Are More Rent-A-Reps On The Way?

That's what Deutsche Bank analyst Barbara Ryan suggests in an investor note after digesting the news that Pfizer is cutting about 2,400 sales reps, or roughly one-third of its sales force, as part of its ongoing downsizing.

In her view, tapping contract sales organizations makes sense, since revenues now follow a "cyclical pattern surrounding patent expirations" and most US drugmakers will lose more than 25 percent of their revenue base during this upcoming period. The answer? A new model, of sorts, that involves moving from a fixed cost to a variable cost base in order to maintain margins.

How would it work? A mix-and-match approach that calls for augmenting a drugmaker's best salespeople with a CSO. "Mature brands will be managed by less costly outsourced sales forces, which could cost as much as 25 percent less, which can be pulled before patent expirations," she writes.

Of course, such gambits are already under way. Ryan, in fact, points out that Merck tried this a few months ago by signing a deal with InVentiv Health to market Cozaar and Hyzaar just as the drugmaker axed 1,200 sales reps. These sorts of efforts, by the way, were foreshadowed in an IN VIVO article in 2006:

"The drug industry has accepted the need to outsource R&D--now, with sales productivity down, and the rising cost and risk of owning too much commercial infrastructure, why not outsource more of the sales effort, too? Big and small pharmas resist the idea but will eventually have to accept it."

And since then, the need for a new model has been hastened by a few familiar factors - more product recalls, fewer product approvals and ongoing complaints from some physicians about the number and effectiveness of reps walking through their doors. The bright side? This is one job that can't be outsourced overseas.

image from flickr user 'Howdy, I'm Michael Karshis' used under a creative commons license