February 2006
Pharmaceutical Sales 101: Me-Too Drugs

Jake Whitney

While the conflicts of interest in the doctor/drug representative relationship have come under growing criticism of late, the argument could be made that these conflicts, as pervasive as they have become, would be tolerated if two key factors weren't involved: the rising costs of healthcare, and the enormous number of pharmaceutical representatives now working in the United States.

“Over the past two decades [the drug industry] has moved very far from its original high purpose of discovering and producing useful new drugs.”

In her 2004 expose, "The Truth About The Drug Companies: How They Deceive Us and What To Do About It," Dr. Marcia Angell, former editor in chief of The New England Journal of Medicine, points out that pharmaceuticals are the fastest rising segment of our national healthcare bill—and yet 75 percent of all new drugs coming to market are merely imitations of existing medications.

Angell elaborated on this in a recent interview. She said that these derivative medications—or "me, too" drugs as they have been dubbed—have identical, or only slightly different, chemical compounds as drugs already on the market, and thus little or no benefits over their predecessors. Yet drug companies spend billions marketing them. This is because "me, too" drugs are invariably for common ailments such as heartburn or arthritis, with a huge potential target market. An extensive, well executed marketing campaign for a "me, too" drug (think "little purple pill") can mean a windfall for the manufacturer. (On the flip side, when a drug company manufactures a groundbreaking drug for, say cancer, news of the drug will spread through the industry so quickly that there is little need for marketing.)

It has been the drug industry's growing reliance on "me, too" drugs as profit generators, and the gargantuan marketing costs required to make them so, that leads Angell to conclude that "over the past two decades [the drug industry] has moved very far from its original high purpose of discovering and producing useful new drugs." She asserts that the industry is now "primarily a marketing machine that sells drugs of dubious benefit." And, as to the role drug representatives play in the marketing equation, she adds, "most of [the drug industry's] marketing efforts are focused on influencing doctors, since they must write the prescriptions."

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So, as more and more patients look for answers as to why their prescription drug costs keep rising, more and more critics, like Angell, are leveling their gazes at the armies of drug representatives.

There are approximately 100,000 drug representatives in the United States today, almost triple the amount of just ten years ago, according to the market research firm Verispan. Of the $9 to $15 billion drug companies spend annually promoting their drugs in this country (estimates vary widely because drug companies' books are not entirely open to the public), between $5 billion and $8 billion is spent on these representatives. This number includes, among other things, gifts for physicians, drug samples, market research, meals for doctors and their staffs, hotel stays, and generous salaries. (The two working sales representatives interviewed for this article —both of whom wished to remain anonymous—said they made nearly six figures, and also got a car, including insurance, a gas card, cell phone and service, a lap top and internet service, all paid for. Former Pfizer rep Jamie Reidy, and former Johnson & Johnson rep Kathleen Slattery-Moschkau, both said they were making $100,000 per year, with perks, before they left the business.)

Overall, the top U.S. pharmaceutical companies spend between two and two-and-a-half times as much on "marketing and administration"—of which supporting drug representatives is a part—as they do on research and development. In 2004, Pfizer, for example, spent 2.2 times as much on marketing as on research—$16.9 billion globally on "selling, information and administration" and $7.7 billion on R&D.

“We were stepping over each other to get to doctors… There were so many reps crawling around it was just pathetic.”

Dr. Howard Brody, distinguished professor of family practice at the University of Michigan, argues that, if not from an ethical standpoint, then at least from a time-management standpoint physicians should stop seeing drug company representatives. In an editorial for the January/February 2005 issue of Annals of Family Medicine, Brody acknowledges both the increasing numbers of representatives and the often biased information they provide, and concludes that the only professionally acceptable way to visit with them would be to take the time to research their claims. "But," he says, "a physician who actually did that research would, in turn, be devoting a good deal of time that might be better spent in other activities."

All four drug representatives interviewed for this article told stories of arriving at doctors' offices only to find more drug reps than patients in the waiting room. "We were stepping over each other to get to doctors," said Slattery-Moschkau. "There were so many reps crawling around it was just pathetic." She added that it is still common practice for drug companies to have three reps calling on the same doctor about the same drug; the strategy being that each rep can bond with the doctor in a different way. "They go in one a week for three weeks," she said. "One might be a female that's kind of a looker, one might be a sports person who would bring (the doctor) to the game, one might be more analytical."

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For more and more doctors, however, strategies like this are becoming a turn off, and there are hints that a backlash is in the making. Pfizer and Merck, for example, admitted recently that they are receiving an increasing number of complaints from doctors, and have announced cuts to their sales forces. Indeed, an increasing number of physicians have stopped seeing drug representatives altogether. The ones who continue to find value in visiting with them—for samples or "education" or simply because they enjoy their company—may be left wondering, Where did they all come from?

The cause of the representative explosion is threefold. First, and most obvious, is because drug representatives are unsurpassed as a marketing tool; they are the most effective way to influence doctors' prescribing habits. Second, they are especially necessary for marketing "me, too" drugs. And third, their increasing numbers have been a direct response to a slight downturn in the drug industry's profit growth over the past several years.

Since the early 1980s, the drug industry has been among the most profitable industries in the world. It was the number one most profitable industry in the United States until 2003, when it dropped to third behind "mining, crude oil production" and commercial banking. This slow down began with the recession in 2001, although the drug industry wasn't affected nearly as badly as many other industries were. In 2002, for example, pharmaceutical profits dropped only slightly, from 18.5 to 17 percent of sales, while in that same year, the combined profits for the ten drug companies in the Fortune 500 were more than the profits for all the other 490 businesses put together—a fact that Angell describes as "startling."

In 2004, the drug industry's overall sales continued to grow, but not nearly as rapidly as they once did. According to IMS Health, a healthcare research company, in 2004 global pharmaceutical sales topped the $500 billion mark for the first time ever, but at the same time U.S. prescription sales grew by only 8.3 percent, the first ye