Top 5 Reasons Why Big Pharmaceutical Companies are Failing: An Inside Perspective

The Wall Street Journal recently reported how drug companies are using cues taken from Disney to improve lagging sales.  I usually do not write opinion articles, but having worked as a pharmaceutical representative for 15 years, I witnessed a lot of mistakes in the industry that I believe should be uncovered.  While high pressured sales pitches may be causing some of the problems facing Big Pharma, there were plenty of other issues that I experienced.

  1. Too Many Reps – The biggest problem I saw was the number of sales representatives hired.  When I began selling pharmaceuticals in 1985, I had my own territory.  It consisted of several zip codes.  My job was to call on doctors within those zip codes once a month.  In that sales call, I presented information about my drug.  As time went by, leadership decided that if one person could do so well calling on doctors, having two people delivering the same message would just improve sales.  They began to think it was inspired to just double the amount of reps.  By the time I left in 2002, there were eight of us in my territory all delivering the same message to the same doctors.  It is no wonder that doctors began to stop seeing reps.  Doctors were tired of being overwhelmed by the same information.  While it may sound bad that a company like AstraZeneca is laying off 24% of its sales staff, perhaps it is important to realize that they may have had too many sales reps in the first place.
  2. Rewarding Mediocrity – The commission structure was set up in way that did not inspire motivation.  My company set up forecasts so that reps would attain around 105% of projections.  If a representative came in at 100%, the next year, their forecast would be decreased.  If the representative came in at 120%, the next year, their forecast would be increased.  There was no real incentive to do well, because it would catch up in the next cycle. Reps also were paid most of their income as a base salary.  Commissions were a smaller part of their income.  In the Wall Street Journal article, it mentioned that companies are now considering changing the way they pay commissions.  In the past, commissions were based on number of sales.  Companies like Glaxo are now considering basing commissions on physician satisfaction.  Now that I am just a patient and not a rep, I would rather a doctor wrote me a prescription for a drug because it is the best drug and not because they are satisfied with a drug rep’s performance.
  3. Lack of Control – A pharmaceutical rep either sold a drug that was or was not on a formulary.  A formulary is the list of medications an insurance company will pay for if a doctor prescribes it.  If the drug he or she sold was on the insurance company’s formulary that the doctor used, then the rep had a fighting chance of convincing the doctor to prescribe the medication.  If not, the rep had little effect because patients would not be willing to pay cash for their prescriptions.  The reps had no control over getting drugs on the formularies.  That was someone else’s job.  The lack of control led to low sales and poor performance.
  4. Training not Realistic – Pharmaceutical reps go through intense training before entering the field.  In that training, they are taught sales scripts.  These scripts were things they should say when they were in the doctors’ offices.  When a rep would get out into the field, they quickly saw that the training was not realistic.  They did not have the kind of time to say the kinds of things they were taught.  Doctors were too busy.  My boss basically told me to forget everything they taught me and just be conversational.  This is interesting to me now that the Wall Street Journal article claims that this style is now being embraced by Lilly.
  5. Doctors’ Preferences – Like it or not, many of the reasons people are given the medications are due to doctors’ friendships with and preferences for their reps.  I had a doctor tell me that he wrote a medication for a rep he hated just because he saw him so much it was “just in his mind” to do so.  He did not choose the drug because it was better.  The Wall Street Journal article explained that a psychiatrist deliberately wrote for a competitive product just because he did not like the rep.  It was disturbing to me to see the reasons why a doctor prescribed what they prescribed.  It usually was based on familiarity and friendship rather than anything else.

I was fortunate that I was successful in my 15 years as a pharmaceutical rep.  I was a multiple winner of their coveted “Presidents Circle of Sales” award. However, some of my success was based on luck.  If my drug was on a formulary, it made my job a lot easier.  Now that I am a Professor of Business, I see many problems with their business model.  It may have worked for a while, but over time, there have been cracks in a less than solid foundation.

I believe that a lot of the problem in that industry is due to the lack of time doctors put forth in terms of researching their medications.  I have witnessed a lot of scary things that doctors have done over the years.  I witnessed a lot of doctors who only obtained information about medications based on a sales pitch.  I would rather have a well-informed doctor that has done his research prescribe my medication, than a physician who liked the lunch or “performance” delivered by the rep that was just in his office before I arrived for my appointment.

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