A few pages into a whistleblower legal complaint against Cardiovascular Systems that just became public, the plaintiff points out that CSI sales representatives each had a $28,000 marketing budget, “more than twice the pharmaceutical industry average.”
What the plaintiff’s counsel appeared to be doing here, in a lawsuit alleging aggressive sales tactics that crossed the line, was using the $28,000 to help raise doubts about the legitimacy of the whole sales operation.
Why it’s compared with pharmaceutical industry practices is one question, given that CSI makes medical devices. A better question has to be this: Is $28,000 really all they got? If it’s for travel it’s a lot, but if it’s meant to cover everything related to sales and marketing, a little over $2,000 per month doesn’t go very far.
That’s one aspect of this that made the CSI complaint an odd little document. A former sales manager makes some very serious allegations in it about such things as off-label marketing, yet much of the complaint reads like it was drafted by a naive lawyer who was appalled that selling a lifesaving device meant sales reps getting paid commissions, developing referral sources, and yes, spending $28,000 on marketing.
It’s not exactly shocking that medical devices, like cars on a lot of the local Ford dealer, need somebody to actually sell them.
It’s not always an elegant process, either, at least not as described at CSI. The complaint has snippets of some sales managers’ e-mail including one plea for more sales typed in all caps and ending with not one but three exclamation points. Another sales manager agreed, writing, “I don’t care if you have to stab someone, it’s time to blow this thing out.”
Is this evidence of an out-of-control sales organization? Or an amped-up sales manager painfully aware there are only five days of selling left in a quarter?
Seems far more likely to be the latter, and there’s no chance that CSI employs the industry’s only excitable sales manager. A little urgency actually seems useful in a sales field that looks as competitive and high pressure as any. A fine living can be had, though, with a 2015 survey putting the average field rep’s annual salary and commissions at about $157,000.
It sure adds up to pay a big group of people that much, along with paying for sales material, training, trade shows and all the rest. At New Brighton-based CSI, the sales, general and administrative expense is about five times larger than the cost of developing new products and other R&D expense, but it’s important to note that this ratio is not that different for an established giant like Medtronic.
The big device companies here in the Twin Cities aren’t really inventors that then need to sell their products. It’s more like they are sales organizations that also have an R&D arm.
It’s also clear that the sales reps, at least the good ones, really do contribute to patient care. Even physicians at a renowned medical center like Mayo Clinic lean a little on their device suppliers, as described by Dr. Richard Ehman, who chairs the industry relations committee for Mayo Clinic and also serves on the conflict of interest review board.
Mayo Clinic has had a process in place for nearly 100 years to govern its dealings with private companies out to make a buck. The clinic seems to have adopted a common-sense approach.
For instance, it’s common in health care for device company representatives to actually come into a surgical suite during a procedure. Ehman said Mayo recognizes the value of having an extra expert around when using complex devices, and so a medical device product specialist, after careful screening, could be invited in at Mayo.
“It’s an interesting question, why we still have all this marketing activity in medicine,” Ehman said. “The positive side of this is that our system of innovation in medicine … is the envy of the world. It’s an amazing producer of innovations that have really improved patients’ lives and extended life.”
And because change comes slowly in medicine, he said, companies convinced they have useful new products had better hire some salespeople to knock on the door of the likes of the Mayo Clinic.
That job has lately become much more highly scrutinized than it once was, as federal regulators want to stop sales practices they conclude only lead to overuse of devices, sticking programs like Medicare with unnecessary cost. That’s partly why there’s been talk in the industry that the era of the sales representative may be coming to a close.
One recent high-profile experiment in getting rid of reps altogether comes from Smith & Nephew, now able to sell a few orthopedic implants at far cheaper prices by having no salespeople. That role, including providing technical advice, gets mostly filled by an iPad.
Executives at this U.K.-based company have said this plan is limited and that the traditional selling model still has legs, and a scan of the job boards shows there’s plenty of open sales jobs this week. Medtronic is looking for a “combined bag” sales manager here, and there’s also a sales job at a Medtronic unit on lots of job websites.
The “essential functions” of this position include “effectively manage sales pipeline, closing ‘A’ accounts, moving ‘B’ accounts to ‘A’s and ‘C’ accounts to ‘B’s.”
It’s also essential, of course, that the sales rep “meet and exceed assigned quota and sales objectives.”
Remember, the “B” account to be turned into an “A” account may be an understaffed community hospital. The people who need to be driven to make a decision could be doctors caught for five minutes between seeing patients in the hallway of a clinic. And this isn’t a sales quota for widgets, but devices used to treat people.
If all that feels a little too commercial for medical care, just remember this: We have the lifesaving technologies we now enjoy in part because we have had enthusiastic champions of new devices — people who also happened to really want to hit their quarterly sales quotas.