A CIA first: mandatory de-link in sales force pay
Most startling, perhaps, is the provision requiring GSK to cut the link between sales rep pay and how much they sell. "The
GSK CIA is very significant because it does address the issue of financial incentives for individuals within [GSK], in a way
that we have not done in the past," says Demske. "There are two major ways that we do that: one is compensation for sales
people; GSK's current system breaks the tie between sales person compensation and the volume of business that they're generating,
and the second part is the claw-back provision."
With respect to sales rep compensation structures, government has been gnawing on this idea for a few years. Since 2008, Pfizer,
Novartis, Merck, AstraZeneca, Johnson & Johnson, Lilly, Abbott, Novo Nordisk, Allergan, and Forest Labs—to name a few—all
signed CIAs that directly addressed the issue of sales rep pay as it relates to potentially incentivizing off-label promotion.
The GSK CIA, however, is the first time rep compensation based on sales volume has been outlawed entirely.
The claw-back provision, formally known as the "executive financial recoupment program," is another CIA first. It mandates
that GSK establish a program that "puts at risk of forfeiture and recoupment an amount equivalent to up to three years of
annual performance pay (i.e., annual bonus, plus long-term incentives) for an executive who is discovered to have been involved
in any significant misconduct," according to the text of the CIA. Combine this with Park Doctrine expansions that make it
easier to hold executives responsible for crimes committed by their subordinates, and government's ultimate ability to exclude
non-compliant individuals from doing business with public healthcare plans, and you get a situation where "executives are
no longer interested in people that can push the envelope," says Ron Ginor, CEO at Becker & Associates Consulting, a Washington
DC-based firm. "They're interested in people that are going to keep them out of trouble." In other words, GSK execs have real
skin in the game. The cost of doing business the wrong way just got a lot pricier.
"The idea is to try to change the financial equation for people at the sales level and the executive level, so the executive
isn't just thinking, 'Well, the more profits that are generated, the more bonus I get,' but also thinking, 'If I cross the
line, I may have some of my money on the line, and I may lose that bonus, and maybe even more than that,'" says Demske. Sir
Andrew Witty, GSK's CEO, wouldn't go broke if he had to give back three year's pay, but "in our analysis, nothing can damage
a company's value more than a significant compliance enforcement action," says Ginor. "With a CIA, essentially for five years,
the government is running your company."
"Dear Payer" and other CIA firsts
There are other completely new provisions in Glaxo's CIA. Mary Riordan, senior counsel, office of counsel to the inspector
general, points to an expansion of the famous "Dear Doctor" program that requires a pharma company working under a CIA to
send out a letter notifying physicians about the settlement. "This CIA goes one step further...there's also a requirement
that [GSK] send a letter to payers, government, and other payers with which the company has rebate agreements, to notify the
payers about the settlement," says Riordan. "Part of the purpose of that provision is to really focus the company's attention
on the relationship that GSK has with government payers." Government payers, including Medicare and Medicaid, represent around
half of Big Pharma's revenues.
In addition to the provisions cited above, other CIA requirements "reflect what GSK was already doing," says Riordan, like
restrictions on the way funding is provided to third party medical education organizations, and the criteria for determining
which organizations are eligible. Another example, unique to GSK's CIA, requires that a physician—if requesting off-label
information from a rep—sign a form stating that the request was unsolicited. This is an example of a program already instituted
by GSK, but reinforced by the mandate of a CIA. "That provision is part of a broader section [III.B.3] that talks about policies
and procedures that the company has to maintain," says Riordan. "We were sort of memorializing and binding GSK to abide by
those policies and procedures during the course of the CIA," which lasts through June of 2017.
This enshrining of internal compliance programs and policies is often the result of a typically long and protracted negotiation
between pharma and government, prior to a settlement. Ginor says companies can derail enforcement actions before they escalate,
by bending over backward to show that a problem is being adequately addressed. An apology letter from a CEO won't cut it.
"It is escalation versus negotiation...government does not feel that they are your consultants," says Ginor. It's better to
spend a little extra money on compliance programs at the outset, in good faith, than to spend a whole lot more later on, after
the Justice Department steps up on its soapbox, says Ginor.