How do you judge a sales rep's performance if not on how much she sells? Two summers ago, GlaxoSmithKline (GSK) made big noise about the fact that it was eliminating sales-based compensation and bonuses for US-based sales reps. Instead of rewarding the biggest sellers, a sales rep's bonus would, beginning in 2011, be determined in part by "customer feedback, and by a sales professional's adherence to the company values of transparency, integrity, respect, and patient focus," the company said.
Deirdre Connelly, GSK's president for North America pharmaceuticals, said in a July 26, 2010 release that "physicians have been telling us they want to see fewer sales professionals, and those they do see need to provide greater value in helping improve patient health. In response, we are changing the way we sell our medicines and vaccines in order to deliver the value our customers demand, in a transparent way, with integrity and respect for the patient."
The story got a lot of play in the media, and has been used as a congratulatory example of how one of the major industry players is taking real steps toward changing the pharma business model from one based on sheer volume selling, to one focused on patient health outcomes. GSK's "Patient First Program" may indeed have been created in response to physician feedback, as Connelly described, but it was also created in response to the Department of Health and Human Services (HHS) Office of the Inspector General (OIG) and the Justice Department.
While the dollar amount itself is significant, it wasn't a surprise; in January 2011, GSK announced that it had stashed away $3.4 billion to cover the costs of an inevitable settlement with government. The leftover $400 million may come in handy as GSK is forced to meet the multitude of requirements housed in the company's 122-page corporate integrity agreement (CIA), which began on June 28 and introduces provisions never before seen in pharma, including the previous CIA GSK signed in 2003 as part of a $88 million settlement that ended false claims litigation related to Paxil and Flonase, a nasal spray.