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Eli Lilly plans to lay off around 1,000 sales reps to reduce costs, after facing competition from generic versions of some of its most profitable meds, according to a person familiar with the matter.

By Ben Steele on Apr 12, 2013

The restructuring plans, originally reported in The Wall Street Journal (WSJ) are scheduled to be completely by July and include both full-time and contract employees, affecting around 30 per cent of Lilly’s U.S sales force.

Controlling costs has helped the company outperform Wall Street expectations in the October-December quarter, yet profit fell due to generic competition on its blockbuster schizophrenia drug Zyprexa, the patent for which expired in 2011. Lilly will lose patent protection on the antidepressant Cymbalta, its current top-selling medication, this December, and next March its osteoporosis treatment Evista will also face patent expiration. Taken together, sales of Cymbalta and Evista accounted for 43% of Lilly’s $11.8 billion in U.S sales last year. Although the company has been searching for new treatments to take up the slack, sales of recently approved drugs such as blood-thinner Effient haven’t lived up to Wall Street expectations.

The WSJ points out that the role of sales representatives is becoming less important as physicians’ increasingly heavy workloads leave little time to meet reps; physicians may also be concerned that their relationships with reps will be seen as improper, after the passing of the Physician Payment Sunshine Act in 2010. A spokesman told the WSJ that Lilly's U.S sales force "will move to a smaller structure that is more directly aligned with our business realities—along with the realities our customers face, and the way they want to interact with us" – which alludes to the fact that many doctors now prefer digital marketing as a time-saving alternative to meetings with reps. Today there are around 60,000 pharma sales reps operating in the U.S, down from a peak of 104,000 in 2006, according to ZS Associates, a sales and marketing consultant.

Lilly is not the only firm to be downsizing its workforce in the face of patent expiries and squeezed profits: last month AstraZeneca announced it would be axing jobs, relocating staff, and giving its R&D facilities an overhaul in order to boost revenue. The plans involve trimming 1,600 jobs in the U.K and the U.S in order to save $190 million annually. However, while some firms are cutting back in the hope of surviving the patent cliff, there are also indications that these layoffs have left pharma with a talent gap when it comes to R&D staff.

A recent PwC report has found that 72 per cent of companies are aiming to boost their R&D capacity in the next year, yet only 28 per cent of the top execs surveyed were confident that they could meet their staffing needs. Our readers may disagree, but overall it seems that the role of the sales rep has decreased in importance in today’s market, while ensuring a robust pipeline that can produce the next generation of blockbusters has taken center stage.