Pfizer Slashes U.S. Sales Force by 20%

Says Cuts Won't Affect Marketing Budget; Competitors May Follow Suit

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NEW YORK (AdAge.com) -- Pfizer is cutting its U.S. sales staff by 20%, a move that could alter the way the world's largest pharmaceutical company markets its drugs in the future -- and one that could trigger similar steps by its competitors.
Despite the cut to its sales force, Pfizer is not slashing its ad budget.
Despite the cut to its sales force, Pfizer is not slashing its ad budget. Credit: AP

Flat sales expected
Corporate restructuring and cost-cutting reorganization has been expected since the summer, when Jeffrey Kindler took over as CEO from Hank McKinnell. The restructuring was spurred by subpar sales and the loss of patent protection on key brands such as Zoloft and Zithromax. The company said last month it expected 2007 and 2008 sales to be flat.

A Pfizer spokesman this morning said its advertising and marketing budget would not be cut. Pfizer was the 11th largest national advertiser in 2005, according to Advertising Age research, spending $2.15 billion. "The announcement pertains only to reductions in personnel in our U.S. sales organization," the spokesman said.

Many analysts predicted the cuts would come from Pfizer's sales force, but few thought the trim would be as large as 20%. Pfizer's renowned sales force is the industry's largest, with 35,000 employees worldwide and 11,000 in the U.S. Some 2,200 people will lose their positions.

'Agile and effective'
"This is an important step toward making Pfizer a more agile and effective company," Mr. Kindler said in a statement. "Our field force will now be in a much better position to adapt to changes in our product mix and capitalize on the growth opportunities we see for our innovative medicines."

When he took over in August, Mr. Kindler wrote a memo to Pfizer employees and explained, "We need to align our organization to today's market, so that we see opportunities quicker and act on them. ... We need an integrated, leaner structure."

"We see this as a bold move [and the right one for the industry], but are unsure if the rest will follow," UBS analyst Roopesh Patel wrote in an investors' note.

Waiting for Pfizer
But many others do expect other pharma companies to follow suit for several reasons. They believe the industry has been waiting for Pfizer to take the lead, unwilling to cut numbers while Pfizer still had a whopping sales force on the ground. In addition, they are expecting pressure from a new Democratic Congress to cut the costs of drugs.

The industry also expects some physicians, who say they have been overwhelmed by sales reps, to try to pressure companies into following Pfizer.
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