The Wall Street Journal | Ed Silverman
The pharmaceutical industry has shed thousands of sales representatives over the past decade, but drug makers continue to invest in hiring and training, albeit at rates that are only slightly higher than what was seen several years ago. The upshot is that the demise of these marketing stalwarts may have been exaggerated.
Among U.S. drug makers, the
annual cost per primary care rep ranges from $125,000 to $200,000, although
most companies allocate roughly $160,000, which is up from $150,000 back in
2005. The modest increase reflects less travel, fewer extravagant meetings and
lower costs for laptops and tablets, according to a recent report by Cutting
Edge Information, a market research firm.
The same factors helped temper
cost for reps who call on specialist physicians and hospitals, although the
averages were, not surprisingly, higher than for primary care reps. The average
cost for a specialty rep was $228,000, while the average annual cost for
hospital reps was $243,000, according to the report, which queried 61 drug and
seven device makers late last year.
Although the industry shed
40,000 reps between 2006 and early 2013, according to ZS Associates, a sales
consultant to drug makers, reps remain a primary vehicle to reach physicians
with product information. Drug makers increasingly use technology – from
emailing materials to informational webinars – to interact with physicians. But
reps continues to fill an important role in distributing medical research and
samples of products– a process known in the industry as “detailing.”
“The reps are still very much
needed to talk to physicians,” says Christie Shilling, a Cutting Edge research
analyst. “I think the ratio of reps to physicians is dropping from 4-to-1 to
nearly 1-to-1, and the nature of the interactions is going to change. Their
responsibilities are going to become more like relationship managers.”
Drilling down, the average
cost of making a sales call to a primary care physician, with samples, was
$210, compared with $178 without samples. But costs ranged from $50 to $500,
underscoring differences among therapeutic categories and medicines. To visit a
specialist, the average cost with samples was $285, but $267 without samples.
And the average cost of a hospital visit was $260, which fell to $228 without
samples.
Interestingly, an average of
only 10% of all interactions are spent using the Internet or mobile device to
host webinars or interact with physicians by email. The vast majority of
physician outreach efforts continue to be undertaken through traditional
methods – a face-to-face encounter with doctors. In any event, the average
annual investment in electronic methods is $1.96 million.
Overall, sales rep
compensation consumes a varying portion of budgets for sales efforts, ranging
anywhere from 30 percent to 70 percent. Samples, however, cost drug makers
between 2 percent and 6 percent of budgets, on average, while training for
newly hired sales reps cost between 5 percent and 8 percent. Specifically, the
average cost of training primary care sales reps is about $18,300, but $20,500
for specialty and nearly $21,900 for hospital reps.
But how much do reps make?
Compensation levels have largely remained unchanged in recent years. On average,
primary care reps make $96,000, while the highest-paid received $129,000.
Incentive pay made up about one-quarter of compensation, but high-performing
reps derived 30 percent from bonuses.
The average total compensation
for a U.S. primary care district manager was $142,000, and $168,000 for a
specialty sales manager, while district managers overseeing hospital reps
received $186,000 (this included device makers). For regional managers, the
average total compensation was between $180,000 and $250,000. Among those
overseeing primary care reps, the average compensation was $204,000, which
climbed to $220,000, for specialty regional managers and $229,000 for hospital
regional managers.