Pharma needs to jettison sales-based bonus pay, firm says

Why pay pharma executives on their current numbers, when it's the future that really counts? The Hay Group asks that question in a new study, and found that Big Pharma's compensation plans are "flawed." Eighty percent of incentive plans are tied to revenue, and only 12 percent include metrics based on developing and rolling out new drugs. 

At a time when drugs are falling off the patent cliff left and right, pay packages should really reward CEOs for their long-term work, not for pumping the last bit of sales from soon-to-be-off-patent blockbusters, the consulting firm notes. In other words, incentive plans need to pay out on innovation and new-drug marketing, rather than bare numbers. "That's the game in early biotech and emerging biopharmas--not just pay for financial 'performance' but pay for new and innovative technologies which are the lifeblood of these new companies," it adds.

Big Pharma has to take some big risks to transform itself for the brave new world of pricing pressures, niche meds, personalized medicine and so on. Current pay packages don't account for that. And unless drugmakers figure out a way to measure and reward the kind of performance that does, they're not going to make the changes necessary for sustained growth, the consulting firm says.

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