Like a giant steam vent on a pressure cooker, the law of supply and demand has finally relieved the pressure pharmaceutical
companies have felt for the past 10 years from ongoing pay inflation. Enough large pharma companies are downsizing their primary
care sales force that it is now becoming an employers' market for qualified primary care reps.
For the first time in more than a decade, the sales force "arms race" has halted. Salaries appear to be leveling off, and
pay practices are likely to be less aggressive in the immediate future. If this trend continues, it will have a ripple effect
on hiring practices and pay structures. Companies will have the luxury of attracting talent in an environment with lower pay
inflation and of choosing from more qualified candidates.
These were some of the findings of the Hay Group's 17th Annual Sales Force Effectiveness Study. (See "About the Survey," left.) However, not all companies—and not all positions in sales and marketing—are experiencing the same loss of prominence as
Big Pharma's PCP field reps. In particular, Big, pharma is rethinking its sales force structure and investing in areas like
managed care and national account management, which can have a greater impact on sales.
All these changes show that the pharmaceutical industry recognizes it's living in a new world—but that a tightening of the
belt, when it comes to sales forces, may be just what the doctor ordered.
Hiring: On the Downhill Slope
For the first time in more than a decade, the pharma industry has halted its sales force expansion. In 2007, thousands of
reps were hit with pink slips in a much-publicized spate of downsizing.
Of the Big Pharma companies responding to the Hay Group survey, 17 percent have decreased their sales staff by more than 15
percent. This precipitous drop is particularly telling because launch activity—the main driver of sales force ramp-ups—has
been steady for the past five years. These major layoffs from Pfizer, AstraZeneca, and others made headlines and indicate
major shifts within the industry. But they don't tell the whole story.
Half of all Big Pharma companies reported no significant change at all in the size of their sales force. This is somewhat
a function of product pipeline and somewhat related to their focus on specialty products. Meanwhile, if one looks across the
spectrum of company types, there are still pockets of growth. Half of all Hay Group survey respondents increased the size
of their sales force by 6 percent or more in the past year. The highest growth rate (22 percent) was among hospital sales
reps, reflecting the continued emphasis on reaching larger provider groups and specialty products. (See "Expansion Slows,")
As is expected in a climate of major layoffs, the rates of voluntary turnover—when the employee decides to terminate his employment
by a company—have also declined. Voluntary turnover was 12 percent in 2007, compared with 15 percent in 2006. This is, however,
still a bit higher than the 10 percent we see in sales positions in other industries. The most movement is typically among
PCP reps, but interestingly, for the first time, voluntary turnover among PCP reps, hospital reps, and specialty reps was
the same. Hospital and specialty reps have begun gravitating toward smaller or midsize companies with more robust pipelines.
We are seeing that many of these reps are willing to accept lower pay in exchange for perceived greater job security—a big
concern, given that only 17 percent of Big Pharma companies anticipate growth in the next 12 months.