Death of a Salesman: AstraZeneca Replaced Entire Nexium Salesforce With Telemarketers -- and It Worked

Last Updated May 18, 2010 12:21 PM EDT

AstraZeneca (AZN) may have discovered the future for pharmaceutical sales representatives: The company has axed virtually all its traditional reps -- people who go door-to-door visiting doctors -- on its Nexium heartburn franchise and replaced them with telemarketing call centers, where they only answer questions or visit doctors on request.

AZ pulled back on sales resources for Nexium even though the $4.9 billion-selling blockbuster doesn't lose market exclusivity until 2014. The drug's sales were flat last year, as was its market share. AZ even managed to raise the price of Nexium, by 7.4 percent.

The conventional wisdom in the drug business is that marketers should increase resources for their biggest brands as their patents expire and they face competition from cheap generics. The logic is that you want to squeeze every last drop of sales from the drug before it expires.

AZ's experiment suggests that the opposite strategy may work just as well, or even be more profitable: despite tens of thousands of layoffs in the drug business, companies can still make sweeping cuts on their largest brands, replacing expert sales staff with a web site and on-call phone operators.

Bernstein Research analyst Tim Anderson described the move in a recent note to investors:

By the end of 2009, essentially all detailing of Nexium was eliminated, with remaining reps redeployed to other brands. As part of this transition, AZN established a 300-person call center that provides for most doctors' basic needs for samples, reimbursement information, and patient materials. By having a call center and an internet site where doctors can order materials and samples, AZN says it can adequately meet the needs of many prescribers at a lower cost. Such a sales model could be used for other mature brands.
AZ reduced its salesforce headcount by 430 full-timers, a 50 percent cut. The reps sitting in call centers got new job titles: "customer service associates" and "personal account specialists."

Anderson had this ominous conclusion for sales reps everywhere:

AZN concurred with our assessment that there are more costs to come out of the system â€" AZN said they are probably less than halfway through such cost cutting activities.
Related: Image by Flickr user Seattle Municipal Archives, CC.