications take the place of older colleagues in the medical community, expect the trend away from deploying large numbers of sales reps to accelerate.