Merck's Not-So-New Marketing Model

July 3, 2007

Pharmaceutical Executive

Volume 0, Issue 0

Or: No news is good news--for everyone but us reporters

Last week an item posted by Ed Silverman on his ever-interesting blog,Pharmalot, made us do a double take. "At week's end," Silverman e-wrote,"[Merck] will introduce a marketing shake-up and flesh out its 'NewCommercial Model.'" Reporting that sales reps were "bracing for teleconference calls," the 'Net newshound linked to a source indicating that the drug giant plans to cut its doc-promo spend by 9 percent.

This had us seeing a flurry of pink slips. Such a move would get a bear hug from Wall Street, which is chomping at the bit to see the rest of Big Pharma follow the lead of Pfizer CEO Jeff Kindler, who announced last December that he would slash the firm's storied sales force by 20 percent by next year.

But Merck spokeswoman Amy Rose wasn't having any of it. "Our 'New Commercial Model' won't be in place until 2010," Rose said, adding (most emphatically), "This is not a head-count reduction." As for following Pfizer, she pointed out that the blueprint for Merck's new model had gone live in 2005. (Uh, we clearly hadn't done our homework.)

Silverman's post suggested that Merck's model involves refocusingpromotional efforts around specific therapeutic areas--and away from theindustry "arms race" of 100,000 sales reps who have long since worn outtheir welcome at doctor's offices. True or false?

"Just adding sales reps is a broken model," Rose agreed.

Did that mean Merck was cutting its sales force?

"Our new model calls for an increased use of technology [and metrics], and it is much more customer-focused," Rose said. "Gauging the feedback of our customers is a core piece of our strategic direction." And that was that.

Indeed, Merck CEO Richard Clark, during his annual business briefing onDecember 12, had talked up the company's new commercial approach--though he, too, kept it vague. Clark did get specific, however, when discussing company cost cutting, including plans to trim head count by 7,000 in order to save up to $5 billion over the next five years.

"It sounds like Merck is rebalancing its portfolio, like Pfizer, Lilly,Wyeth and other big pharmas," said Michael Goodman, editor in chief of"Insight Pharma Reports," Cambridge Healthtech Institute. "The focus isincreasingly on niche and specialty diseases. But the new sales model willrequire understanding the world of the specialist."

Turning an army of perky primary-doc sales reps into savvy specialtymarketers will present Big Pharma with yet another interesting challenge.But Merck will be two steps closer to meeting it now that the firm's topmanagement is playing with a full team again. Last Friday, Pete Kellogg wasnamed new CFO. Kellogg boasts a diverse portfolio, having done stints atFrito-Lay and Arthur Andersen before jumping to pharma by way of Biogen,Inc., where he oversaw its merger with IDEC Pharmaceuticals in 2003. Hejoins David Anstice, the longtime Merck commercial exec who ran Europe, Asia, and the Americas before stepping up as new Interim Head of Global Human Health following Peter Loescher's exit.

In the end, Friday passed with no ax falling on Merck sales divisions. Hmm...why do we have pink slips on the brain?