Sex and Starbucks: Odd Incentives in Glaxo's New Bonus Plan for Sales Reps

(MoneyWatch)  GlaxoSmithKline (GSK) may have shot itself in the foot with its new bonus structure for pharmaceutical sales reps. Instead of rewarding its sales staff based on the number of prescriptions doctors write, reps will now be compensated based on "customer feedback" from doctors and other touchy-feely, non-quantitative variables.

It's a gigantic experiment -- GSK employed as many as 9,000 reps at one point. While the power of sales reps has dwindled over the last decade, they're still a huge part of any drug company's marketing mix. All other major pharma companies link their salesforces' pay to actual sales of the companies' drugs. GSK will be the first to remove that incentive. The results will be closely watched by any company that employs a large sales force.

The scheme could have two negative consequences:

1. The sales reps that get the best feedback from their doctors could well be the ones who most reliably bring docs their Starbucks orders in the morning, or who develop even more inappropriate relationships with physicians.
2. By delinking compensation from actual sales, the scheme significantly undermines GSK's refusal to give its reps overtime pay based on the notion that they're technically sales staff. Now they're not actually selling anything, the company has inadvertently admitted.

The Starbucks (SBUX) angle came up immediately on CafePharma, the gossip site where drug sales reps go to whine anonymously about their employers. Doctors like Starbucks, it seems, and bringing them their favorite coffee is a good way to get your foot in the door. Two different reps noted:

So if you like some crappy Starbucks drink and I bring it to you every week and never say anything product related, vs. a different rep who has actual clinical conversations with you but doesn't bring you your favorite mocha frappachino every week- the one having actual details should get penalized?

If all the companies go to this, the reps with the biggest spending accounts win. Say NO to our demands that you bring Starbucks in the morning (our standing order that Starbucks keeps under the register since we use it so much!) then we give you a crap rating.

And it's not just coffee from Starbucks. Whether it's true or not, drug sales reps believe that plenty of their colleagues sleep with the doctors they call on. One CafePharma denizen noted that linking compensation to positive feedback from doctors creates an incentive for reps to get extra friendly with their physicians:

My coworker one territory over is sleeping with TWO of her docs. Flirts with dozens more. If you ask a dr which rep makes them feel all "happy"- of course she'll win it hands down.

The ruling also flies in the face of GSK's insistence that its sales reps are actually in the business of sales. There's currently a war over overtime going on in the drug industry, with reps claiming that as they don't actually sell drugs directly to doctors they're not sales reps, and if they're not sales reps then federal labor law requires they should be paid overtime if they work more than 40 hours a week. GSK won a ruling fending off litigation on that issue in 2009 by successfully persuading a judge that its reps were salesmen and women. This new compensation structure -- which appears to completely delink compensation from sales -- suggests that reps aren't sellers and thus should get the regular OT pay that other workers are entitled to.

Related:

• Victory for Micro-Managers: King's Alpharma Sales Reps Lose Overtime Case Against "Controlling" Bosses
• Pfizer Sales Reps Discuss Having Sex With Doctors
• A Glass Half Full: Avandia Case Reveals Hole in FDA's Conflict-of-Interest Rules
• In Plain Sight: GSK's Avandia Mess Eclipses Federal Probe of Paxil Factory

Hat tip to Internet Drug News.
Image by Flickr user ASurroca, CC.