Pharmaceutical sales in the eyes of the storm: competition, sky high prices, and compliance. Hospitals on the road | Representative | Storm
On August 11th, pharmaceutical representative Chen Xi sat in the outpatient hall of a hospital in Baoshan District, staring closely at the entrance of the consultation room.
Since entering the industry for three days, she has not dared to knock on the door in front of her. There are security guards patrolling by her side from time to time. She remembers the manager's instructions and always holds the medical record in her hand. During special times, she must not "act recklessly", otherwise she may be easily taken away by the security guards. All compliance visits, "Let's wait until the wind blows."
On July 21, 2023, a video conference on the centralized rectification of corruption in the national pharmaceutical industry was held. The pharmaceutical anti-corruption storm, covering all fields, chains, and coverage, has begun for one year.
For a while, pharmaceutical sales became a key target of attack. Visits to business, academic conferences, and industry activities have been suspended, and many practitioners are on vacation, transferring jobs, or changing careers. Anxious pharmaceutical representatives flock to social media, writing about "industry upheavals", "people in the pharmaceutical sales circle are in danger", "where the representatives are headed"
This is not the first anti-corruption action in the pharmaceutical industry, but an unprecedented crackdown.
As the industry undergoes "barbaric growth", the disorderly side is emerging in the storm.
Tuyuan Jiefang Daily
"Nerve endings"
"We are like capillaries, located at the nerve endings of the pharmaceutical system." Dong Ran has been a pharmaceutical representative for more than 10 years and now works in the marketing department of a pharmaceutical company.
She said that although there are a large number of pharmaceutical representatives, they are the most vulnerable group in the medical organizational structure and have the strongest reaction in the industry's pain.
Since the anti-corruption campaign, she has seen her colleagues in the sales circle "forced to take leave". Many representatives joked that their social circle is either traveling or working part-time in industries such as selling jade and beauty.
Chen Xi is still on the job, but her work task has changed from visiting to checking in: she goes to two to three hospitals every day, takes photos and uploads DingTalk when going in and out. As a newcomer, she doesn't have any customer resources. If she doesn't have any performance this month, she will only receive a pre tax salary of 5800 yuan. The manager promised to take her to see the client in a while, but now it's important to save her life.
Lawyer Guo Yafei from Shanghai Huiye Law Firm pointed out that the anti-corruption efforts in the pharmaceutical industry have been unprecedented, and will significantly increase the criminal accountability for bribery. Among the targets of centralized rectification and reporting in multiple provinces, "pharmaceutical representatives" are prominently listed.
Prior to that, Dong Ran's Tiktok account shared the daily life of many medical representatives. Since August, there have been constant comments from netizens below these videos: "Do female representatives rely on that kind of transaction?" "Representatives are just giving money." "Find a more serious job!"
She felt aggrieved: in the past, medical representatives had a dignified image.
In the 1980s and 1990s, foreign-funded pharmaceutical companies flooded into China, and for the first time, "pharmaceutical representatives" appeared in China, belonging to the sales department of pharmaceutical companies. In 2015, the Occupational Classification Code of the People's Republic of China Occupational Classification Code defined medical representatives as "professionals engaged in drug information transmission, communication and feedback". Visiting hospital doctors can be done under the premise of compliance.
In 2000, Dong Ran, a pharmaceutical graduate, entered a foreign-funded pharmaceutical company in the Fortune Global 500 through a friend's introduction and became a pharmaceutical representative.
Dong Ran remembers that the company's management is very strict. "Each representative must undergo 15 days of closed training, and their clothes must have a collar and sleeves. The length of the skirt cannot be above the knee, and even the materials to be placed in their backpack every day are specified."
At that time, Dong Ran had a monthly income of 8000 to 9000 yuan, a fixed annual salary increase, and almost all the hotels she stayed in during her business trips were five-star. She looks more glamorous than many old classmates in hospitals and pharmacies.
But at the same time, she saw a huge number of personal agents in the pharmaceutical industry.
A pharmaceutical company manager stated that since the 1990s, pharmaceutical manufacturers have been looking for agents to be responsible for drug sales, mainly for the sake of saving time, labor costs, and reasonable tax avoidance. Agents are delegated from one level to multiple levels, from provinces and cities to regions. These practitioners earn the price difference between drug costs and sales, which is referred to as "big package" or "outsourcing" in the industry.
"The current mention of 3 million pharmaceutical representatives should include all these agents." Dong Ran believes that compared to traditional pharmaceutical representatives, the professionalism and income of the employees of agents are difficult to guarantee, and there is a mix of good and bad. If they don't have customer relationships and resources, they won't be able to get the product. As a result, some non compliant visits and sales behaviors began to emerge.
"The response of nerve endings is just a superficial phenomenon that everyone can see," said Dong Ran. Behind the "shock" of the representatives is the long-term "barbaric growth" of the industry.
Competitive admission
Yu Jun, who used to work in a rare disease pharmaceutical company, saw that drugs successfully go public from one theory to one target, with an average of 10 years, during which multiple rounds of financing are required. Money is the "life" of pharmaceutical research and development.
But the patent period for a drug is 20 years, and from the start of research and development, it takes 12 to 18 months to apply for market launch. Many drugs have a patent period of only two to three years left when they are launched. Once patents pass, a large number of generic drugs will appear. Therefore, most drugs need to compete for admission opportunities within a limited time frame in order to seize a larger market share.
Fu Hongqiao, Associate Researcher at Peking University School of Public Health, stated that currently around 80% of drug categories are still outside of centralized procurement.
Former pharmaceutical representative Li Hui mentioned that the admission threshold for drugs other than centralized procurement is relatively high, and they need to go through temporary procurement, director's bill of lading, drug meeting voting, and director's signature. So for pharmaceutical companies, it is necessary to "manage" some of the key power figures. "In addition to the director, pharmaceutical companies usually go through all the members of the pharmacy committee, and some companies directly ask the director to do member work to avoid direct contact." He said that the pharmacy committee cycle varies in different hospitals, and the fastest time for drugs to enter the hospital is two to three months. The "management" work needs to be prepared in advance before temporary procurement. There are many operations to manage, and the most direct one is to give money.
"If you can talk about it without money, why spend money? It's just that the market is too difficult to do." Dong Ran said that the difficulty of entering the hospital is on one hand because the drugs are "not good" or "usable but not necessary". Most doctors have a conscience and calmness, and will not choose such products; On the other hand, product homogenization is severe. Similar drugs need to be differentiated, and the evaluation indicators are first efficacy and safety, followed by price and customer relationship.
Yu Jun was responsible for the sales of a rare disease innovative drug and needed to represent the hospital in promoting the drug. "Out of 100000 people, only one is sick and can't make any money. How can they use it?" She smiled bitterly, as a doctor often only leaves two to three minutes for medical representatives. If the other party cannot see the pain points of the drug, it means there is no chance to introduce clinical data at all.
In Li Hui's view, the pharmaceutical market is very competitive, especially for cardiovascular, orthopedic, and chronic disease drugs. Taking the PD-1 drug for treating tumors as an example, as of February this year, more than 100 companies have been involved in research and development.
However, both Yu Jun and Li Hui mentioned that the current pharmaceutical market is still dominated by generic drugs, and there are very few truly innovative drugs. Most existing innovations involve modifying existing drugs or purifying old drugs, without a unique competitive edge.
"I want to find subtle advantages in homogeneous drugs, constantly expanding and expanding," said Li Hui. Therefore, in the process of applying for admission, there is inevitably vicious competition: fighting low prices, increasing kickbacks, reporting competitors as "stumbling blocks", and so on.
At the same time, he mentioned that drugs within the scope of centralized procurement and those already hospitalized will also seek incremental markets. The prices of these drugs are being pushed down, and they need to be sold in large quantities to obtain higher profits.
Dr. Jiang Hao from a comprehensive hospital across the country revealed that in the early stages, some pharmaceutical representatives would talk to department directors about kickbacks. In his hospital, kickbacks are usually between 10% and 20% of the drug price, which are then allocated by the department head to the doctors under him. "They will look for information technology experts to use as a basis for calculating money."
Sky high sales
In a 2022 expenditure list of listed pharmaceutical companies, there are 10 companies with sales expenses exceeding 5 billion yuan and 89 companies with sales expenses exceeding 1 billion yuan. Among them, the highest sales expenses reached 9.171 billion yuan.
Li Hui pointed out that "sky high sales" are mainly used for profit transmission such as hospital rebates, and also for organizing various promotional activities, the most typical of which is academic conferences. "At the same time, sales are also a 'panacea', and many unknown expenses are packaged as sales expenses."
Yu Jun stated that the drug had no reputation or reputation when it was first launched, and according to legal regulations, it cannot be directly advertised to patients, and can only be "implicitly promoted" through academic conferences.
"The speakers are all professional experts who have a great influence on the medical professionals in the audience," she said. The marketing department of pharmaceutical companies will "weave stories" for experts: design part of the lecture notes or slides to introduce the newly launched drugs of the company. "The content is all facts, just favorable facts."
She said that academic conferences need a lot of sponsorship, for example, the annual breast cancer conference needs 500000 to 800000 yuan, and the investment invitation price is clearly marked. The price of one of the small booths is about 50000 yuan, and the advertising space for the tea break is 100000 yuan. An academic conference will also have many satellite events, and after listening to them in the main venue, everyone will go to other small venues to hold forums and salons. These expenses are sponsored by one or more companies.
Regarding the controversial expert lecture fee, Dong Ran emphasized that there is a "321" payment standard in the industry: divided into 3000 yuan, 2000 yuan, and 1000 yuan according to the professional title level of doctors. "If it's an academician or a top teacher, it may increase to 5000 yuan, reaching the peak of 8000 yuan. This is something that similar companies default to."
"Some small companies have no reputation and will rush to grab a booth for promotion." A pharmaceutical representative once saw that the professor's lecture fee was originally 3000 yuan, but many companies maliciously inflated the price. "Someone suddenly shouted for 10000 yuan, and soon there will be 20000 or 30000 yuan to keep up."
Regarding this, Lu Yiguang, Director of the Medical and Health Business Research Committee of the Shanghai Lawyers Association, stated that the first criterion for judging whether academic conferences are compliant is "qualitative". Some are fake conferences that have not been held at all, or they are advertising under the guise of academic research. Experts have become "advertising spokespersons" for pharmaceutical companies. The second is "quantitative": what is the compensation paid by pharmaceutical companies to experts? For example, 2000 to 5000 yuan is reasonable, but he has encountered extreme cases where the professor's lecture fee after a class is as high as 50000 yuan.
"More than 50%, or even 80%, or 90% of the profits of some pharmaceutical companies are used for marketing and promotion. These expenses should be used to develop new drugs." Lu Yiguang pointed out that for a long time, many people have criticized "our drugs are safe, ineffective, and expensive.". If the atmosphere of prioritizing marketing is not reversed, pharmaceutical companies will fall into a vicious cycle of emphasizing promotion, neglecting research and development, making it difficult to innovate drugs, and having to increase promotion efforts.
However, Yu Jun felt helpless: many research and development projects with medical prospects are difficult to open up the market due to the lack of touching "stories". "Investors are very skilled, so naturally they are not willing to invest.". As a result, companies have no money to invest in research and development, and if research and development fails, they lose even more money until they collapse. "Even the most noble science needs money to support it."
At the beginning of 2022, Yu Jun's pharmaceutical company laid off more than 300 employees due to a decrease in profits and no financing. 45 year old Yu Jun is one of them.
Tuyuan Xinhua News Agency
The Road to Compliance
Lu Yiguang was once a surgeon. He saw that around 2000, market-oriented reforms encouraged hospitals to generate revenue and allowed drug markups. In the context of "relying on medicine to nourish medicine", many contradictions such as high and difficult medical treatment have emerged.
Jiang Hao has been working for more than 30 years, and he described it as the "most rampant" time for medical representatives: when some doctors were treating, some medical representatives sat on the side and counted how many drugs were prescribed in a day, and settled the accounts on the same day; Some doctors have just finished their surgery, and there will be snacks and drinks prepared by representatives at the door.
"The director and seniors who are older than me are all taking it, why don't I take it?" He admitted, "If I don't take it, I'm afraid of being isolated."
Lu Yiguang said that in the early days, young doctors were influenced by the overall environment and felt that taking kickbacks was a normal thing, which in the long run helped promote the trend of "bad coins driving out good coins" in the pharmaceutical industry.
But Dong Ran observed that since 2000, many pharmaceutical companies have started to carry out compliance work. For her company, the boss gives each medical representative a budget of up to three department meetings per month, which is around 3000 yuan, with no other expenses. After the department meeting, the representative needs to submit relevant proof materials to the company, including time, location, and task content. "I spend a lot of time every month turning materials into a book."
In Lu Yiguang's eyes, the true beginning of the road to compliance was after the "New Medical Reform" in 2009: gradually phasing out drug bonuses nationwide; Implement a "two invoice system", where only two invoices can be issued during the drug distribution process from the pharmaceutical factory to the hospital, to reduce layer by layer exploitation; Various regions are carrying out centralized and quantity based procurement of drugs. The era of "relying on medicine to support medicine" is gradually coming to an end.
What made Dong Ran personally feel the trend of compliance was in 2014, when multinational pharmaceutical giant GlaxoSmithKline was fined 3 billion yuan for bribery and bribery. This year, multiple pharmaceutical companies have been frequently fined, and the pharmaceutical industry has experienced a wave of job hopping. More and more practitioners are starting to pay attention to compliance policies when seeking employment.
In recent years, a comprehensive tertiary hospital in China where Jiang Hao is located has established strict regulations on the use of medication by clinical doctors. If a doctor is found to have incorrect dosage, frequency, or indication of medication, the fine for each case is the original price of the medication. If it is a major mistake, the fine for each case discovered is increasing from two to three hundred yuan to ten or twenty thousand yuan. "If you prescribe medication randomly, you will earn more money through kickbacks than kickbacks, and you will also be talked to by the hospital."
At the beginning of this year, Li Hui felt the increasing trend of compliance and decided to leave his sales position to work as a pharmaceutical compliance consultant.
In his view, there is still a long way to go for compliance in the pharmaceutical industry.
"At present, most enterprises still pursue financial or criminal compliance, that is, to wear a compliance vest for all kinds of gray and bribery behaviors." He said that many pharmaceutical enterprises still failed to achieve business and behavior compliance: unfair competition through academic conferences affects the prescription behavior of medical practitioners, and benefit transmission is more concealed through Internet medical treatment and other means.
In addition, he mentioned that some pharmaceutical companies do not have dedicated compliance departments, and compliance internal control business is handled by accountants and finance; Many hospitals do not have a sound and localized visiting system, and the rules for medical representatives to conduct activities in hospitals are not clear.
"In the short term, compliance will bring higher costs to businesses, but this is a long-term investment, and the interception of illegal costs in the future is very effective," he said.
Waiting for return
In 2016, Li Hui, who had just graduated from a medical university, felt that his major was noble and holy, and he firmly determined his future career direction in the pharmaceutical industry.
But over the past seven years, he felt that medicine had become a product, a profit margin, a floating number, and his ideal of "treating illness and saving people" in school had gradually faded away.
"We still need to find a balance between ideals and interests." He pointed out that pharmaceutical companies need to make profits, but the industry also needs some pure researchers to promote technological development, and requires more fair rules and the existence of neutral institutions.
Fu Hongqiao and Lu Yiguang both mentioned that healthcare reform is not something that can be achieved overnight. Unlike other industries, the regulatory requirements for the pharmaceutical and medical industries are highly professional, and there are many difficulties in implementing them. First, we need to "correct some obvious mistakes", and then promote more professional reforms and streamline the industry order. Public medical institutions must ultimately return to public welfare, and the pharmaceutical industry must force enterprises to truly rely on innovation capabilities for development. "This is a very long-term vision."
In the eyes of Dong Ran and Li Hui, pharmaceutical practitioners may fall into a downturn in the short term, but being in a storm is "both a challenge and an opportunity."
Dong Ran believes that with the reform of the industry, the number of pharmaceutical representatives will decrease, but the threshold and value will be higher. She learned that globally, some excellent pharmaceutical representatives have higher academic abilities, can introduce cutting-edge industry knowledge to doctors, collect hospital clinical data, and convey doctors' innovative ideas to pharmaceutical companies, becoming an important part of drug innovation to commercial operation. "I hope one day, pharmaceutical sales can appear in front of the public with a positive image, on magazine covers, and become a representative of a certain group of people."
Li Hui has been frequently promoting compliance knowledge of pharmaceutical companies on social media recently. Many companies have come to him for consultation, hoping that during this period of rest, they can proactively consider some compliance policies and methods, establish a compliance department in the company, and redeploy personnel.
Yu Jun interviewed several pharmaceutical companies. She still believes that medicine is an influential industry. A small step in pharmaceutical technology may extend a period of high-quality life, which is completely different from ordinary sales.
Fu Hongqiao said that anti-corruption in medicine may be a good opportunity to promote longer-term institutionalized reforms: improving the treatment of doctors and public image. At present, corruption is concentrated in the "key minority", and frontline doctors who occupy the majority should have a more reasonable salary and welfare system, so that their returns reflect the value of their efforts.
Dong Ran said that when visiting hospitals at night, many doctors would rush back to check the patient's condition and then return to the office to work overtime. Some of them have already gained a good reputation and are still improving themselves.
"Those moments gave me the energy to move forward." Dong Ran still remembers vividly. At 11 o'clock at night, every illuminated window lit up a hospital building.
