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NEW YORK (Reuters) - Does the pharmaceutical industry have too many sales reps?
It is an issue uppermost in the minds of companies grappling with an increasingly tough market; but industry executives at the Reuters Health Summit in New York this week said they would not be rushing into major cutbacks.
"Frankly, there are lots of other places in the company to trim expenses before you would turn to the sales force," said Hank McKinnell, chief executive of the world's biggest drug maker, Pfizer Inc..
His company reduced its previous 12,000-member U.S. sales force by some 500 earlier this year, in the face of declining revenues from top-selling painkiller Celebrex. But McKinnell said getting reps in front of doctors remained central to selling the "story" of a medicine.
Large sales forces are among drug companies' biggest costs, so it is no surprise they have come under the microscope at a time of slowing growth.
And there is no doubt companies are getting less bang for their buck than they once did, since overcrowding in the marketplace means the average duration of a rep call to a physician is now down around 1-1/2 minutes.
Many analysts blame the spiraling sales war on rival firms trying to out-gun each other in an "arms race" that generates no additional revenues for the industry as a whole.
But this is not the whole picture, according to Chris Viehbacher, head of U.S. operations at British-based GlaxoSmithKline Plc, the world's No. 2 drugs group.
He points to the example of Glaxo's asthma drug Advair, which faces no direct competition in the U.S. market yet is given large-scale rep support designed to educate doctors about new clinical data.
In a similar way, Merck & Co. Inc's first-in-class cervical cancer vaccine Gardasil will also require a heavyweight campaign to educate doctors and patients about a whole new approach to preventing disease, according to the president of the group's vaccines business, Margaret McGlynn.
In the long term, Viehbacher said Glaxo would like to spend a lot more on researching new medicines and a lot less on selling them -- but the shift won't happen overnight.
"My personal view is that the change will be incremental versus revolutionary," he said. "So far we haven't found a more effective way of educating physicians."
Part of Glaxo's gradualist approach is to try to get more out of its existing sales force, which is second only to Pfizer's in the United States, at around 9,000.
This year, for example, Viehbacher said Glaxo had decided to launch a clutch of new products without increasing sales force headcount, as would have happened in the past.
Long-term, the pressures on drug makers to sweat their marketing assets seems likely to grow, as the industry continues to adjust to a harsher era, following the heady 1990s.
According to Lehman Brothers, the industry as a whole now spends half as much again on selling its drugs as it does on researching them, with sales and marketing costs having risen to 25 percent of sales from around 20 percent in 1990.
Yet, over the same period, drug company sales growth has slowed from 10-15 percent a year to little more than 5 percent in major markets today, according to industry analysts.
The advent of new prescription drug benefit for U.S. Medicare beneficiaries in January next year could provide a further incentive for companies to cut their sales budgets if, as many fear, the new plan proves a net negative for revenues.