THE SEVEN TYPES OF MEDICAL COMPANIES

“To business that we love we rise betime, and go to't with delight.”

William Shakespeare

Medical companies offer great variety to the professional salesperson because of the many types of companies that exist. Rather than viewing this sales field as a single "category" of sales, it is best perceived as a diverse industry consisting of several distinct enterprises. There are no fewer than seven classes of medical companies with each being identified by unique differences in products and services. Each type of company is briefly reviewed to give the reader a basic understanding of the unique business environment in which the companies operate.

• CAPITAL EQUIPMENT COMPANIES

Capital equipment companies manufacture products that represent a large capital investment by a medical facility.

These are products such as lasers, sterilizers, beds, or operating room lights that can range in cost from several hundred to several million dollars. Although an individual institution's monetary qualifications for capital equipment may vary, financial officers will ordinarily identify capital equipment as any product priced on a per unit basis at $1,000 or greater. When planning to purchase capital equipment, medical institutions customarily write purchase specifications and seek competitive bids.

For the most part, capital equipment companies employ a small number of sales representatives to handle large geographic territories. Many of the sales opportunities are onetime opportunities, because the products sold may have a longer life than the rep's career will last. Unit sales for these companies are usually low, but unit cost and profit are correspondingly high.

Sales Highlight

Income opportunity in capital equipment sales is the highest of all types with annual incomes into the highly sought after six-figure area. However, it can be a feast or famine business as many companies pay based on a straight commission. The challenges and rewards are accordingly high.

• " MEDICAL/SURGICAL COMPANIES

Medical/surgical (Med/Surg) companies specialize in single-use or low-cost-per-unit reusable products. These products, which must be regularly replenished, range from Band-Aids and gauze sponges to sutures and surgical drapes. Although the unit prices of these products are low (at times less than $1.00), their high volume can often push them to the highest percentage of a hospital's supply budget. For example, a hospital performing 10,000 surgical procedures per year (typical for a 350-400 bed hospital), may spend as much as $400,000 to $500,000 annually on sutures and wound closure products.

Hospitals, surgery centers, and clinics often buy med/surg products through national contracts arranged by group purchasing organizations (see additional GPO discussion in Chapter 5). As such, a sales representative may become more of a contract implementation specialist than a Sales professional. It is extremely important to know if the company you are considering has GPO contracts and whether the products can be sold without them. Also consider whether the company will actually see you as a "service" or "sales" person. It could make a difference in the long-term income opportunities.

Sales Highlight

Medical/surgical companies have sales forces that range up to a couple of hundred salespeople. Because of this size, there are usually one to three levels of sales management, which translates into more career development opportunities. If sales management is your long-term career goal, medical/surgical companies offer plenty of opportunity. Income levels vary greatly in this category, and most companies will pay their representatives a base salary plus an additional bonus or commission tied into overall sales performance.

• MANUFACTURER REPRESENTATION FIRMS

Many medical companies are so small that they cannot deploy an independent sales force to market their products. The expense is simply too great. As such, companies turn to private firms who represent many manufacturers. The manufacturer representative is essentially a medical mercenary who may work alone or with a small group of other independent reps incorporated as a privately owned firm.

Manufacturer representation (MR) firms have very broad product lines and are constantly adding and deleting products from their offerings. The products represented could be highly specialized one-of-a-kind items, an initial product offering from a foreign manufacturer, or a medically related product from a consumer product company. Versatility is a necessary character trait in this field as new products are the lifeblood of the business. This requires constant training in product knowledge.

Sales Highlight

MR Sales is truly the entrepreneurial segment of the market in that a rep's personal financial responsibility is at its greatest. Because MR reps are frequently treated as independent contractors, they usually have to pay for expenses, but they benefit with a salary resulting from an agreed upon percentage of sales with the manufacturer. Because the business is proprietary in nature (as a manufacturing rep, you do not usually report to a "manager"), it is your business. If independence is what you are seeking, this may be the avenue to pursue. Keep in mind, though, that the person succeeding in this area usually has years of medical sales experience and has built strong business relationships with an existing customer base. If you are trying to break into the field, you might persuade an existing MR firm to take you on a trial basis, since you would be paid only on closed sales.

• ORIGINAL EQUIPMENT MANUFACTURER

Original equipment manufacturer (OEM) companies have grown substantially in the marketplace since the mid-1980s, and they can be broken down into two subgroups. The first and largest OEM companies are known as custom tray manufacturers. They buy products from other medical companies and then repackage them in order to better meet a hospital's product needs for specific patient procedures. Since the sales platform is based primarily on the principles of labor and waste reduction, custom tray selling is more conceptual than product related selling.

The second subgroup of OEM companies manufacture private label products for medical/surgical companies that want to sell a specific product without actually making the capital investment to manufacture it. This is similar to a car parts maker who would make the seat cover material to be used in assembling a car. These companies usually have limited sales personnel because their target customers may be one or two other major manufacturers instead of the end user of the product.

Sales Highlight

OEM representatives can make a nice living by developing business in just a few accounts since one large account can represent $1 million or more in annual sales. If you enjoy building long-term relationships, are motivated by problem-solving and cost-reduction challenges, and are extremely organized, you will greatly enjoy this marketplace.

• PHARMACEUTICAL COMPANIES

Pharmaceutical companies such as Johnson & Johnson, Merck, and Schering-Plough promote their prescription drug products to physicians and pharmacists through dedicated sales forces. The company representatives detail their products to health care providers for the express purpose of increasing the number of patient prescriptions. This type of selling is indirect because the end user who buys the product actually knows very little about it. Pharmaceutical representatives are educators who solicit the influence of a third party upon end users.

Pharmaceutical companies can have sales personnel numbering into the hundreds, and this sales category provides more employment opportunities than do the other six. Sales training and ongoing professional education must necessarily be outstanding because physicians and other health professionals view reps as a primary source of their pharmaceutical education. Sales performance in this category is somewhat subjective because you do not leave a doctor's office with a physical order, however you do have the opportunity to develop a strong supporter who can be a product proponent for months and years to come.

Sales Highlight

By demonstrating superior product knowledge to customers, pharmaceutical sales representatives can nurture their professional relationships to the point that they are viewed as true consultants or subject matter experts. This is a great sales category for individuals who enjoy the consultant/educator role, and due to the large number of sales position, it also provides more opportunity to break into the medical sales field.

• DISTRIBUTION COMPANIES

In order to reduce materials management costs, health care providers (HCP) prefer to buy from the smallest number of companies possible. Therefore, most manufacturers actually sell their products to a distribution company, such as Baxter International or General Medical, which in turn "resells" the product to the end user. This allows the HCP to benefit from "just-in-time" and "stockless" inventory programs offered by distribution companies. Distributor sales representatives are responsible for selling the efficiency of their distribution programs and also play a major role in making sure that the supply chain from manufacturer to end user is never broken.

Distribution companies range in size from national distributors to smaller, regional distributors that may only cover accounts in a few cities. Distributors may focus on providing every product known to health care or, in the case of specialty distributors, sell products related to only one medical specialty such as neurosurgery. Some companies may have sales divisions. For example, one division may be selling to the hospital market and another division may sell only to the physician market. Territories for the national companies are small, and profits are made through high volume and inventory turns, not high-profit margins. Group purchasing organizations have drastically driven down distributor profit margins over the last fifteen years. This means that efficiency, organization, attention to detail, and great communication skills are vital for the success of a distributor sales rep and the company represented.

Sales Highlight

The relationships built by distributor representatives are so strong that the end user eventually begins to see the rep as part of the end user institution. The reps can have a lot of power in product evaluation and selection because they are in the facility on a frequent basis (sometimes as much as daily) and develop a great understanding of the customer's needs. Individuals who enjoy being "part of the family" make successful distributor reps.

• CONSUMER PRODUCT OVER-THE-COUNTER COMPANIES

Pharmaceutical, medical/surgical, and consumer product companies also manufacture nonprescription consumer products with a medical indication. Pepto-Bismol, made by Procter & Gamble, and Visine, by Pfizer, are good examples of such products. Many of these companies have salespeople who specialize in promoting these products through both traditional merchandising efforts and direct marketing to physician specialties.

This medical sales segment is unique in that the over-the-counter (OTC) rep can be employed by a small division of a Fortune 500 company. It is like working for a start-up company in that there is lots of room for sales imagination and flexibility, but you also have the security of being backed by a financially strong corporation. Some of these companies also employ flex-time employees who work twenty-five to thirty hours per week, so this is a great area for individuals who do not really want full-time work or need the personal benefits associated with a full-time position.

Sales Highlight

Much like the pharmaceutical sales category, representatives of OTC companies serve as educators or professional communicators. Job performance is usually activity related (i.e., a rep must call on seven rheumatologists a day), and task-oriented individuals will enjoy this environment.

• SUMMARY OF COMPANIES

These seven types of companies have different characteristics and sales approaches. It is important when considering a company to understand the differences and how they might impact a career decision. The differences become advantages or disadvantages only when applied to individual circumstances. For example, capital equipment companies require lots of travel because the territories are usually very large. A sales representative with a family might frame the situation as undesirable, while a single person may view high travel requirements as a wonderful opportunity to visit new locations. Only you can decide which would be best for you.