Field Force Evolution: Adapting to a New Ecosystem

Sep 30, 2013

The ongoing changes, and challenges, to the way drug companies promote and sell products to their customers are too numerous to recount in one place. But there is one overarching factor that continues to influence every aspect of the decision-making process with respect to managing an effective professional sales operation: cost.

To win in the offline, outdated, and broken share-of-voice model, pharma companies needed to simply outspend the competition by putting more boots—or cap-toe oxfords and high heels—on the ground. If you had a physician's ear more often than someone else, market share consistently followed. Post patent-cliff, there are fewer resources to throw at professional promotion, and when money does talk, it's mostly the government that's listening. Physicians in general are less available to sales reps—less than half of the physicians surveyed by CMI/Compas recently said they'd see a sales rep in person without restrictions—and many have ceded the fundamental choice of which drug to prescribe to formulary committees overseeing networks of clinics and hospitals, where a growing number of physicians now practice medicine.

Like the US economy, the drug market seems to have turned a corner, with key indicators like the number of FDA approvals on the increase. But also like the US economy, external forces in the healthcare ecosystem are having unpredictable effects on the recovery. Outside of specialty companies in key therapeutic areas—like Novo Nordisk, Biogen Idec, and Gilead—most companies are experimenting with new ways to get more bang for their buck, while simultaneously promoting a culture of compliance. "The industry is in middle school right now, everybody is trying out new behaviors to figure out what works and what doesn't," says Matt Gurin, vice president, Hay Group. As the Hay Group finishes tabulating the results of its annual pharmaceutical sales force effectiveness study, a portion of which is devoted to compensation, Gurin says the reemergence of potential blockbuster products has some companies scrambling to ­retain the reps they still have.

Pay structure largely unchanged

Do you see pharmaceutical sales representatives in person?
Companies have downsized their sales forces so dramatically that managers ­believe the only reps left in the stable are the cream of the crop, and they don't want to lose them to competitors, says Gurin. As a result, there hasn't been much experimentation with compensation, at least outside of managed care (GSK notwithstanding, but that's another story). The longtime standard in terms of salary to bonus ratio has held at between 75/25 and 80/20 for salary/bonus, plus or minus five percent, says Gurin. Gerry Melillo, president of sales services at PDI, a contract sales firm, agrees that "most companies have not followed GSK" regarding that company's arm-twisted methodology for assessing sales reps and awarding bonuses. As for base salary, Melillo says the figure hovers between $65K and $75K per year. Bonuses—determined by the volume of product a rep successfully moves—typically run about 25 percent of total compensation, equal to between 30 percent and 35 percent of the base.

Andrew Ajello, SVP, national diabetes sales at Novo Nordisk, says he feels good about offering Novo reps a 75/25 salary to bonus split. "Reps hate what GSK did," says Ajello. "We hired all their good people." In addition to direct compensation, Ajello says Novo offers solid benefits and "awesome cars," the latter of which many younger generation reps find attractive. "We're unique in the cars," says Ajello, adding that while Novo is shifting toward a diabetes education and patient-management approach with physicians, the company is "still selling something, and if you do it right, you'll get a nice compensation based on the volumes that you generate."

Ajello notes that when Schering-Plough launched Claritin, in 1993, the company offered up a Dodge Viper to the top selling rep in the nation, and set compensation at 50/50, salary to bonus. In that kind of situation, "people are going to go overboard," says Ajello. (Novo's cars aren't bonus prizes—they come with the job.)

Among therapeutic areas, oncology reps are still the highest paid in general, and greater specialization usually commands a greater base salary, somewhere between $80K and $90K, says Melillo. For smaller pharma companies with only one or two products on the market, it's not uncommon for the salary base to be down around $55K per year, with another possible $25K or so in bonus. Then there's the recent college grad getting paid "thirty something thousand dollars a year just to go in and make sure there are samples in the office," says Melillo.