Glaxo plans changes to compensation programme for US sales team

[GENEVA] 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 Glaxo said in an April 1 statement to its US sales employees. Sarah Alspach, a spokeswoman for the UK'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 US operations, which account for almost a third of Glaxo's sales. The Patient First program was put in place in 2011 to end the focus on sales targets following allegations that Glaxo 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 US pharmaceuticals head Jack Bailey about the changes. Bailey, who joined Glaxo in May 2009, replaced Deirdre Connelly on Feb. 16.

"We remain resolutely committed to our commercial model," Glaxo said in an e-mailed statement today. "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.

US 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," Glaxo 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, Glaxo 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.

Glaxo's US 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 US to help replace the lost sales of Advair, and pledged in October to cut costs by 1 billion pounds (US$1.54 billion) over three years, with half the savings coming in 2016.

In December, Glaxo said it would cut 900 jobs in North Carolina, in its commercial and research operations. The drugmaker has about 98,000 employees in 115 countries. Most of its US staff are at North Carolina's Research Triangle Park and in Philadelphia.

BLOOMBERG