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CARDIZEM SR IS GETTING SUPPORT FROM 1,200 COMBINED MARION MERRELL DOW DETAIL FORCE TO MOVE UP FROM $79 MIL. AND 8TH PLACE AMONG HYPERTENSIVES

Executive Summary

Cardizem SR is getting the combined attention of the 1,200 Marion Merrell Dow sales reps in the U.S. as part of an expanded antihypertensive detailing effort begun April 1. The combined detailing is expected to increase the number of promotional calls for the sustained-release version of diltiazem by "more than 60% in the months ahead," Marion Merrell Dow Exec VP David Sharrock told a recent meeting with wholesalers. The standard-release Cardizem will continue to be detailed by the Marion sales force exclusively. The sustained-release product generated $79 mil. in revenues for Marion in calendar 1989 and has a long way to climb to match the standard-release product's leading position in the angina market. Cardizem (at $588 mil. in sales for calendar 1989) was the number two retail prescription product in the U.S. last year ("The Pink Sheet" March 26, p. 14) and the number one cardiovascular product. In March of this year, Marion says, Cardizem SR ranked eighth in the antihypertensive category. Sharrock observed that Marion Merrell Dow (MMD) is increasing "our budget for Cardizem promotional activites by 50%" to coincide with the increased detailing. He also noted that in mid-March, MMD changed the pricing of the standard-release product to establish a new strategy: "tablets 10% higher, SR selling at a 10% discount." On March 16, the net wholesale price of a box of 500 60 mg Cardizem tablets, for example, was raised to $205.50. The strategy is similar to Pfizer's pricing for Procardia XL. Marion also raised the prices on its anti-ulcer product Carafate at the same time. A 500 tablet bottle of Carafate is now priced at $213 net wholesale. Sharrock told the wholesalers at an April 4 meeting in Naples, Fla.: "When I look back on the marketplace since last July," when the Marion Merrell Dow merger was announced, there has been a "major disruption in our demand creation activities." He maintained that "at this point...those disruptions are nearly over." Noting that the non-sedating antihistamine Seldane has been getting the attention of the combined sales forces since the beginning of the year, Sharrock told the wholesalers that "the bottom line of importance to all of you is that we are absolutely dedicated to improving and increasing market share" for both Seldane and Cardizem SR "in very competitive markets." The effort for Cardizem SR and Seldane ("The Pink Sheet" April 9, p. 7) may be complicated by the recent changes in trade policies instituted by MMD to synchronize the policies of the two previously independent organizations. Among its changes in the prescription product area, MMD is going to establish an average wholesale price (AWP) for all of its prescription products at 20% above the net wholesale price. That policy was previously applied to Merrell Dow products but not to the Marion line. Exec VP Jim McGraw explained to the wholesalers that the change on the Marion part of the line was implemented to help offset unfavorable price comparisons being made in the field. "In the past with Marion, we never established a wholesale AWP price for our products," McGraw noted. "By default, they were established at 25%. We found, unfortunately, that this placed us at a disadvantage competitively." MMD USA President Harley Tennison contended that the de facto 25% AWP price for Cardizem has been compared against other AWPs to create the impression that Cardizem is more expensive. "It is an unfair comparison," Tennison said, "and we are fighting that type of thing in the field. We recognize that in doing this we have created a difficult situation for many retail pharmacists and we have to find a way to help them if we can." The difficulty for pharmacists stems from the use of AWP as a trigger point for reimbursement levels for pharmacy. By reducing the AWP by five percentage points to 20%, Marion is apparently reducing pharmacy reimbursement in some areas. One Texas wholesaler said pointedly: "I've already had a number of calls from our larger accounts that understand third-party reimbursement. They understand the effect that this is going to have on their pocketbooks; they're already asking us for information on competing products that mark up 25%." Another change in terms may effect the continued growth of the former Merrell products. The combined companies are going to the Marion 30 days-payable formula rather than the 35 days Merrell Dow had used. To balance these changes, MMD is shifting all chain and hospital orders to move through wholesalers. "All MMD products sold to the hospitals will be distributed through you, the wholesalers," McGraw emphasized. The wholesaler-only policy continues a Marion practice, McGraw observed, but "it is new for Merrell Dow." He predicted "this will represent many millions of dollars of additional sales opportunities for you." He also noted that MMD "will provide upfront money to you to the equivalent of one-month of the chargebacks." MMD further "will no longer accept orders from the chains unless they have been approved by you, the wholesalers." Sharrock said the changes in the prescription line and a move to direct-only sales for OTCs were designed to produce a net balance, a "wash," in terms of the effect on wholesalers. He indicated, however, that MMD is working "very hard" on changing the way it receives orders and takes payments. The changes could lead to more liberal terms in the future. Tennison said: We are not in a position for electronic transfer, but when we are, we will probably come back to you and say: 'if you can do this for us, we will do something more for you.'" The decisions that Marion and Merrell Dow have been making on trade policies are illustrative of a second-tier of post-merger issues that are being dealt with at the newly combined companies in the drug business. These changes are important to the growth of companies and their traditional relationships with the trade but occur with less fanfare than the ballyhooed merger write-offs and top management changes. MMD told the wholesalers that the change in hospital distribution policy for the Merrell products could be particularly noteworthy given an upcoming new hospital antibiotic in the MMD pipeline, Targocid (teicoplanin). Sharrock indicated that the company intends to file for approval in the U.S. by the end of this year. "In the first quarter of this year," Sharrock said, "the product is selling at a rate well over $30 mil. -- still all just in Europe." He maintained it is "a very effective hospital antibiotic." MMD's objective, Tennison said, is to try to move into the top five among the U.S. companies selling products through drugstores. Citing projections from drugstore audits, Tennison said that MMD should rank seventh by the end of the year with sales of about$1.51 bil. The number two company, by MMD calculations, is Johnson & Johnson with sales of $1.559 bil. Tennison noted that the gap between two and seven is under $60 mil. "So our first goal is we are going to close that gap," he said.(ITEM 150)] EDITORS' NOTE: Carafate's 1989 volume, according to figures in a recently released "transition report" from MMD, was $215 mil., up 18% from the year before. "The Pink Sheet" incorrectly cited a June through December figure of $80 mil. for the full-year sales in a story in the April 9 issue. Carafate sales slowed in the second half of 1989, down from $84 mil. in the comparable period the year before.]
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