Pfizer to cut US sales force

London, Nov 29 | Updated: Nov 30 2006, 09:39am hrs
A pharmaceutical marketing arms race that has chewed up billions of dollars a year of potential industry profits seems to be coming to an end.

Rivals breathed easier on Wednesday after the worlds biggest drugmaker, Pfizer Inc, announced plans to cut its US sales force by about 20%, or some 2,200 jobs, in a move that may trigger similar cutbacks by others. The employment of a large sales force, among drug companies biggest costs, has come under scrutiny as sales slow and generic competition intensifies.

Smaller firms such as Wyeth and Bristol-Myers Squibb have already taken steps to retrench, but this is the first time that Pfizer, whose reps outnumber all comers, has wielded the knife in a significant way. It means other people will be able to take their foot off the accelerator, which is going to benefit the industry from a margins perspective across the piece, said Mike Ward, an analyst at Nomura Code Securities.

Shares in Europes leading drugmakers rallied, with GlaxoSmithKline Plc, the worlds second-biggest drug manufacturer, adding 2.5%, AstraZeneca Plc 2.1% and Sanofi-Aventis 1.5%.

One official with a top-five drugmaker said rivals would cheer the decision by new Pfizer chief executive Jeffrey Kindler, who took over in July. It would be great if we all cut our sales forces. This may be the start. You are not going to see everybody cut over the next couple of months, but over the coming 12 to 18 months that might well be the direction, said the official who wanted to remain unidentified. There is no doubt companies are getting less bang for their buck than they once did. Overcrowding in the marketplace means the average duration of a US reps call to a physician is now down to around 1-1/2 minutes.

The industry is looking hard at costs and margins and return on investment. The reality is the physician is not going to open his door to more reps, said Simon Friend, head of pharmaceuticals at PricewaterhouseCoopers. Several industry leaders in the past have publicly criticised the spiraling sales battle, in which rivals try to outgun each other in a fight that generates no additional revenue for the industry as a whole. Glaxo chief executive Jean-Pierre Garnier, for example, has argued that much of the money plowed into promotion would be better spent on research and development.

Reuters