Sales Slip - Pharmaceutical Executive

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Sales Slip
Even before Pfizer blinked, companies were asking, "What ails sales?" In this annual survey, 50-plus pharmas and biotechs answer the hard questions about reps' productivity, profitability, and what to do about it.


Pharmaceutical Executive


Sales Staffing: And the Beat Goes On

Growth in overall sales-force size is far from grinding to a halt. While 63 percent of the companies surveyed anticipated no change in their staffing levels through 2006, a quarter anticipated some growth. Interestingly, all of the biotech companies reported that they intended to make little or no change in their sales-force staffing (see "Not-So-Great Expectations,").

Launch activity, the main driver of sales-force rampups, has been steady: More than 60 percent of companies in the study pitched a new product in 2006, and the same number expect to launch one or more this year. Of course, Pfizer's recent rock-our-world reversals—the downsizing of its sales force and the failure of its blockbuster-to-be, torceptrapib—likely portends greater shifts in the near future. The drug giant's cuts are expected to give other companies the impetus to lessen their emphasis on the "bombardment" model of selling, resulting in fewer PCP reps industry-wide.


Not-So-Great Expectations
At the same time, as previously mentioned, products aimed at specialists are playing a larger role in companies' portfolios, and companies will need appropriately-trained reps to sell these drugs. And more than half of all companies planned to step up their managed-care workforce to accommodate the influx of Medicare-eligible consumers and the increasing clout of managed-care organizations in the prescribing marketplace.

One fortunate consequence of a somewhat slower job market is that tenure levels are increasing. Companies report that more than 60 percent of their sales reps and about 80 percent of their first-level sales managers have at least two years of relevant experience. This is a big jump over previous years when as many as 40 percent of managers had less than 18 months of sales under their belt.

Even though 30 percent of companies have what they believe to be an effective process in place for retaining high-potential sellers, voluntary turnover remains at about 15 percent for PCP and specialty reps. Such fluidity is costly: The average "hard cost" to recruit and hire an entry-level rep is approximately $84,600—an expense the industry absorbed to the tune of over $1 billion last year.

Curiously, voluntary turnover for regional and national account managers rose to 11 percent, from six and seven percent, respectively, in 2005. This may reflect the intense pressure on these positions—this is where real selling (as opposed to merchandising) takes place. It also indicates that the competitive market for these positions is heating up, as the roles continue to grow in importance. To expand the candidate pool, companies are increasingly willing to hire sales reps without pharmaceutical experience (56 percent compared with 40 percent in 2005).

Base Salary: The Easy Part

For reps, selling pharmaceuticals still has an edge over selling widgets. The median base salary for all drug reps was $68,600 in 2006 (up from $66,300 in 2005), which compares favorably to $59,800 for reps in other industries. PCP reps averaged $61,910 in base salary, with specialty reps and hospital reps earning an average of $73,890 and $83,530, respectively (see "Comparing Comps," right).


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Source: Pharmaceutical Executive,
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