GSK's anticorruption overhaul in China may be hobbling sales

Since Chinese officials slapped GlaxoSmithKline ($GSK) with a $489 million fine on bribery charges, the company has overhauled its sales practices to quash corruption. But some say its reforms could hurt its top line at a time when the company's already suffering.

GSK has eliminated sales-based compensation incentives for reps, nixed doctor speaking fees and tripled an in-house compliance team that now checks every submitted receipt. The company says its staff is on board with those anticorruption moves.

But industry players and reps told the Financial Times that they put the British drugmaker at a commercial disadvantage in a market where doctors are eager for incentives. Now, physicians will "only prescribe GSK drugs if they have to," one said.

According to Glaxo's China general manager, Hervé Gisserot, reps have responded positively to the changes. But one anonymous salesman told the newspaper that his GSK pay has sunk by 25%, and he works around the new rules to boost his income. He takes his GPS-enabled iPad--meant to monitor doctor-rep interactions--to a coffee shop near a hospital and has no sales meetings. And he works on the side for a domestic pharma company that still lets him offer handouts to doctors to bolster sales.

"To stop linking pay to performance is something we do not understand," the head of one Western drugmaker told the Times. "We fully support that sales is not the only factor. But performance has to be one element of compensation."

The way Gisserot sees it, though, it won't be long before other companies are following in GSK's footsteps.

"I think it will be a domino effect," he told the FT. "It will be hard for other players to explain why they are sticking to the old model."

In the meantime, he's not expecting sales in China to be what they once were--and that's a tough spot for a company that's already suffering from payer pressure and generics to top-selling product Advair. "The mindset was more, more, more," he said of the culture that led to the bribery scandal. "We will not win in the future as we have in the past 10 years. We have to invent a new model."

- read more from the FT here and here (sub. req.)

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