GSK Adjusts Pharmaceutical Representative Compensation Model, Affecting One-Fifth of Global Sales Force, Effective July

In recent years, in an effort to improve corporate management transparency, GlaxoSmithKline’s (GSK) sales compensation system was regarded as one of the strictest in the industry. However, GSK recently announced that it will adjust its existing compensation structure to remain competitive and to attract and retain talent.

As part of the initiative to enhance transparency, in 2012, GSK established a highly stringent compensation system for its pharmaceutical sales representatives, whereby employee remuneration was evaluated based on the group’s sales figures, with little consideration given to individual performance factors. Meanwhile, compensation calculations were largely based on the acceptance of scientific knowledge about medicines and the satisfaction of healthcare providers. Under the current adjustment, 75% of the compensation is structured as fixed salary, while pharmaceutical sales representatives will additionally receive a 25% variable bonus based on increases in drug prescription volumes and sales revenue.

It is understood that this compensation adjustment involves medical representatives from the oncology division, ViiV Healthcare (the HIV division), as well as those covering the lupus drug Benlysta and the severe asthma treatment Nucala. For sales representatives in GSK’s Primary Care and Vaccines divisions, the variable bonus component of their compensation will remain tied to team objectives; however, the size of the sales teams used as the basis for evaluation will be reduced.

The new sales compensation plan will take effect this July, initially rolling out in the United States, the United Kingdom, and Canada, with global implementation scheduled for January 2020. GSK aims to apply this new compensation structure to approximately one-fifth of its sales force worldwide.

Adjustments to the compensation system do not signify a relaxation of GSK’s supervision and management of medical representatives, as the new policy explicitly states a “zero-tolerance approach toward any employee who violates corporate values or company policies, with off-label promotion of pharmaceuticals and/or non-compliant monetary transactions being key areas of focus.” GSK further clarified that the new compensation system applies exclusively to medical representatives who have met the “ethical conduct threshold related to behavior, including the completion of specific training.”

GSK’s pharmaceutical sales representatives have long been a sensitive topic. In 2013, GSK’s Chinese subsidiary was implicated in bribery in China and was ultimately fined RMB 3 billion. In 2014, GSK faced multiple bribery allegations in markets including Poland, Iraq, the United States, and Syria, prompting investigations by regulatory authorities in multiple countries.

Last October, GSK announced that it would resume payments to physicians for lecture fees, registration fees, travel expenses, and other related costs. Reportedly, this sales policy applies to certain products in the United States and Japan. Based on effective implementation and risk assessments, the policy will continue to be implemented in 2019 in key markets across Europe, North America, and Asia. GSK explained that in recent years, the practice of not paying physicians has reduced their understanding of GSK’s products, ultimately limiting patients’ access to new drugs and vaccines. Furthermore, the no-payment policy applied only to select products and markets and was not emulated by competitors. Nevertheless, questions remain regarding the compliance of such payments to physicians and whether the aforementioned adjustments will prove successful. (Compiled by Fan Dongdong for Sina Medicine)

Reference:

[1]GSK tweaks ethics-based rep compensation rules to recruit and retain talent

[2]Doctor payments back on the table at GlaxoSmithKline with rollback of its total ban