Are Sales Representatives still relevant in today’s turbulent pharmaceutical industry environment? This is a question that, although it may seem a little out of place now, will become more scrutinized over the next few years.

The pharmaceutical industry faces a number of key resistors to growth, including the impending 2011 “patent cliff” set to erode some $78 billion in branded sales from drugs whose patents expire between 2010 and 2014. In addition, there will be $32 billion lost due to the continued erosion of already expired brands. These are big numbers. The priority for pharma is to ensure the successful navigation of this new landscape to maintain current growth rates.

While the imminent erosion of sales will no doubt be a major headache for the industry, many payers will be jumping for joy. Payers can expect to make savings of $44 billion in the US and $5 billion in the five European markets as generic prices take the bottom out of the branded market.

Companies can no longer expect that expensive drugs providing marginal benefit will be reimbursed at historically high prices. In response to this, there will be a transition from primary care drugs to the more specialist secondary care portfolios.

The planned launches of these new drugs will not, however, escape the attention of the payers. Competition for reimbursement will intensify given the high price points of these specialist/orphan indication drugs.

While globalization and expansion into newer markets is an additional strategy that will aid in successful navigation, the strategies most pertinent to the traditional pharmaceutical sales force are the cost containment strategies being implemented by large and mid-size pharma.

These cost containment strategies are encapsulated by the reduction seen in Research and Development spending and, hence, the increased focus on in-licensing. In addition, “mega mergers” have been a recent strategy to cut costs, grow sales, and ultimately boost profits. Roche/ Genentech and Merck/Schering are the most recent examples.

With the global economic downturn dominating headlines over the last couple of years, the negative press that would normally be associated with the 67,000 employees laid off across just 10 companies has escaped the attention of the media. Of this number, sales teams assigned to promote expired or soon-to-expire blockbuster drugs took the brunt of the hit.

So, is this just a small indication of things to come or will we see a reversal in this approach to cost cutting? The signs unfortunately seem to indicate a continuation of this trend. With the reduction in primary care type drugs, the focus will be on smaller sales teams with increased responsibility.

In order to remain competitive, the Sales Representatives of the future will have to have greater clinical knowledge as they get to grip with the complexity of rare diseases and oncology drugs, in addition to a solid understanding and articulation of health economics so that they can have credible discussions with the local payers.

The answer to the question, “Are Sales Representatives still relevant?” is, therefore, not straightforward and the relevancy of Representatives to the industry will very much depend on their skill sets and responses to change.

It is, therefore, the responsibility of both the pharma industry and the individual Representatives to ensure that they are not left behind and appropriate training is provided and/or sought in order to maintain a competitive edge.

Those who doubt the importance of the Representatives to the future success of the industry should not forget that one of the reasons the “patent cliff” is so high is the tremendous contribution that Sales Representatives have made over the last 10 years!

Industry giants are facing major new challenges as patents run out on many of the drugs that have kept them in clover the past two decades.

Lipitor® is one of the biggest selling prescription drugs in the world. It is produced by the giant pharmaceutical company Pfizer and has revolutionized the treatment of patients with high cholesterol.

In 2009, Lipitor® topped the best-selling prescription drug charts, generating $5.7 billion in sales in the U.S. and an additional $5.7 billion outside the U.S. It is what is known in the industry as a classic “blockbuster drug.”

The problem for Pfizer is that next year, the patent to exclusively produce and sell Lipitor® expires. This “coming-off-patent” process will allow other companies to produce and sell generic copies of Lipitor®, and it will take a hatchet to Pfizer’s revenue stream from the drug.

But the real issue for the sector is that Lipitor® marks the start of a coming avalanche of expiring patents of blockbuster drugs over the next few years, known colloquially as the “patent cliff.”

Some estimate that, over the next five years, drugs currently generating $142 billion in sales annually will lose patent protection. Leading pharmaceutical companies will lose between 14 and 41 percent of their existing revenues because of patent expiries. And, despite record levels in research and development, there appears to be few similar blockbuster drugs in the pipeline to plug the gaping revenue hole.

The sector is preoccupied with its own evolution, and, as this analysis shows, the challenges, and potential risks and rewards are immense. The “patent cliff” is the chief challenge facing the industry. Patents can sometimes be extended by making slight changes to the chemical composition through a process called “evergreening.”

The number of new medicines is at an all-time low and is as low as it has been since World War II. However, some analysts argue that the search for new blockbuster drugs is just not a good value for the money.

Discovering new drugs is not the only answer for the sector as there are new frontiers opening in emerging markets such as China, Brazil, India, Russia, and Turkey. These markets could produce revenue which could be equal to the revenue lost from drugs coming off patent.

One half of the merger and acquisition dollars that have gone into acquiring companies has been in the emerging markets sector. Many of these companies that previously focused on branded products are looking to tap into the growing generic drugs market by setting up their own generic-drug producing and licensing arms to market their own “branded generics.”

As budgets are cut and health-care reform gets underway, many are buying or recommending only drugs that have a proven record and are cost-effective. The “payer-agenda” is much more powerful now than ever before, and the industry has to participate in the debate and demonstrate the value of its products.

At $518 billion, the size of the pharmaceutical industry is still significant. It could grow to between $800 billion and $1.3 trillion by 2020. The “grey factor” boosts the need for medicines dramatically. Global census figures suggest that four in five people aged over 65 take at least one prescription product, while more than a third take four drugs or more.

As each company works to redefine its own product portfolio, demographics is the elixir the industry has in its own medicine chest to help nourish its growth as it moves forward.

What three trends are most important to pharma these days? Generics, emerging markets and personalized medicine, according to the Harvard Business Review (HBR).

Branded generics are the wave of Big Pharma’s future. These are branded versions of off-patent meds sell at higher prices than regular generics do, but are cheaper than the branded meds themselves. They give a measure of assurance to patients worried about counterfeit meds, and to those concerned that unbranded generics don’t work as well as their branded counterparts. They also offer drug makers a niche in emerging countries.

That leads us to the second trend: Emerging – markets growth is a “beacon of hope” for the drug industry. With India and China growing so quickly, everybody who’s anybody in pharma is seeking a piece of that business. But there are pitfalls, including pricing pressure (hence branded generics), and the fact that drugs developed in mature markets sometimes aren’t “relevant” in emerging countries. Furthermore, insurance and payment systems are different in those nations, something that might be a problem (or an opportunity).

Finally, personalized medicine: Gene testing has identified cancer patients who are most likely to respond to certain drugs. As pharma targets drugs more tightly, it will change their economic model, HBR argues. Marketing will have to become highly specialized. Some companies might abandon vertical integration and focus instead on a few core areas such as drug discovery or development. And all will have to get more involved in diagnostics, one way or another.

By understanding who the target patients are based on their genetic data, pharmaceutical firms can anticipate who their ideal subjects for the new compound are. This could reduce the substantial development time of clinical trials and result in lower development costs. A technology disruption such as personalized medicine could very well become the driver of widespread industry transformation.

It is just a matter of time before all three initiatives are out of the starting gate and picking the right strategy will set apart the winners from the losers.

Healthcare reform and the mandate for insurance coverage for all US citizens would appear to represent new growth opportunities for the pharmaceutical industry. This can be true for the companies that begin to adapt to the realities of this evolving new healthcare market. Nothing in the current legislation seems to be dramatically different than what has been discussed and debated now for months … no surprises! Also, keep in mind, the plan will take about four years to unfold and become a reality. That doesn’t mean pharmaceutical companies can or should wait. In fact, the evolving new market will mean significant changes will be necessary to the traditional pharmaceutical business model which will also take time for companies to implement and execute.

Despite the upsides of potentially having more than 32 million new prescription drug customers, the closing of the “doughnut hole” for seniors that will increase the prescription refill rate, and the 12-year “exclusivity window” to sell biologic medicines, here are some implications the industry must prepare for:

• The market for prescription drugs will progressively change from healthcare providers and patients to payers, insurers, and managed plans.
• Payers (insurance companies and government programs) will have to become increasingly cost-conscious to ensure sustainable affordability.
• Generic drugs will become the work horses for drug plans, including being used in place of branded products that fail to demonstrate meaningful clinical benefits over generic drug options.
• There will be tremendous cost-savings incentives for the market to push for and demand a clear regulatory pathway for generic biologics.
• To secure premium pricing, newly launched branded medicines will have to meet an even higher standard for proving their value over other therapeutic options, including generic drugs.
• Information technology, including e-prescribing, will be employed to a much greater extent to help manage compliance and costs.
• Traditional Sales and Marketing will have less influence on product availability at the drug plan level and even less influence on physician prescribing practices which ultimately may result in more Sales Representative layoffs.

Overall, drug makers fare well and the approval of these provisions in the legislation is likely to be applauded by Wall Street and could benefit the stocks of drug makers in the long term.

By Ken Luchansky

Drug makers are starting to collaborate with technology companies as they look for ways to prove the value of their products to governments and insurers. By using smart gadgets to monitor patients in real time, pharmaceutical companies believe they can improve clinical outcomes and establish the cost-effectiveness of their treatments.

The result will be a host of new collaborations between pharmaceutical companies and businesses in non-traditional areas such as computing, telecoms, and even retail. A few such partnerships are already happening.

Novartis, for example, signed a $24 million deal with Proteus Biomedical to create “smart pills” that can transmit data from inside the body to monitor patients’ vital signs and check that they have taken their medicines as prescribed. Johnson and Johnson’s Lifescan unit has an iPhone application that lets users upload readings from their connected blood glucose monitors to their Apple phone.

This movement will be driven by a focus on outcomes, with pharma companies having to commit themselves to deliver more and more. The larger drug makers have traditionally relied on a few blockbuster products to generate their revenue. But, the old business model is breaking down and companies are diversifying into new areas such as consumer health, as well as cutting costs and forging more flexible alliances with small biotech companies. This revised model is sometimes referred to as “Pharma 2.0.” But, coming up next, is an era in which pharmaceutical companies will increasingly look to sell ancillary products and services linked to their medicines by working with IT and other companies.

This new era poses some notable challenges, not least the cultural gap between fast-moving technology companies–with rapid innovation cycles and a more ponderous drug industry–where bringing a new drug to market typically takes 10 years or more.

The reward, however, is worth fighting for. By monitoring clinical data and ensuring that patients take the right medicines at the right time, drug companies should be able to demonstrate their products really work, ensuring reimbursement by governmental agencies or insurers and helping to justify their pricing structure.

So, in the future, if you think your medicine is not working, don’t be dismayed. There just might be an application available to correct that.