The key to successful video detailing on a large scale is effective market segmentation, Merck President-Global Human Health Peter Loescher said Dec. 12.

During an investor meeting in Whitehouse Station, N.J., Loescher announced that Merck has significantly expanded its video detailing program.

Loescher acknowledged that "we have seen video detailing in the early and mid-90s ... but have never seen it really scaling up. If you want to really gain this scale," you need to have a "very good segmentation initiative underway," he said.

Segmentation is essential for understanding "which of the physicians would like to engage with this channel and what time and when and how," he explained.

Merck's video detailing initiative is intended to be a more cost effective and efficient alternative to interface with large physician offices than traditional sales forces, Loescher said. "We have identified targets. We have scaled this up to 50,000 physician offices. Physicians want to communicate with us so that is a critical element," he added.

The video detailing effort is part of Merck's new commercial model, which is designed to increase sales force productivity, while reducing primary care promotion costs between 15 and 20 percent by 2010 (¹ Also see "Merck Sales Restructuring Sacrifices Physician Detailing To Payer Marketing" - Pink Sheet, 19 December, 2005., p. 3).

Loescher said that Merck began pilot testing the new model in 2006 with the launches of the human papilloma virus vaccine Gardasil and the type 2 diabetes agent Januvia (sitagliptin). "We have basically started to deploy elements and pilots of our new commercial modeling in a more integrated and from a more broad perspective" using e-detailing and video detailing, he said.

The exec said Merck has created a database outlining which method of interaction different physicians prefer, he said. The database will make it clear that "there are some of them who would like to continue to use our model as we have interacted with them for many, many years, and they're very happy with it," he noted.

The database creates "productivity for our field force organization, as well, because they will deploy far more effectively in terms of targeting and then we have, in the meantime, a solid understanding in terms of the number of physicians who would like to engage," Loescher added.

Merck expects "significant cost effectiveness with this new means of communication," he said. The company estimates the average cost per a detail of a sales rep to specialists and primary care physicians is about $120 and $50, respectively. By comparison, the firm expects the cost per a video detail to be about $40.

Merck expects the cost savings with video detailing to increase over time. "This is the very early scale phase so this is full costing and going forward this will be a significant scale effect which we will leverage," he said.

In addition to being more cost effective, Loescher reported that Merck has found that video detailing has increased the quality of physician interactions. The average length of a video detailing call thus far has been 10 minutes, he said; in contrast, the average duration of a sales rep call under the former model was 4.5 minutes.

"That's just an early indicator that the model is, number one, scalable; that the model is more cost effective; and that we get into the position to have really a quality interaction through this use of communication," he said.

Loescher said the new commercial model has also improved the productivity of Merck's existing sales force. In early pilots, the firm saw a 17 percent increase in the number of days reps were spending in the field and a 20 percent increase in annual calls per rep.

The exec said that Merck will not increase the size of its sales force, despite major launches such as Gardasil and Januvia.

When asked if Merck would consider using a contract sales force, Loescher said "rental reps are used in an opportunity, it could be a specific situation where we've got flexibility ... but overall we will keep the head count structure flat."

Loescher noted that "the new commercial model really allows us now, from a competitive perspective, the flexibility to really deploy in a far more flexible way. In other words, we do not have to mirror ... the number of reps our competitors are deploying with the old format ... to be successful and winning in a specific market segment."

"I think this is the key advantage for us going forward," he added.

Companies such as Pfizer and Lilly have looked to new marketing models in recent years to control spending and boost performance. Pfizer announced earlier this month it was reducing its U.S. sales force by 20 percent in an effort to cut costs and improve interactions with physicians (² Also see "Quality Not Quantity: Pfizer Cuts Sales Team To Increase Meaningful Contacts" - Pink Sheet, 4 December, 2006., p. 3).

Lilly has implemented a "sales force of the future" initiative aiming to improve the productiveness of sales efforts through increased specialization of reps and a broad force realignment ³ Also see "For Lilly Sales Force The Future Is Now: Reorg Emphasizes Sales Specialists" - Pink Sheet, 19 December, 2005., p. 12).

Merck's selling and marketing restructuring is part of its long-term growth strategy - titled the Plan for Winning - which is expected to return the company to double-digit earnings growth by 2010.

Another way that Merck could further leverage its existing sales force is through acquisitions of companies with marketed products. During the investor meeting, CEO Richard Clark emphasized that Merck is open to such acquisitions.

"Even though we're looking at Sirna's and GlycoFi's as part of our strategy right now, we're still very focused on looking at those types of companies that we could buy, or have partnerships with, that would help us with our top line," he said. Merck announced plans to acquire Sirna in October and acquired two private biotechs, GlycoFi and Abmaxis, earlier in the year.

Merck would consider acquisition of a more mature firm "if we could find the right size company that has in-line products that align with our therapeutic areas, and the science that [Merck Research Labs President Peter Kim] is looking at," Clark said.

When asked why Merck was not using its cash reserves to more aggressively buy back shares, CFO Judy Lewent said "we want to make sure we that we have the funds and the financial flexibility to undertake some of those acquisitions anytime we want to and be opportunistic about that - those take precedence over share buy backs.

"We have $6.6 billion left, and there's no time limit on it, but you think about the Sirna acquisition is $1.1 billion and then you couple that with GlycoFi and Abmaxis and you've spent about $1.6 billion, and those are technology platforms....We continue to have a very careful focus on opportunities out there that have in-line products, late stage products, we certainly think that takes precedence over share buy backs."

- Kathryn Phelps

Video Kills The Sales Rep? Merck Rolls Out Large Scale Video Detailing

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