Prime Minister Vladimir Putin could make pharmaceutical companies abandon their most effective method of product promotion: he promised to ban the activities of pharmaceutical sales representatives. At present, pharmaceutical companies spend between 10% and 50% of their turnover on them.
At a meeting devoted to the development of the pharmaceutical industry last Friday, Putin said that medical institutions must get rid of all "pharmaceutical sales representatives" working there. The Prime Minister said that clearly abnormal practices have developed in Russia in relations between, primarily foreign, pharmaceutical producers and part of the Russian medical community. He said it was inadmissible that pharmaceutical companies should make extra payments to specialists in exchange for prescribing their medicines. "Pharmaceutical producers sponsor corporate events and all sorts of seminars, including those held abroad, which involve thousands of specialists in Russia today," he added.
A gift in a time of crisis
According to Alexander Kuzin, director general of the marketing and advertising company DSM Group, pharmaceutical and medical sales representatives are consultants working in the industry's interests who tell doctors about the medicines their company produces; they are not engaged in direct sales.
"Pharmaceutical sales representatives are one of the main ways of promoting prescription medicines. Under the law, such medicines can only be advertised in specialised media which are not accessible to all doctors," said David Melik-Guseinov, marketing research director at PharmExpert, a Russian pharmaceutical company. "If pharmaceutical sales representatives' visits [to medical institutions] and the organisation of conferences by the pharmaceutical companies are banned, it is not be clear how new medicines can be promoted," he said.
"At present, pharmaceutical companies spend 10% to 15% of their turnover on their sales representatives, which is comparable with their production expenses. This could be as much as 40% to 50% for foreign companies with no production facilities in Russia," Melik-Guseinov said.
"To put it mildly, this is not the time for statements about bans," a top manager at the Russian office of a transnational pharmaceuticals producer said. Government officials' heightened attention to their companies has already resulted in a tougher procedure for registering the prices of vital medicines (accounting for about 30% of all pharmaceuticals), as well as in inspections of the price formation by prosecutor's offices.
The rouble devaluation has complicated the foreign companies' operations still further. At the end of this year, PharmExpert expects a slight decline, for the first time over the last 20 years, in pharmaceutical consumption in both rouble and volume terms.
Within the bounds of decency
The pharmaceutical companies assert that their sales representatives do not in any way contravene either the law or any ethical principles.
"Pharmaceuticals need to be advertised so that medical professionals can learn about new methods of treatment and update their knowledge of diseases, their treatment and available medicines," said Fabio Landazabal, director general of GlaxoSmithKline in Russia. In addition, pharmaceutical sales representatives ensure the companies' feedback links with the doctors. "GlaxoSmithKline does not allow their sales representatives to give valuable gifts or money to doctors, or to organise special cultural, entertainment or sports events," Mr Landazabal added.
"In fact sales representatives working for transnational pharmaceutical corporations work as their agents telling the doctors which medicines can be prescribed for which diseases, and how they should be taken," a medical sales representative from a European pharmaceutical company told Vedomosti on condition of anonymity. "We can give the doctor a bunch of flowers or a box of chocolates for Women's Day, but, like most innovative healthcare product makers, we do not offer them money or a percentage of sales profits. I have heard about companies whose sales representatives offer money to doctors, but few take it," she said. She explains that in order to determine the efficiency of the company's work with medical professionals, they analyse the sales of advertised medicines at local pharmacies and may advise specialist doctors to direct their patients to pharmacies where their products are available.
It is rare for the pharmaceutical industry paying doctors, Mr Kuzin of the DSM group said. According to him, it is easy to reveal the doctor's material interest because his personal stamp is put on the prescription.
The price paid
Following the Prime Minister's statement, pharmaceutical companies are more reluctant to talk about their medical sales representatives: even big companies like Sanofi-Aventis, Nycomed, Bayer Schering Pharma AG and Novartis left Vedomosti's questions about the number and duties of their employees unanswered. Each of the 20 global pharmaceuticals producers operating in Russia employ about 200-250 medical sales reps; smaller companies have fewer, but even conservative estimates show that there are some 7,000-8,000 medical sales representatives working in this country, a top manager of a foreign pharmaceutical company said.
According to analysts with HeadHunter, the average monthly pay offered to pharmaceutical sales reps by the pharmaceutical industry in September was $1,268 plus the social package. Apart from that, HeadHunter says, the pharmaceutical industry provides them with company cars, and 10% of them even pay expenses (job advertisements do not indicate which ones). On average, a medical sales representative costs a pharmaceutical company 160,000 roubles per month (including bonuses, company car and promotional materials expenses, and the unified social tax), said Mr Melik-Guseinov of PharmExpert.
Meanwhile, the position of medical sales representative is one of the most highly sought after in Moscow, second after that of insurance dealer, said Mikhail Zhukov, director general of the HeadHunter Group.
Yulia Shmidt