FacebookTwitterGoogle+RedditEmail

Pfizer’s Shell Game

So the news is finally out, after months of speculation. Pfizer, the #1 drug company which started the arms race among pharmaceutical sales forces, is finally cutting back.

And they’re not cutting back lightly. 20% reduction is a huge change when it comes to the 11,000 sales people they have on board. Most doctors, however, probably won’t miss those displaced sales reps, since Pfizer also pioneered having multiple sales forces calling on the same doctor. So I guess the cutback means those docs will only get bagels once a day in the future.

And while this is a sad development for the people involved, it probably isn’t a bad development for patients. Less sales people means less hype. But let’s get real. 2,000 more or less sales people among around 100,000 in the entire sector isn’t going to make much of a difference.

The real difference may be that for the first time Pfizer is changing course, and since many of the smaller companies are simply trying to mimic what Pfizer is doing, they will feel they have the permission to do the same.

So careful disarmament appears to be underway in the drug business.

And here’s the part you may not read anywhere else, since most journalists really don’t know how a cutback such as this one affects a drug company.

The truth is, it doesn’t; not much anyway.

Here’s the deal. I’ve reviewed lots of sales force models, sales force restructuring scenarios, etc. And based on all the data we had, we found not only that more sales reps give a diminishing return, but we also found something else, which we didn’t expect.

We learned that before that diminishing return hits home, there is a very wide flat area. What that means is that each new rep pretty much paid for himself; but he didn’t add much incremental revenue.

So the good news was that you didn’t have to be a rocket scientist when you organized a pharma sales force. A few thousand more or less really doesn’t make much of a difference. In the end, whichever size was used, they brought home about the same profit.

So why is Pfizer doing this?

For those of you who don’t know, Pfizer is trying to achieve annual savings of $4 billion by 2008.

2000 reps, with a salary cost of $100,000, plus car and a few other costs, probably no more than a total of $200,000 brings in a saving of about $400 million a year. That’s not exactly chicken shit, but it is less than 1% of Pfizer revenue and only about 3% of profit.

No major celebration from Wall Street in sight based on those cutbacks.

So, again, why is Pfizer doing this and why now?

Simple.

On Thursday, November 30, 2006 at 10:00 AM EST, Pfizer will hold its 2006 Analyst Meeting. And they probably don’t have terrific news. So they want to show they can be tough. Instill confidence in the Wall Street types.

And that’s the reason they do this now.

After all, when Pfizer’s biggest new product, torcetrapib, which reduces cholesterol, turns out to actually raise blood pressure, well, then a mass-firing of sales reps may detract some of the attention from Pfizer’s dry pipeline.

But there is more. When we look back at the drug industry, ten years from now, we will probably recognize that this was the turning point, when an entire industry started seriously contracting. So if you own drug company stocks, watch out. The worst may yet come.

Peter Rost, M.D., is a former Vice President of Pfizer. He became well known in 2004 when he emerged as the first drug company executive to speak out in favor of reimportation of drugs. He is the author of “The Whistleblower, Confessions of a Healthcare Hitman.” See: http://the-whistleblower-by-peter-rost.blogspot.com/

 

 

More articles by:
Weekend Edition
August 17, 2018
Friday - Sunday
Nick Pemberton
Donald Trump and the Rise of Patriotism 
CJ Hopkins
Where Have All the Nazis Gone?
Joseph Natoli
First Amendment Rights and the Court of Popular Opinion
Andrew Levine
Midterms 2018: What’s There to Hope For?
Jeffrey St. Clair
Roaming Charges: Running Out of Fools
Ajamu Baraka
Opposing Bipartisan Warmongering is Defending Human Rights of the Poor and Working Class
Paul Street
Corporate Media: the Enemy of the People
David Macaray
Trump and the Sex Tape
Daniel Falcone
The Future of NATO: an Interview With Richard Falk
Robert Hunziker
Hothouse Earth
Cesar Chelala
The Historic Responsibility of the Catholic Church
Ron Jacobs
The Barbarism of US Immigration Policy
Kenneth Surin
In Shanghai
William Camacaro - Frederick B. Mills
The Military Option Against Venezuela in the “Year of the Americas”
Nancy Kurshan
The Whole World Was Watching: Chicago ’68, Revisited
Robert Fantina
Yemeni and Palestinian Children
Alexandra Isfahani-Hammond
Orcas and Other-Than-Human Grief
Shoshana Fine – Thomas Lindemann
Migrants Deaths: European Democracies and the Right to Not Protect?
Paul Edwards
Totally Irrusianal
Thomas Knapp
Murphy’s Law: Big Tech Must Serve as Censorship Subcontractors
Mark Ashwill
More Demons Unleashed After Fulbright University Vietnam Official Drops Rhetorical Bombshells
Ralph Nader
Going Fundamental Eludes Congressional Progressives
Hans-Armin Ohlmann
My Longest Day: How World War II Ended for My Family
Matthew Funke
The Nordic Countries Aren’t Socialist
Daniel Warner
Tiger Woods, Donald Trump and Crime and Punishment
Dave Lindorff
Mainstream Media Hypocrisy on Display
Jeff Cohen
Democrats Gather in Chicago: Elite Party or Party of the People?
Victor Grossman
Stand Up With New Hope in Germany?
Christopher Brauchli
A Family Affair
Jill Richardson
Profiting From Poison
Patrick Bobilin
Moving the Margins
Alison Barros
Dear White American
Celia Bottger
If Ireland Can Reject Fossil Fuels, Your Town Can Too
Ian Scott Horst
Less Voting, More Revolution
Peter Certo
Trump Snubbed McCain, Then the Media Snubbed the Rest of Us
Dan Ritzman
Drilling ANWR: One of Our Last Links to the Wild World is in Danger
Brandon Do
The World and Palestine, Palestine and the World
Negin Owliaei
Toys R Us May be Gone, But Its Workers’ Struggle Continues
Chris Wright
An Updated and Improved Marxism
Daryan Rezazad
Iran and the Doomsday Machine
Patrick Bond
Africa’s Pioneering Marxist Political Economist, Samir Amin (1931-2018)
Louis Proyect
Memoir From the Underground
Binoy Kampmark
Meaningless Titles and Liveable Cities: Melbourne Loses to Vienna
Andrew Stewart
Blackkklansman: Spike Lee Delivers a Masterpiece
Elizabeth Lennard
Alan Chadwick in the Budding Grove: Story Summary for a Documentary Film
FacebookTwitterGoogle+RedditEmail