In the Classroom
Marketing Pharmaceuticals: Has Competition Gone Too Far?

With the rise of direct-to-consumer (DTC) advertising and Internet communications, there are more channels than ever for pharmaceuticals marketing — but all of them are crowded. From the sales reps stacked up in doctors' waiting rooms like flights over O'Hare to the relentless stream of ads for drugs to treat depression or erectile dysfunction, the question naturally arises: Have marketing and sales gone too far?

Dr. Hans Rudolf Keller, head of sales at Novartis in Switzerland and a past participant in Wharton's Leading the Effective Sales Force program, points out that pharmaceuticals firms asked themselves the same question in the early 1990s. Many companies cut back on their sales forces at that time. One company went against the trend and kept expanding its sales force — and became the pharma giant Pfizer. The lesson wasn't lost on other firms. While some doctors or consumers may feel it is too much, the messages are still getting through. "Physicians do remember it, even if the average sales call is only about 3 minutes," Keller said.

Total sales reps in the United States have tripled since 1995, reaching more than 90,000. Not only are competing sales reps pitching products to treat the same diseases, but there are sometimes as many as three to five reps from the same company selling the same drugs to the same set of health care professionals. The idea of quintuple teaming is that certain reps may click with certain doctors better than others.

The Power and Perils of a Large Sales Force

"A large sales force allows companies to create barriers to entry and speed the launch of new products. It takes over $800 million to develop a new product," said Wharton Marketing Professor Jagmohan Raju, academic director of Wharton's Essentials of Marketing program and co-director of Pricing Strategies and Competitive Marketing Strategy programs. "Companies need to fully capitalize what they take to market, to create blockbusters." This involves super-careful positioning, speeding up the launch, and maintaining market share in the face of new entries. "Competitors now come within 1 year as opposed to 8 to 10 years."

In this arms race of building up sales forces, it would be hard for companies not to play. "My belief is that the first mover to increase sales force size gained some short-term benefit, but that was short-lived as competitors responded in kind," said Wharton Marketing Professor David Reibstein, academic co-director of Wharton's Competitive Marketing Strategy program. "The net effect has been that everyone has raised the size of the sales force, and as a result, the costs have gone up without the major benefits. It is a classic prisoners' dilemma. Some could argue the same will occur with DTC."

Why Competition Could Be Good for Viagra

For now, however, sometimes increased competition and advertising can have a positive impact by growing the market for everyone, said Reibstein. He argues, for example, that the launch of rival treatments for erectile dysfunction may actually be a good thing for first-mover Viagra.

"Viagra obviously has advertised and achieved a great level of awareness," Reibstein said. "Yet, they have only gotten some of the people who need Viagra to try it — it requires education and getting over a stigma. Now we have Levitra and Cialis, both heavily advertised. While it will most definitely cut into the market share of Viagra — the only way is down from 100% — it will also help with the education and stigma issue, thereby increasing the overall size of the market. Indeed, sometimes having competition is good, particularly if it helps increase primary demand."

Reibstein said he expected DTC to continue to increase. "I fully expect to see DTC to continue to grow as pharma companies continue to get positive sales results with increased spending," he said.

Rethinking the Sales Force

The intensity of competition and new technologies have changed how the sales force is staffed and managed, said Keller, who was a marketer for Novartis' hypertension drug Diovan in the U.S. before returning to Europe. Sales in the U.S. market have become much more sophisticated, with carefully targeted strategies for reaching physicians and assessing results.

Sales force managers, in addition to leading larger, more sophisticated sales teams, have many more options for organizing their strategy. They can rent sales reps from independent outsourcing firms or co-market their products with other pharmaceuticals companies. In addition to a team of physical reps, some sales forces include virtual reps who communicate with doctors through computer, either through recorded programs or real-time, one-to-one interactions. Sales force managers also have to keep an eye on shifting regulations. "The whole thing has become much more complex," Keller said.

The capabilities needed for successful sales reps are also changing. While emphasis in the past was placed on scientific background, today more reps come from sales backgrounds. With tighter competition and less time to speak with doctors, sales skills become increasingly important. The science can be learned.

While the number of reps in Europe is also growing, lower pricing in these tightly regulated markets has led to smaller sales forces than in the United States. Europe's privacy protections limit information that can be used by companies to direct their sales strategies, and DTC is prohibited. But this is changing, with new regulations coming on line to allow unbranded advertising about diseases without mentioning specific drugs.

More Complex Marketing Strategies

In addition to sales force management, other key concerns of marketing strategy include pricing, branding, managing new product launches, providing value to customers, and managing relationships with HMOs and other payors. Pricing is more complex, with local, regional, and global pricing. Similarly, the launch strategy can be global or sequential in different regions. "There is also careful thought being given to the value of the customer and building marketing strategies around that concept," Raju said.

Overall, marketing and sales continue to receive increasing attention at pharmaceuticals firms. "Companies are making investments in better positioning and pricing," Raju said.

   

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