Business

GSK reviewing compensation model for US sales team

GlaxoSmithKline, which replaced the head of its struggling U.S. operations in February, is considering changes to its compensation model for sales staff, according to an internal memo obtained by Bloomberg News.

A task force is looking at “more comprehensive options to simplify the Patient First program” for incentive pay and will provide a report within a month, London-based GSK said in an April 1 statement to its U.S. sales employees. Sarah Alspach, a spokeswoman for Britain’s largest drugmaker, confirmed the contents of the memo.

The review of the compensation model underscores the pressure on Chief Executive Officer Andrew Witty to revive U.S. operations, which account for almost a third of GSK’s sales. The Patient First program was put in place in 2011 to end the focus on sales targets following allegations that GSK had illegally promoted drugs and failed to report key safety data.

The company suspended some training programs for April and May while the review is underway in response to “feedback from the field,” according to the note, which was sent to sales employees following a March 23 announcement by U.S. pharmaceuticals head Jack Bailey about the changes. Bailey, who joined GSK in May 2009, replaced Deirdre Connelly on Feb. 16.

“We remain resolutely committed to our commercial model,” GSK said in an emailed statement Friday. “Glaxo has led the industry by changing the way we reward our sales representatives.”

The Patient First program was rolled out in 150 countries earlier this year, according to the company.

U.S. sales staff will be paid their target bonus for a portion of the year while the compensation system is under review, according to the memo earlier this month.

“This pause allows us to concentrate our attention on program improvements to be implemented in the second semester,” GSK told employees. “Until then, it is critical that our focus be on driving performance, and that we use the removal of the simulations to increase business performance.”

Under the Patient First model, bonuses are based on scientific knowledge, selling competency, customer evaluations and overall performance of the representative’s business unit, rather than linked to meeting sales targets. In November, GSK amended the program to change the way sales professionals were tested on knowledge of products as part of their evaluation, two people familiar with the matter said at that time.

GSK’s U.S. sales are flagging amid increased competition for the company’s best-selling Advair asthma medication. The company is trying to establish new respiratory drugs in the U.S. to help replace the lost sales of Advair, and pledged in October to cut costs by 1 billion pounds ($1.54 billion) over three years, with half the savings coming in 2016.

In December, GSK announced that it was eliminating about 900 research-and-development jobs in Research Triangle Park throughout 2015. About half of those employees were offered jobs at Parexel, a contract research organization that helps drug companies conduct clinical trials of experimental drugs and analyze the results.

Last month, GSK said it would lay off another 180 workers at its RTP campus. Those layoffs affected GSK's commercial business and include sales, managerial, marketing and support staff jobs.

Staff writer David Bracken contributed.

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