GSK revamps sales reps' compensation

British pharmaceutical giant GlaxoSmithKline announced on Tuesday it will on longer reward its Chinese sales representatives based on their sales volume, a vast change after the company became embroiled in a series of bribing scandals.

The new system applies to all of the GSK sales employees, including sales representatives and sales managers, who interact with prescribing healthcare professionals, according to GSK's Tuesday announcement.

Under the new system, all customer service employees will be evaluated on technical knowledge, quality of service and adherence to the company values of transparency, integrity, respect and patient focus.

GSK is the first pharmaceutical company to publicly implement such changes in China. The company said the new system allows it to put patients' needs above everything else it does.

The Chinese government initiated an anti-corruption campaign for the medical industry in July after conducting a bribery investigation into GSK.

According to China's public security authorities, the company allegedly used travel agencies to funnel at least 3 billion yuan ($489 million) in bribes since 2007.

The scandal widened across an industry in which other multinational pharmaceutical companies also faced scrutiny in China over claims they bribed medical staff to prescribe their products.

GSK denies that the new move is directly related to the probe by Chinese authorities, saying the changes are part of its efforts to evolve their business model, build trust in the markets and improve transparency.

Experts said GSK and its sales team face a difficult transition.

"It will take some time for GSK to find out how to improve the effectiveness of its incentive system and how to encourage its salespeople to pay attention to their service quality for more income," said Bruce Liu, partner and co-head of the Pharma & Healthcare practice at Roland Berger Strategy Consultants.

Liu said GSK's former payroll was based on objectives, which translates to sales volume, but it now is focused on process management.

"It is helpful to improve employees' academic level in order to provide professional information to doctors," he added.

"Our medical representatives are the gateway to our customers, and it is important that we inspire, coach and ultimately reward people working within the organization to focus on behaviors that reflect our values," said Herve Gisserot, senior vice-president and general manager of GSK Pharmaceuticals and Vaccines China.

But Liu cautioned that GSK's changes "will not get instant results."

In the third quarter that ended Sept 30, the company reported a 61 percent year-on-year slide in its China pharmaceuticals and vaccines business.

But the crisis, Liu said, could be a blessing in disguise.

Since the government is encouraging private investment in the medical sector and prioritizing support of nonprofit hospitals run by private investors, and as experts are calling for the separation of medical services and drug sales in hospitals, Liu said GSK's prompt action will help the company grab market share ahead of its peers.

GSK also announced it will stop paying individual healthcare professionals to attend medical conferences and instead will fund education for them through independent grants.

The transition to the new sales compensation model will start in January in China as well as in other markets around the world.