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Pfizer cuts 2,200 US sales reps

Published on 01/12/06 at 11:37am

 

Pfizer has announced a cut of 20% to its US salesforce, a move it says will help it adapt to the changing market and also save money.

The move is likely to spark similar cutbacks across the industry, with reductions to Europe's field forces likely to follow suit in 2007.

Pfizer announced on 29 November that it is to slash 2,200 of its 11,000 US salesforce, the biggest ever reduction of this type in a major company, and a sign that pharma's business model is firmly moving away from mega-salesforces.

The move will almost certainly serve as a catalyst for other companies, in particular GSK and Sanofi-Aventis, the companies with the second and third biggest US salesforces.  There are a number of factors behind the shift in strategy. Across the industry, portfolios of products are already shifting towards specialist drugs aimed at hospital doctors, meanwhile the continual growth of salesforces has produced diminishing returns in recent years.

Finally, saturating the market with reps calling on doctors is also increasingly seen as costly and bad for relations with physicians.

Cutbacks made by other companies have so far been considerably less than the 20% announced by Pfizer, but this move in the US by pharma's leading company is certain to have repercussions throughout the industry.

Europe's salesforces are likely to see similar cuts in the near future, though Pfizer refused to confirm if it would replicate its US reductions in the UK and Europe.

A spokesman for Pfizer UK said: "At the moment, no such plans have been announced for Europe. As Pfizer has made known in the past, globally we are looking to organise all aspects of our operations to most effectively meet the needs of our customers in todays challenging environment."

The spokesman indicated that a fuller statement concerning Europe's salesforces would be made in the near future.

Pfizer announced in mid-October that it planned to undertake a comprehensive review of every aspect of its global operations to make them more efficient.

Last year, Pfizer announced it was making cost cuts of $4 billion over three years in an attempt to return to double-digit earnings growth, but at the time its huge salesforce escaped a predicted cull.

Instead, it found savings across its business, from streamlining procurement, administration and manufacturing, as well as partly re-organising its salesforce and squeezing greater efficiency from its R&D operations.

Analysts expect Pfizer to save $440 million from the move, although it will still retain a large US salesforce.

Investors have been keen to see cuts in major drug companies salesforces for some time because they cost so much money to maintain.

Many analysts have described the retention of large salesforces as a stumbling block to new ways of marketing drugs, and Pfizer has stressed that these cuts will not affect its ability to sell its key drugs.

Jeffrey Kindler, Pfizers chief executive, said:"These changes are an important step towards making the company more agile and effective. Our field force will now be in a much better position to adapt to changes in our product mix and capitalise on the growth opportunities we see for our innovative medicines."

Overall, in the UK pharma industry, there are between 10-12,000 field-based reps, around 30% of whom are outsourced.

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